Delhi High Court
Sarabjeet Singh vs Anup Sharma & Ors. on 17 May, 2016
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ CS(OS) No. 439/2008
% 17th May, 2016
SARABJEET SINGH ..... Plaintiff
Through: Mr. Sanjeev Singh, Advocate with plaintiff
in person.
versus
ANUP SHARMA & ORS. ..... Defendants
Through: Mr. Arun Aggarwal, Advocate for D-1 to 3.
Mr. Manish Sharma, Mr. Pranay Raj Singh,
Mr. Abhishek Agarwal and Ms. Jigyasa
Sharma, Advocates for D-4,7 and 8.
Mr. Raman Kapur, Sr. Adv. with Mr. Varun
Kapur, Adv. for D-9.
CORAM:
HON'BLE MR. JUSTICE VALMIKI J.MEHTA
To be referred to the Reporter or not? YES
VALMIKI J. MEHTA, J (ORAL)
1(i) This is a suit for specific performance of entire property being plot
no.D-16-G, Block No.D, admeasuring 247-9/10 sq. yds, in the residential
colony known as Hauz Khas Enclave, situated at Village Kharera on Delhi
Qutub Road in the state of Delhi except the first floor portion. Plaintiff is the
proposed purchaser namely Sh. Sarabjeet Singh.
(ii) The specific performance suit is not for one agreement to sell but
two Agreements to Sell dated 19.6.2006. The reason for two agreements to sell
is that the predecessor-in-interest of defendant nos. 1 to 3 in the suit namely Sh.
Jagdish Chander Sharma was the owner of the ground floor portion of the
CS(OS) No.439/2008 Page 1 of 31
property, and therefore, qua the ground floor portion one agreement to sell was
executed by the plaintiff. The total sale consideration of the agreement to sell of
the plaintiff with defendant nos.1 to 3 was for a sum of Rs.1.71 crores, of which
an amount of Rs.25 lacs was paid on the date of entering into the agreement to
sell.
(iii) Late Sh. Badri Nath Sharma, and who is now represented by
defendant nos.4 to 9, was the other co-owner of the property as he was the
owner of the first floor, second floor and portion above the second floor as also
the basement (theoretical) of the suit property. Plaintiff entered into the second
Agreement to Sell dated 19.6.2006 with late Sh. Badri Nath Sharma for selling
of the basement (theoretical), second floor and above portion of the suit
property. Consideration for the second agreement to sell with Sh. Badri Nath
Sharma was that Sh. Badri Nath Sharma besides being paid an amount of Rs.33
lacs, of which an amount of Rs.5 lacs had been received by late Sh. Badri Nath
Sharma on the date of the agreement to sell, plaintiff was responsible for
reconstruction of the entire property and cost of the construction of the first
floor, which was to remain with Sh. Badri Nath Sharma, was also to be borne by
the plaintiff. Therefore, the sale consideration with respect to the agreement to
sell with Sh. Badri Nath Sharma was that plaintiff was to bear the cost of
reconstruction of the first floor and pay the amount of Rs.33 lacs.
CS(OS) No.439/2008 Page 2 of 31
(iv) Simultaneous to the entering into of the agreement to sell by the
plaintiff with Sh. Badri Nath Sharma with respect to the basement (theoretical),
second floor and above portion of the property, a Memorandum of
Understanding (MOU) was also entered into on the same date of the agreements
to sell dated 19.6.2006 with late Sh. Badri Nath Sharma under which the
plaintiff undertook to reconstruct the property at his own cost and out of the
reconstructed property plaintiff was to have the newly constructed basement,
ground floor, second floor and terrace above the second floor and the newly
constructed first floor was to remain with late Sh. Badri Nath Sharma.
(v) With respect to the aspect that late Sh. Badri Nath Sharma and late
Sh. Jagdish Chander Sharma (predecessor-in-interest of defendant nos. 1 to 3)
were the co-owners of the complete property, the same is an admitted fact by
the plaintiff. This is because the plaintiff in the plaint refers to the factum of the
suit property being originally owned by Smt. Kasto Devi, the mother of Sh.
Jagdish Chander Sharma and Sh. Badri Nath Sharma and who purchased this
property by a Sale Deed dated 15.5.1956. Smt. Kasto Devi expired on 2.2.1977
leaving behind her Will dated 28.10.1976 bequeathing the ground floor portion
along with entire rear courtyard and the open space in the front to the younger
son Sh. Jagdish Chander Sharma and rest of the suit property to her elder son
Sh. Badri Nath Sharma. Both Sh. Jagdish Chander Sharma and Sh. Badri Nath
Sharma accepted the genuineness of the Will dated 28.10.1976 and to this effect
CS(OS) No.439/2008 Page 3 of 31
a mutual Settlement Deed dated 15.2.1977 was entered into between the two
brothers Sh. Jagdish Chander Sharma and Sh. Badri Nath Sharma. Mutation of
the respective portions of the property thereafter took place in the names of Sh.
Jagdish Chander Sharma and Sh. Badri Nath Sharma in terms of the Letter of
the Municipal Corporation of Delhi (MCD) dated 3.6.1980. Sh. Jagdish
Chander Sharma died on 13.6.2002 leaving his Will dated 12.5.2002 whereby
his share in the property was bequeathed to his two sons and wife, defendants
no.1 to 3 in the present suit, and whose names were hence mutated in place of
Sh. Jagdish Chander Sharma in the records of the MCD by MCD‟s Letter dated
16.2.2006
.
(vi) Accordingly, two Agreements to Sell dated 19.6.2006 and the
MOU of the same date was entered into between the plaintiff and defendant
nos.1 to 3 and late Sh. Badri Nath Sharma as stated above.
