Supreme Court of India
R. Kandasamy(Since Dead) vs T.R.K.Sarawathy on 21 November, 2024
Author: Dipankar Datta
Bench: Sanjay Karol, Dipankar Datta
2024 INSC 884 REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 3015 OF 2013
R. KANDASAMY (SINCE DEAD) & ORS. … APPELLANTS
VERSUS
T.R.K. SARAWATHY & ANR. …RESPONDENTS
WITH
CIVIL APPEAL NO. 3016 OF 2013
M/S. ABT LIMITED … APPELLANT
VERSUS
T.R.K. SARAWATHY & ORS. …RESPONDENTS
JUDGMENT
DIPANKAR DATTA, J.
THE APPEALS
1. The appellants1 in Civil Appeal No.3015 / 2013 were the defendants in
a suit2 for specific performance of an agreement for sale3 instituted by
Signature Not Verified
Digitally signed by
JATINDER KAUR
Date: 2024.11.21
17:40:48 IST
Reason:
1
sellers, hereafter
2
O.S. 420 of 2006
3
Agreement, hereafter
1
the first respondent as the plaintiff4, in respect of land together with a
tenanted building5. The suit was dismissed by the Trial Court vide
judgment and decree dated 17th December, 2007. Upon a first appeal6
being carried under section 96 of the Code of Civil Procedure, 19087
by the buyer before the High Court of Judicature at Madras8, the same
succeeded vide judgment and decree dated 21st October, 20119. The
High Court reversed the judgment and decree of dismissal of the suit
and granted decree for specific performance. The sellers have taken
exception to the first appellate judgment and decree in this appeal by
special leave, granted on 5th April, 2013.
2. Civil Appeal No.3016 / 2013 is also an appeal against the impugned
judgment, special leave wherefor was also granted on 5 th April, 2013.
It is at the instance of a company10 who had purchased the property,
forming the subject of the Agreement, from the sellers when the first
appeal was pending before the High Court without any order
restraining the sellers to alienate the same. Upon such purchase, the
subsequent purchaser derived knowledge of pendency of the first
appeal; thus, it applied for and was impleaded as the eight respondent
therein.
4
buyer, hereafter
5
property, hereafter
6
A.S.811 of 2008
7
CPC, hereafter
8
High Court, hereafter
9
impugned judgment, hereafter
10
subsequent purchaser, hereafter
2
RESUME OF FACTS
3. Although the facts leading to institution of the suit by the buyer and
the defence raised by the sellers are captured in the decisions of the
Trial Court as well as the High Court, for the sake of completeness, we
consider it appropriate to briefly refer to the same hereunder:
a. The parties, on mutually agreed terms, executed the Agreement
dated 20th January, 2005 for sale of the property. Towards
consideration, the buyer agreed to pay Rs. 2.3 crore to the sellers.
Other noticeable features of the Agreement are:
i. A sum of Rs. 10 lakh was paid by the buyer as an advance.
ii. The buyer had to pay the balance sale consideration within
four months from the date of the Agreement (the period
ending on 19th May, 2005).
iii. On the date of the Agreement, the property was occupied
by tenants and the sellers agreed that they will have the
tenants vacate the property and deliver vacant possession
thereof to the buyer at the time of sale.
iv. Time shall be of the essence.
b. The buyer started effecting payments in instalments. She paid Rs.
5 lakh, Rs. 4 lakh, Rs. 1 lakh and Rs. 5 lakh on 2nd February, 24th
February, 5th June, and 24th July, 2005, respectively, totalling to
Rs. 15 lakh. Taking into consideration Rs.10 lakh paid in advance,
3
the buyer paid in all Rs. 19 lakh prior to 19th May, 2005 and Rs. 6lakh beyond that date.
c. The sellers vide letter dated 23rd February, 2006 cancelled the
Agreement and returned the sum of Rs. 25 lakh claiming that the
said period of 4 (four) months had expired and that the buyer had
not shown interest to complete the deal. However, the buyer vide
reply letter dated 24th February, 2006 refuted the contents of the
letter and emphasized that the sellers were bound to have the
property vacated and the sale deed had to be executed only after
all the tenants had vacated the property. It is noted that the last
of the tenants vacated the property on 2nd February, 2006.
d. The sellers vide letter dated 2nd March, 2006 asserted that the
buyer has no right to claim purchase of the property as the
Agreement had already been cancelled. The sellers reiterated that
time is not the essence of the contract; the said period of 4 (four)
months had expired; the fact of vacation of property by tenants
was duly conveyed to the buyer multiple times; and despite
multiple requests, the buyer did not come forward to execute the
sale deed. For these reasons, the Agreement was cancelled vide
letter dated 23rd February, 2006 and the pay order of Rs. 25 lakh
was returned.
e. Despite the letter dated 23rd February, 2006 whereby the sellers
cancelled the Agreement (reiterated vide letter dated 2nd March,
2006), the sellers vide a telegram dated 11th March, 2006 again
4
expressed interest to sell the property and conveyed that they
were ready to sell it; consequently, the buyer was called upon to
complete the sale before 24th March, 2006.