2. As per the plaint, the plaintiff pleads that defendants, reference to
the defendants being also to Sh. Badri Nath Sharma wherever context so
requires inasmuch as Sh. Badri Nath Sharma died after entering into an
agreement to sell, committed breach of contract by refusing to sell the suit
property to the plaintiff. Plaintiff avers that plaintiff found that Sh. Badri Nath
Sharma had mortgaged his second floor portion of the suit property to Punjab
National Bank for a loan and therefore the agreement to sell with Sh. Badri
Nath Sharma could not be fructified because in terms of the agreement to sell
the plaintiff was to receive the portion of Sh. Badri Nath Sharma
unencumbered. Plaintiff also pleads that one daughter and daughter-in-law of
late Sh. Badri Nath Sharma, defendant no. 5 and 6 in the present suit namely
Smt. Manju Sharma and Smt. Anita Sharma, issued and sent to the plaintiff and
the Sub-Registrar, Mehrauli Legal Notices dated 23.6.2006 stating that they
were the co-owners of the suit property and that therefore Sh. Badri Nath
Sharma could not have entered into agreement to sell with the plaintiff
representing that Sh. Badri Nath Sharma was the sole owner of his portion of
the property. Plaintiff further pleads that on account of these frauds committed
by Sh. Badri Nath Sharma, plaintiff was forced to lodge complaint with the
police on 1.8.2006 stating that since plaintiff has been defrauded and cheated,
action be taken against defendant nos. 1 to 3 in the present suit as also against
late Sh. Badri Nath Sharma. Plaintiff alleges that plaintiff has always been ready
and willing to perform the agreements to sell and the memorandum of
understanding of the same date, and therefore, the suit for specific performance
be decreed.
3. Written statements have been filed. One written statement is filed
by defendant nos. 1 to 3 who are the signatories to the Agreement to Sell dated
19.6.2006 with respect to the ground floor portion. Another written statement is
filed by defendant nos. 4, 7 and 8, and who are the three legal heirs (being the
son, daughter-in-law and grandson) of late Sh. Badri Nath Sharma. The
grandson Sh. Ashit Sharma/defendant no. 7, in addition to pleading that the
plaintiff is guilty of breach of contract and hence not being entitled to specific
performance and also that plaintiff was not ready and willing to perform the
contract, also pleads that late Sh. Badri Nath Sharma on 5.9.2006 executed a
registered Gift Deed with respect to the second floor and terrace portion of the
property in favour of defendant no. 7 transferring Sh. Badri Nath Sharma‟s right
in the suit property to the defendant no. 7. Written statement has also been filed
by defendant no. 9/Smt. Renu Sharma pleading that Sh. Badri Nath Sharma had
no right to sell the suit property as the suit property was ancestral and therefore
Sh. Badri Nath Sharma was only one co-owner of the suit property and not the
sole owner of the suit property, and which was the stand also taken by the
defendant nos. 5 and 6 (who have not filed any written statements) by issuing
their Legal Notices dated 23.6.2006 to the plaintiff.
4. The main contesting defendants are defendant nos. 1 to 3 so far as
ground floor portion of the property is concerned and which is the subject
matter of one of the agreement to sell. The other contesting defendants are
defendant nos. 4, 7 and 8 who represent the estate of late Sh. Badri Nath
Sharma. All these defendants plead breach of contract on behalf of the plaintiff
and also that the plaintiff has not always been ready and willing to perform his
part of the contract and hence the suit for specific performance is liable to be
dismissed.
5. The following issues were framed in this suit on 16.7.2013:-
"1. Whether the plaintiff is entitled to specific performance of Agreements
dated 19.6.2006 entered into between the plaintiff and defendant Nos. 1,2
and 3 and defendant Nos. 4,7 and 8 respectively? OPP
2. Whether the plaintiff was ready and willing to perform his part of the
aforesaid Agreements to Sell with defendant Nos. 1,2 & 3 and 4, 7 & 8
within the time stipulated in the agreement? OPP
3. Whether time was of essence of the contracts comprised in Agreements to
Sell between the plaintiff and defendant Nos.1,2 and 3 and defendant Nos.
4,7 and 8? OPD 1,2&3 and 4,7 & 8
4. Whether the plaintiff is guilty of concealment of material facts and mala
fides in relation to the present suit? OPD 1,2 and 3 & 4,7 & 8.
5. Whether any case of action arose or survives in favour of the plaintiff and
against the defendant Nos.1,2 and 3 and/or defendant Nos.4,7 & 8? OPP
6. Whether the plaintiff is entitled to a decree of declaration declaring the gift
deed dated 05.09.2006 executed by late Badri Nath in favour of Mr. Asit
Sharma, defendant No.7 to be null & void? OPP
7. Whether the suit has been correctly valued for purposes of court fees and
jurisdiction and appropriate/proper court fees paid thereon? OPP
8. Whether the plaintiff has any cause of action against defendant Nos.5,6 and
9? OPP
9. Whether the plaintiff is entitled to the decree of specific performance in
respect of the two agreements dated 19.6.2006 and if so, against which
defendant? OPP
10. Relief."
6. Before I take up the discussion on the issues let me at this stage
refer to the documents which are proved by the parties and which would be
relevant to determine the matters in controversy. I may note that I am not
referring to the documents proved on behalf of the plaintiff till the stage of
mutation of the suit property in the name of defendant nos. 1 to 3 of the ground
floor and late Sh. Badri Nath Sharma of the other portions of the suit property
i.e, first floor and above portions, as these documents have no bearing with
respect to the decision of the issues because these documents only reflect the
position as on the date of the Agreement to Sell and the MOU dated 19.6.2006
whereby the plaintiff and the main contesting defendants concede to the factum
of Sh. Jagdish Chander Sharma (predecessor-in-interest of defendant nos. 1 to
3) being the owner of the ground floor portion and consequently defendant nos.
1 to 3 entering into an agreement to sell with the plaintiff of the ground floor
portion, and Sh. Badri Nath Sharma who was alive on 19.6.2006 entering into
the agreement to sell with respect to the other portions of the property;
excluding the ground floor portion of the property; and which portions were in
the ownership of late Sh. Badri Nath Sharma. The relevant documents are as
under:-
(i) Agreement to Sell dated 19.6.2006 between the plaintiff and
defendant nos. 1 to 3; Ex.P-1
(ii) Agreement to Sell dated 19.6.2006 of the plaintiff with late Sh.
Badri Nath Sharma; Ex. P-20
(iii) Memorandum of Understanding dated 19.6.2006 between late Sh.
Badri Nath Sharma and the plaintiff ; Ex. P-23.
(iv) Legal Notices dated 23.6.2006 sent on behalf of Smt. Manju
Sharma and Smt. Anita Sharma, defendant nos. 5 and 6 in the suit, to the Sub-
Registrar, Mehrauli and to the plaintiff; Ex P1/1 (it should be exhibited as
Ex.PW1/1), Ex. P1/2 (it should be exhibited as Ex. PW1/2) and Ex. P1/3 (it
should be exhibited as Ex. PW1/3).
I may note that unfortunately though documents have been referred
to by the exhibits in the affidavit by way of evidence of the parties, exhibit
marks are only given to the documents till the stage of admission/denial.
Therefore, the documents which have been exhibited in the affidavit by way of
evidence do not have a corresponding marking in the documents which have
been so exhibited. I am accordingly referring to these exhibited documents as
per the exhibit numbers given in the affidavit by way of evidence of the parties
though concerned documents specifically do not bear the exhibit marks.
(v) Legal Notice dated 24.7.2006 by the plaintiff to defendant nos. 1 to
3 and late Sh. Badri Nath Sharma; Ex.P-12
(vi) Reply dated 28.7.2006 to the legal notice of the plaintiff given by
the Advocate of defendant nos. 1 to 3; Ex. P-13
(vii) Criminal complaint lodged by the plaintiff with the SHO PS Hauz
Khas dated 1.8.2006; Ex.P-14 and an FIR dated 14.10.2006 registered by the
police on the basis of the aforesaid criminal complaint dated 1.8.2006; Ex.P-16.
(viii) Gift Deed dated 5.9.2006 executed by late Sh. Badri Nath Sharma
in favour of the grandson Sh. Ashit Sharma defendant no. 7 with respect to the
second floor and above portion of the property ; Ex. P-24.
The aforesaid documents are proved and exhibited by the plaintiff.
7. The following relevant documents have been proved and exhibited
by the defendants:-
(i) Legal Notice dated 19.7.2006 sent to the plaintiff on behalf of
defendant nos. 1 to 3; with corresponding postal receipts, Ex.DW2/2 and Ex.
DW2/3. (Due to administrative error, instead of legal notice being exhibited as
DW2/2 and postal receipts being exhibited as DW2/3(colly), both the postal
receipts have been exhibited as DW2/2 and DW2/3. However plaintiff concedes
that plaintiff had received this Legal Notice dated 19.7.2006.)
(ii) Bank certificate dated 7.3.2007 of Punjab National Bank, Swami
Ram Tirath Nagar, New Delhi that the mortgage against the property was
cleared as the amount of loan was cleared on 31.7.2006; Ex. D2.
8. Issue nos.1 to 3, 5 and 6 are being heard and disposed of together
because these issues pertain to who is guilty of breach of contract i.e are they
the defendants including late Sh. Badri Nath Sharma or it was the plaintiff who
was guilty. Under these issues aspect with respect to readiness and willingness
of the plaintiff in terms of Section 16(c) of the Specific Relief Act, 1963 will
also be considered.
9. So far as the existence of two Agreements to Sell dated 19.6.2006
and the MOU dated 19.6.2006 is concerned, the same are admitted documents
and therefore it is held that there does exist agreements to sell in favour of the
plaintiff of which theoretically the plaintiff can seek specific performance,
subject of course to the plaintiff proving other issues in his favour with respect
to plaintiff being not guilty of breach of contract and plaintiff always having
been ready and willing to perform his part of the contract. Discussion under
these issues will also cover the aspect as to whether the plaintiff is entitled to
the discretionary relief of specific performance.
10. At the outset, I would refer to the ratios of the two judgments of the
Supreme Court, and which ratios would be relevant on their being applied to the
facts of the present case for deciding as to whether or not specific performance
should be granted. The first judgment is the judgment of the Supreme Court in
the case of K.S. Vidyanandam and Others Vs. Vairavan (1997) 3 SCC 1. The
second judgment is the judgment of the Supreme Court in the case of
Sardamani Kandappan Vs. S. Rajalakshmi and Others (2011) 12 SCC 18. In
the case of K.S. Vidyanandam and Others (supra) the Supreme Court clearly
held that the old rule of time of performance being not of the essence of the
contract in agreement to sell of immovable properties was laid down when
prices were stable and inflation was unknown and that this old rule with respect
to time being not of the essence of the contract, so far as urban immovable
properties are concerned, should be given a go-by. The relevant paras of this
judgment are paras 10, 11 and 14 and these paras read as under:-
"10. 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. The period of limitation prescribed by the
Limitation Act for filing a suit is three years. From these two circumstances, it
does not follow that any and every suit for specific performance of the
agreement [which does not provide specifically that time is of the essence of
the contract] should be decreed provided it is filed within the period of
limitation notwithstanding the time limits stipulated in the agreement for doing
one or the other thing by one or the other party. That would amount to saying
that the time-limits prescribed by the parties in the agreement have no
significance or value and that they mean nothing. Would it be reasonable to
say that because time is not made the essence of the contract, the time-limits
specified in the agreement have no relevance and can be ignored with
impunity? It would also mean denying the discretion vested in the court by
both Sections 10 and 20. As held by a Constitution Bench of this Court in
Chand Rani v. Kamal Rani: (SCC p.528, para 25)
".....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
performed in a reasonable time if the conditions are (evident?): (1)
from the express terms of the contract; (2) from the nature of the
property; and (3) from the surrounding circumstances, for example,
the object of making the contract".
In other words, the court should look at all the relevant circumstances
including the time-limits specified in the agreement and determine whether its
discretion to grant specific performance should be exercised. Now 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. In this case, the
suit property is the house property situated in Madurai, which is one of the
major cities of Tamil Nadu. The suit agreement was in December 1978 and the
six months' period specified therein for completing the sale expired with 15th
of June, 1979. The suit notice was issued by the plaintiff only on 11.7.1981,
i.e., more than two years after the expiry of six months' period. The question is
v/hat was the plaintiff doing in this interval of more than two years? The
plaintiff says that he has been calling upon Defendants 1 to 3 to get the tenant
vacated and execute the sale deed and that the defendants were postponing the
same representing that the tenant is not vacating the building. The defendants
have denied this story. According to them, the plaintiff never moved in the
matter and never called upon them to execute the sale deed. The Trial Court
has accepted the defendants' story whereas the High Court has accepted the
plaintiffs story. Let us first consider whose story is more probable and
acceptable. For this purpose, we may first turn to the terms of the agreement.
In the agreement of sale, there is no reference to the existence of any tenant in
the building. What it says is that within the period of six months, the plaintiff
should purchase the stamp papers and pay the balance consideration
whereupon the defendants will execute the sale deed and that prior to the
registration of the sale deed, the defendants shall vacate and deliver possession
of the suit house to the plaintiff. There is not a single letter or notice from the
plaintiff to the defendants calling upon them to get the tenant vacated and get
the sale deed executed until he issued the suit notice on 11.7.1981. It is not the
plaintiffs case that within six months, he purchased the stamp papers and
offered to pay the balance consideration. Defendants' case is that the tenant is
their own relation, that he is ready to vacate at any point of time and that the
very fact that the plaintiff has in his suit notice offered to purchase the house
with the tenant itself shows that the story put forward by him is false. The
tenant has been examined by the defendant as DW-2. He stated that soon after
the agreement, he was searching for a house but could not secure one.
Meanwhile [i.e., on the expiry of six months from the date of agreement], he
stated, the defendants told him that since the plaintiff has abandoned the
agreement, he need not vacate. It is equally an admitted fact that between
December 15, 1978 and July 11, 1981, the plaintiff has purchased two other
properties. The defendants' consistent refrain has been that the prices of house
properties in Madurai have been rising fast, that within the said interval of 2
1/2 years, the prices went up by three times and that only because of the said
circumstance has the plaintiff [who had earlier abandoned any idea of going
forward with the purchase of the suit property] turned round and demanded
specific performance. Having regard to the above circumstances and the oral
evidence of the parties, we are inclined to accept the case put forward by
Defendants 1 to 3. We reject the story put forward by the plaintiff that during
the said period of 2 1/2 years, he has been repeatedly asking the defendants to
get the tenant vacated and execute the sale deed and that they were asking for
time on the ground that tenant was not vacating. The above finding means that
from 15.12.1978 till 11.7.1981, i.e., for a period of more than 21/ 2 years, the
plaintiff was sitting quiet without taking any steps to perform his part of the
contract under the agreement though the agreement specified a period of six
months within which he was expected to purchase stamp papers, tender the
balance amount and call upon the defendants to execute the sale deed and
deliver possession of the property. We are inclined to accept the defendant's
case that the values of the house property in Madurai town was rising fast and
this must have induced the plaintiff to wake up after 2 1/2 years and demand
specific performance.
11. Sri Sivasubramanium cited the decision of the Madras High Court in
S. V. Sankaraninga Nadar v. P.T.S. Ratnaswamy Nadar holding that mere rise
in prices is no ground for denying the specific performance. With great respect,
we are unable to agree if the said decision is understood as saying that the said
factor is not at all to be taken into account while exercising the discretion
vested in the court by law. We cannot be oblivious to the reality - and the
reality is constant and continuous rise in the values of urban properties -
fuelled by larger-scale migration of people from rural areas to urban centers
and by inflation. Take this very case. The plaintiff had agreed to pay the
balance consideration, purchase the stamp papers and ask for the execution of
sale deed and delivery of possession within six months. He did nothing of the
sort. The agreement expressly provides that if the plaintiff fails in performing
his part of the contract, the defendants are entitled to forfeit the earnest money
of Rs. 5,000/- and that if the defendants fail to perform their part of the
contract, they are liable to pay double the said amount. Except paying the small
amount of Rs. 5,000/- [as against the total consideration of Rs. 60,000/-] the
plaintiff did nothing until he issued the suit notice 2 1/2 years after the
agreement. 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. learned Counsel for the plaintiff says that when the parties entered into
the contract, they knew that prices are rising; hence, he says, rise in prices
cannot be a ground for denying specific performance. May be, the parties knew
of the said circumstance but they have also specified six months as the period
within which the transaction should be completed. The said time-limit may no
amount to making time the essence of the contract but it must yet have some
meaning. Not for nothing could such time-limit would have been prescribed.
Can it be stated as a rule of law or rule of prudence that where time is not made
the essence of the contract, all stipulations of time provided in the contract
have no significance or meaning or that they are as good as nonexistent? All
this only means that while exercising its discretion, the court should also bear
in mind that when the parties prescribes certain time-limits for taking steps by
one or the other party, it must have some significance and that the said time-
limits cannot be ignored altogether on the ground that time has not been made
the essence of the contract (relating to immovable properties).
xxxxx
xxxxx
14. Sri Sivasubramanium then relied upon the decision in Jiwan Lai and
Ors. v. Brij Mohan Mehra to show that the delay of two years is not a ground
to deny specific performance. But a perusal of the judgment shows that there
were good reasons for the plaintiff to wait in that case because of the pendency
of an appeal against the order of requisition of the suit property. We may
reiterate that the true principle is the one stated by the Constitution Bench in
Chand Rani. Even where time is not of the essence of the contract, the
plaintiffs must perform his part of the contract within a reasonable time and
reasonable time should be determined by looking at all the surrounding
circumstances including the express terms of the contract and the nature of the
property." (emphasis is mine)
11. In addition to holding that in urban areas time of performance
should not be ignored, the aforesaid paras also lay down the ratio that merely
because a suit for specific performance is filed within limitation would not
mean that the suit for specific performance has necessarily to be decreed
because delay in approaching the courts for seeking specific performance is a
ground to deny the relief of specific performance.
12. The relevant paras of the judgment in the case of Sardamani
Kandappan (supra) are paras 35 to 37, 41 and 43 and these paras read as
under:-
"35. It is of some interest to note that the distinction between contracts
relating to immovable properties and other contracts was not drawn by
Section 55 of Contract Act (or any other provisions of the Contract Act or
Specific Relief Act, 1963). Courts in India made the said distinction, by
following the English law evolved during the nineteenth century. This Court
held that time is not of the essence of the contracts relating to immovable
properties; and that notwithstanding default in carrying out the contract
within the specified period, specific performance will ordinarily be granted, if
having regard to the express stipulation of the parties, nature of the property
and surrounding circumstances, it is not inequitable to grant such relief.
(Vide Gomathinayagam Pillai, Govind Prasad Chaturvedi, Indira
Kaur v. Sheo Lal Kapoor and Chand Rani following the decision of Privy
Council in Jamshed Khodaram Irani v. Burjorji Dhunjibhai and other cases).
Of course, the Constitution Bench in Chand Rani made a slight departure
from the said view.
36. The principle that time is not of the essence of contracts relating to
immovable properties took shape in 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 in the
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 in the 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 crore or more now.
37. 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, laches, breaches and "non-
readiness". The precedents from an era, when high inflation was unknown,
holding that time is not of 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.
xxxxx
xxxxx
41. 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 v. Vairavan (by Jeevan Reddy J. who
incidentally was a member of the Constitution Bench in Chand Rani). This
Court observed: (SCC pp. 7 & 9, paras 10-11)
"10. 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. ....
11. ......We cannot be oblivious to the reality and the reality is
constant and continuous rise in the values of urban properties -
fuelled by large scale migration of people from rural areas to urban
centres and by inflation. ......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)
xxxxx
43. Till the issue is considered in an appropriate case, we can only
reiterate what has been suggested in K.S. Vidyanadam (supra):
(i) The 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) The 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 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."
(underlining added)
13(i) In the present case, the first aspect which is to be noticed is the
argument on behalf of the plaintiff that the specific performance of the
agreement to sell with defendant nos.1 to 3 is linked with the specific
performance of the agreement to sell with late Sh. Badri Nath Sharma (now
represented by defendant nos.4 to 9) and if breach is committed by late Sh.
Badri Nath Sharma or his legal heirs, plaintiff was hence entitled not to seek
specific performance of the agreement to sell with respect to the ground floor
portion with defendant nos.1 to 3. Plaintiff in effect claims that both the
agreements to sell are interlinked and one agreement with defendant nos.1 to 3
cannot be performed independently of the other agreement to sell of the plaintiff
with late Sh. Badri Nath Sharma.
(ii) This argument of the plaintiff is liable to be and is accordingly
rejected for the reason that nothing is contained in any of the two Agreements to
Sell dated 19.6.2006 or the MOU of the same date, which links the performance
of the two agreements to sell, one being of the ground floor with the defendant
nos.1 to 3 and the other being of the second floor and above portion of the
property with late Sh. Badri Nath Sharma. Just because the two agreements to
sell have been entered into at one point of time does not necessarily mean that
both the agreements are interlinked as regards their performance. No clause in
any of the agreements exists or could be pointed out showing a categorical
interrelation of both the agreements as regards performances thereunder. Also,
merely because both the agreements are for different portions of the same
property cannot mean that defendant nos.1 to 3 can be put to the handicap that
their agreement to sell will not be performed by the plaintiff by causing it to be
delayed alongwith the performance of the agreement to sell by late Sh. Badri
Nath Sharma. If this is done, this will seriously prejudice defendants no.1 to 3
who would have had their own compulsion and reasons for selling the ground
floor portion to the plaintiff holding that admittedly there are independent
ownerships of the defendant nos.1 to 3 so far as ground floor is concerned and
late Sh. Badri Nath Sharma of the second floor and above portion of the
property is concerned. Therefore, I do not agree and reject the argument that
plaintiff was entitled to cause delay and not seek specific performance of the
agreement to sell qua the ground floor with defendant nos.1 to 3 on the ground
of breaches committed by late Sh. Badri Nath Sharma or his legal heirs in
performance of the agreement to sell of the second floor and above portion of
the property.
14. Let us now therefore examine as to who is guilty of breach of
contract as regards the agreement to sell of the ground floor portion.
Admittedly, under the agreement to sell within 40 days from entering into the
agreement, plaintiff had to pay the balance sale consideration and defendants
no.1 to 3 then had to at such time execute the sale deed in favour of the plaintiff.
Therefore tendering by the plaintiff of the balance amount of Rs.1.46 crores was
necessary so that plaintiff is not guilty of breach of contract. Plaintiff thus had
to lead evidence with respect to plaintiff tendering an amount of Rs.1.46 crores
to defendant nos.1 to 3 on or before 29.7.2006. Concededly, no evidence is led
and the fact is that plaintiff never tendered the balance amount of Rs.1.46 crores
to defendant nos.1 to 3 by 29.7.2006. In fact defendant nos.1 to 3 had issued
and sent to the plaintiff their Legal Notice dated 19.7.2006 demanding payment
of balance consideration from the plaintiff. It is also seen that on behalf of the
defendants DW-1 has deposed with respect to the plaintiff not tendering before
29.7.2006 the balance amount and therefore being guilty of breach of contract
and in the cross-examination of this witness there is no suggestion put that the
plaintiff had tendered the balance sale consideration to defendant nos.1 to 3 by
29.7.2006. Therefore, this is another reason why it has to be held in favour of
the defendant nos.1 to 3 and against the plaintiff that plaintiff is guilty of breach
of contract by failing to tender the balance sale consideration to defendant nos.1
to 3 on or before 29.7.2006. Therefore, it is seen that plaintiff not only failed to
tender the balance amount of sale consideration, in fact the defendant nos.1 to 3
sent their Legal Notice dated 19.7.2006 requesting for balance payment which
was not complied with by the plaintiff and therefore it is clear that plaintiff is
guilty of breach of contract. Once plaintiff is guilty of breach of contract, it has
to be held that plaintiff is not entitled to specific performance because specific
performance is a relief which arises on account of the breach committed by the
defendants/sellers under an agreement to sell and when the plaintiff/buyer
himself is guilty of breach of contract, he cannot succeed in a suit for specific
performance which is necessarily predicated on the breach of the
sellers/defendants. Accordingly, I hold that the plaintiff is guilty of breach of
contract and is not entitled to specific performance.
15. The related issue is that whether time of performance was or was
not of the essence of the contract. If time of contract was not of essence of the
contract i.e plaintiff had not tendered the amount by 29.7.2006 plaintiff cannot
be held guilty of breach of contract, however, in this regard I have reproduced
above the ratios of the judgments of the Supreme Court in the cases of K.S.
Vidyanandam and Others (supra) and Sardamani Kandappan (supra) and in
view of these ratios it is clear that once specific dates are mentioned, these
specific dates show that time of performance is of the essence of the contract
qua urban immovable properties and therefore it is held that time of
performance was of the essence of the contract with respect to the payment of
balance sale consideration by the plaintiff to defendant nos.1 to 3 more so in
view of defendant nos.1 to 3 demanding the balance consideration from the
plaintiff by the Legal Notice dated 19.7.2006. Therefore, plaintiff is guilty of
breach of contract, time of performance was of the essence of the contract, and
that since plaintiff being guilty of breach of contract, plaintiff is hence not
entitled to specific performance of the Agreement to Sell dated 19.6.2006 so far
as the ground floor portion is concerned and with respect to which, an
agreement to sell was entered into by the plaintiff with defendant nos.1 to 3.
16. It is also relevant to note that plaintiff is not entitled to specific
performance of the contract against defendant nos.1 to 3 for the additional
reason that plaintiff had to prove in terms of Section 16(c) of the Specific Relief
Act that plaintiff was always ready and willing to perform his part of the
contract. The expression „readiness‟ refers to the financial capacity of the
plaintiff at the relevant times including pendente lite, and willingness means the
continued intention at all points of time of the plaintiff to seek specific
performance and not wanting to get the alternative relief of recovery of moneys
or damages, assuming that defendants are guilty of breach of contract. In this
regard, the issue is clinched in favour of the defendant nos.1 to 3 because the
plaintiff admittedly sent his Legal Notice dated 24.7.2006 and in the operative
part of this notice being the third last para of the notice, plaintiff has only sought
refund of the amount paid by the plaintiff to the defendants under the agreement
to sell and the plaintiff has not sought specific performance of the contract.
Once plaintiff himself has only shown his intention to seek refund of the
amounts paid by the plaintiff to the defendants, then plaintiff‟s intention to be
always willing to enter into the sale deed is admittedly found to be lacking and
once plaintiff himself does not seek specific performance and only seeks refund
of price paid, this Court has no hesitation in holding that plaintiff was not
willing at all times to go through with the specific performance by execution of
the sale deed. It is therefore held that the plaintiff not being willing as required
under Section 16(c) of the Specific Relief Act, plaintiff is thus not entitled to the
relief of specific performance.
17. Plaintiff also failed to prove that he was ready at all times for
entering into the sale deed and thus entitled to specific performance of the
agreement to sell with the defendant nos.1 to 3, inasmuch as, the plaintiff had to
prove from the 40th day of the agreement to sell dated 19.6.2006, till the suit
was filed, that the plaintiff had the financial capacity to pay the balance sale
consideration of Rs.1.46 crores to defendant nos.1 to 3. Admittedly, plaintiff
has not led evidence to show his financial capacity from 29.7.2006 till the filing
of the suit on 29.2.2008, and therefore, this Court can safely hold that plaintiff
was not always ready to enter into the sale deed because plaintiff has failed to
prove his financial capacity for a substantial period from 29.7.2006 to
29.2.2008.
18. Therefore, it is seen that the plaintiff is guilty of breach of contract,
plaintiff has not been found to be always willing to perform his part of the
contract, plaintiff has not been found to be always ready to perform the contract,
and thus for all these three reasons the suit for specific performance is liable to
be dismissed by deciding the issues under discussion being issue nos.1, 2, 3 and
5 in favour of the defendant nos.1 to 3 and against the plaintiff. In view of the
facts as found above, the plaintiff is not entitled to the discretionary relief of
specific performance.
19. On the aspects of breach and readiness and willingness, so far as
the legal heirs of late Sh. Badri Nath Sharma are concerned namely defendant
nos.4 to 9, even qua these defendants the discussion above will apply with
respect to plaintiff having failed to demonstrate both readiness and willingness
because facts qua defendant nos.4 to 9 and the plaintiff are the same.
Accordingly, it is held that even qua late Sh. Badri Nath Sharma, and now
represented by defendant nos.4 to 9, plaintiff has failed to show in terms of
Section 16(c) of the Specific Relief Act that the plaintiff was always ready and
willing to perform the agreement to sell and hence, the plaintiff is not entitled to
the relief of specific performance.
20. Once it is held that the plaintiff has not been always ready and
willing to perform his part of the agreement to sell with late Sh. Badri Nath
Sharma and thus I need not discuss the issue of breach of contract i.e whether
the plaintiff was guilty of breach of contract or it was because of the action of
some of the legal heirs of late Sh. Badri Nath Sharma that the plaintiff could not
seek specific performance of the contract with late Sh. Badri Nath Sharma with
respect to the second floor and above of the suit property, but since all issues
have to be decided this issue will also have to be decided. Though even if this
issue is to be decided in favour of the plaintiff, even then the plaintiff will not
be entitled to specific performance as it is already held that plaintiff was not
always ready and willing. While on this aspect, the issue no.6 will also stand
discussed and decided.
21(i) No doubt, plaintiff has proved that defendant nos.5 and 6 had
issued legal notices claiming rights as co-owners of the suit property and
consequently confusion was created and possibly a cloud was cast on the title of
late Sh. Badri Nath Sharma to go through the sale deed, however, it is seen that
it is not any and every confusion and any and every claim of a third person in
violation of the rights of late Sh. Badri Nath Sharma which would give a valid
reason to the plaintiff/buyer to delay performance of his part of the contract and
not seek specific performance because if it is found that the stand which was
raised by the defendant nos.5 and 6 was a frivolous stand not sustainable in law,
then such a frivolous claim/stand of co-ownership cannot give reason to a
prospective purchaser such as the plaintiff to avoid performance of his
obligations of tendering the balance sale consideration and otherwise seek
specific performance.
(ii) It is seen from the Legal Notice dated 23.6.2006 sent by defendant
nos.5 and 6 to the plaintiff and the Sub-Registrar, Mehrauli that these
defendants claim rights in the suit property on the ground that the suit property
was ancestral property. Defendant nos.5 and 6 are the daughter and daughter-
in-law of late Sh. Badri Nath Sharma respectively. I have already reproduced in
the narration part of this judgment the facts with respect to how Smt. Kasto
Devi was the owner and after her death the suit property devolved upon her two
sons, namely Sh. Jagdish Chander Sharma and Sh. Badri Nath Sharma.
(iii) Firstly, the inheritance of a property from a female ancestor even
under the traditional Hindu law does not create an HUF. It is only on
inheritance of an immovable property from a male ancestor that an HUF was
created. Therefore, when the suit property was inherited by Sh. Jagdish
Chander Sharma and Sh. Badri Nath Sharma from their mother (not a paternal
ancestor) who was the registered title holder, then the property in the hands of
Sh. Jagdish Chander Sharma and Sh. Badri Nath Sharma was not ancestral i.e
not HUF even under the traditional Hindu law. For the sake of arguments, if we
assume that it was the ancestral property which devolved from Smt. Kasto Devi
to her two sons Sh. Jagdish Chander Sharma and Sh. Badri Nath Sharma, and
the property was ancestral in the hands of Sh. Jagdish Chander Sharma and Sh.
Badri Nath Sharma, yet it is seen that inheritance opened in favour of two sons
Sh. Jagdish Chander Sharma and Sh. Badri Nath Sharma in the year on 2.2.1977
when Smt. Kasto Devi expired i.e after 1956 and hence inheritance by the sons
of Smt. Kasto Devi is self acquired in their hands. What is the position when a
person dies after 1956 and such property inherited by the legal heirs as to
whether is or is not HUF property has been dealt with by the Supreme Court in
the judgments in the cases of Commissioner of Wealth Tax, Kanpur and
Others Vs. Chander Sen and Others, (1986) 3 SCC 567 and Yudhishter Vs.
Ashok Kumar, (1987) 1 SCC 204 and it is held in these judgments that
inheritance of ancestral properties after 1956 does not result in creation of
HUF. These judgments of the Supreme Court were passed around 20 years
prior to the agreement to sell, agreement to sell being of the year 2006 and the
law declared by the Supreme Court being of 1986/87, and therefore surely the
Legal Notices dated 23.6.2006 issued by the defendant nos.5 and 6 were wholly
baseless and such baseless notices without having any basis to stand in law
could not have been a basis for the plaintiff to claim that he could not perform
the agreement to sell because of a cloud being cast on the title of late Sh. Badri
Nath Sharma. It is only a reasonable legal stand or possible stands which have
some basis in law which could be the reason for creation of a cloud on title and
not that any and every frivolous reason or defence taken by a person can be said
to create a cloud on the title. In my opinion, therefore, plaintiff cannot claim
that he was not bound to tender the balance consideration allegedly on account
of a cloud created on the title of late Sh. Badri Nath Sharma by defendant nos.5
and 6 issuing their Legal Notices dated 23.6.2006. I may observe at the request
made by the counsel for defendant no. 9 that observations made in this
judgment with respect to claim of defendant nos.5 and 6 to the property of late
Sh. Badri Nath Sharma are limited to the ground of property being HUF
property and not to any other claim of legal heirs of late Sh. Badri Nath Sharma
on any other legal cause of action.
22. Accordingly, it is held that plaintiff is guilty of breach of contract
even qua late Sh. Badri Nath Sharma and hence plaintiff is not entitled to
specific performance of the contract.
23(i) While on these aspects while discussing issue nos.1 to3, 5 and 6,
two aspects will have to be discussed inasmuch as firstly plaintiff has pleaded in
the plaint that plaintiff could not seek specific performance because late Sh.
Badri Nath Sharma had mortgaged the second floor portion of the suit property
with Punjab National Bank, Swami Ram Tirath Nagar, New Delhi and that
since under the agreement to sell plaintiff had to receive unencumbered
property, but on account of the mortgage, the agreement to sell could not
fructify into a sale deed. Second aspect is that the defendant no.7 claims that
late Sh. Badri Nath Sharma had executed a gift deed in his favour of the second
floor portion and above of the suit property in terms of the Gift Deed dated
5.9.2006 and therefore plaintiff pleads that late Sh. Badri Nath Sharma had
consequently incapacitated himself to execute the sale deed on account of the
said Gift Deed dated 5.9.2006.
(ii) In my opinion, both these issues which are raised by the plaintiff
lack any foundation so far as the present suit for specific performance is
concerned because if the plaintiff was to raise the ground of mortgage for his
not tendering the balance sale consideration on or before 29.7.2006, then the
fact of the matter however is that the defendants have filed the certificate of
Punjab National Bank dated 7.3.2007 (Ex.D2) and which shows that the
mortgage of the property was cleared on 31.7.2006. Therefore, it cannot be
strictly held that as on 29.7.2006 late Sh. Badri Nath Sharma was incapacitated
on account of the mortgage to Punjab National Bank in going ahead with the
sale deed inasmuch as immediately on late Sh. Badri Nath Sharma being put to
notice of the mortgage by the plaintiff‟s Legal Notice dated 24.7.2006, late Sh.
Badri Nath Sharma cleared the mortgage by 31.7.2006 i.e within two days of
29.7.2006 and six days of receipt of the legal notice. In my opinion, therefore
this aspect of mortgage cannot be a ground for the plaintiff to claim that he
could not for this reason of mortgage seek specific performance against late Sh.
Badri Nath Sharma.
(iii) So far as the aspect of gift deed in favour of defendant no.7 is
concerned, it is seen that in law all that would have been the consequence of the
gift deed is that plaintiff would have to sue the defendant no.7 in substitution of
late Sh. Badri Nath Sharma because defendant no.7 would be a successor-in-
interest of late Sh. Badri Nath Sharma and a successor-in-interest is always
bound by any contractual documents entered into prior to the execution of a gift
deed transferring the property. Therefore, the gift deed in favour of defendant
no.7 could not have prevented the plaintiff from seeking specific performance
of the Agreement to Sell dated 19.6.2006. The conjoint effect of the Agreement
to Sell dated 19.6.2006 of the plaintiff with late Sh. Badri Nath Sharma, MOU
of the same date 19.6.2006 for reconstruction of the property would have been
that late Sh. Badri Nath Sharma would have got the newly constructed first floor
portion of the property and the balance sale consideration i.e Rs.33 lacs
minus Rs.5 lacs, and on account of the gift deed, the legal consequence would
have been that such consideration would be payable to defendant no.7. These
are therefore not grounds on which plaintiff can claim any handicap in seeking
specific performance of the agreement to sell against late Sh. Badri Nath
Sharma and the defendant no.7. This argument of the plaintiff is also therefore
rejected and issue no.6 is decided against the plaintiff.
24. Accordingly, issue nos.1 to 3, 5 and 6 are held against the plaintiff
and in favour of the defendants.
Issue nos.4 and 7
25. These issues are not pressed and are disposed of accordingly but
the same will not have any impact on the decision of issue nos.1 to 3, 5 and 6
which have already been held against the plaintiff and in favour of the
defendants.
Issue No.8
26. Issue no.8 will stand decided in favour of the plaintiff and against
the defendant nos.5, 6 and 9 because defendant nos.5, 6 and 9 are the legal heirs
of late Sh. Badri Nath Sharma and in law the legal heirs of a person are bound
by the contractual agreements executed by their predecessor-in-interest unless
of course by any judgment or law, the legal heirs get exempted from the
performance of the contractual documents entered into by their predecessor-in-
interest, and which is not so in the facts of the present case. Issue no.8 is
therefore decided in favour of the plaintiff.
Issue nos.9 and 10
27. In view of the aforesaid discussion, it is found that plaintiff is not
entitled to the specific performance of the agreements to sell and plaintiff is not
entitled to succeed for any of the reliefs claimed in the suit. The suit is therefore
dismissed, leaving the parties to bear their own costs. The amount lying
deposited with the defendants as per the FDRs created by them may no longer
be kept in FDRs and these can be encahsed by the defendants as the plaintiff has
not, and on a query being put also, sought any money decree in the present suit.
MAY 17, 2016 VALMIKI J. MEHTA, J
ib/Ne