f. The buyer, claiming that she was out of station, sent a letter on
18th March, 2006. She asserted that as per the Agreement, she
had four months’ time from the date of vacating of the property
by all the tenants. A request was made calling upon the sellers to
bring the original documents and ‘encumbrance certificate for 30
years’ to enable her advocate prepare the sale deed.
g. The sellers then sent a letter dated 23rd March, 2006 asserting
therein that the period of four months is to be counted from the
date of the Agreement, and the demand for encumbrance
certificate was not tenable as the buyer had already obtained
encumbrance certificate from the sellers prior to entering into the
Agreement and had also assured that she herself would verify the
said certificate from the date of Agreement till date of sale. The
sellers further stated that irrespective of the above, they have
applied for encumbrance certificate and requested the buyer to
execute the sale deed within a week from receipt of encumbrance
certificate, failing which, the Agreement would stand cancelled.
h. On 25th March, 2006, the sellers called upon the buyer to pay the
sale consideration of Rs. 2.3 crore within 7 (seven) days. The
buyer responded vide reply notice dated 29th March, 2006 and
5
enclosed with it a draft sale deed and also demanded the sellers
to hand over the encumbrance certificate.
i. The sellers responded vide letter dated 6th April, 2006 and
reiterated that photostat copies of the title deeds and
encumbrance certificate up to the date of Agreement was already
furnished to, and verified by the buyer before entering into the
Agreement and that although it was not possible for them to
deliver the original documents, they were ready to let the buyer
verify the original documents. They also made a request to the
buyer to pay the sale consideration within 5 (five) days from
receipt of the letter.
j. The sellers had not handed over the “original parent documents”
for perusal of the buyer; hence, the buyer directly spoke to one
of the sellers (the fourth defendant) asking him to bring the
“original parent documents” for inspection. The buyer also sent a
notice dated 22nd April, 2006 to the counsel of the sellers
requesting him to advise the sellers to bring the documents for
the buyer’s verification.
k. Vide letter dated 26th April 2006, the sellers deplored the buyer’s
dilatory tactic of conjuring new demands at the eleventh hour.
Despite this, the sellers said, that they attempted their best to
satisfy the buyer’s demand and offered the buyer the chance to
inspect the original parent documents (vide letter dated 6th
April,2006), which offer the buyer showed no interest in availing.
6
In view of the buyer’s failure to perform her part of the bargain
despite multiple opportunities being given, the sellers declared
that the Agreement finally stood cancelled,.
l. Thereafter, vide letter dated 10th August, 2006, the buyer called
upon the sellers to collect the pay order dated 11th February, 2006
for Rs. 25 lakh from the buyer’s office, but the sellers did not
collect the same. The buyer then enclosed the pay order with her
letter dated 10th August, 2006 and sent it to the sellers who, vide
letter dated 14th August, 2006 replied that the Agreement had
already been cancelled and that the buyer, who earlier was not
ready and willing, is now trying to grab the property as the value
of the property has gone up multiple times.
4. It is in this factual background that litigation between the buyer and
the seller commenced with institution of the suit by the buyer before
the Court of the District Judge of Coimbatore. The suit was later
transferred by the District Judge to the Court of the Additional District
Judge (Fast Track Court I)11. Based on the averments in the plaint,
which refer to more or less what we have narrated above in paragraph
3, relief was claimed in the following terms:
a. To pass a decree for specific performance of the Agreement dated
20th January, 2005 or in the alternate a decree for refund of
11
Trial Court, hereafter7
advance amount of Rs. 25 lakh with 18% interest p.a. from thedate of Agreement till realization.
b. For permanent injunction restraining the sellers from alienating or
encumbering the property.
c. To direct the sellers to pay the costs of the suit.
d. Any other relief that the court deems fit.
5. The sellers in their written statement refuted all the contentions raised
in the plaint and pleaded that the buyer was never ready and willing
to purchase the property and alleged that the buyer filed the suit with
the intention to take benefit of the increase in price of the property by
projecting a theory that time is not of the essence.
VERDICTS OF THE TRIAL COURT AND THE HIGH COURT
6. The Trial Court framed and answered the issues as follows:
6.1 Whether the agreement for sale dated 20th January, 2005, is
true, valid and legally enforceable? Answered in the affirmative.
6.2 Whether as per the agreement for sale, the plaintiff was ready
and willing to pay the balance sale consideration and get the
sale deed executed? Answered in the negative.
6.3 Whether the plaintiff is entitled for a decree directing the
defendants to receive the balance sale consideration and
execute the sale deed? Answered in the negative.
8
6.4 Whether the plaintiff is entitled to the alternative relief of refund
of Rs.25,00,000 with 18% interest p.a. from the defendants?
Answered in the negative.
7. As has been noticed above, the fortune of the parties changed before
the Trial Court and the High Court. High Court, in appeal, decreed the
suit of the buyer. High Court observed that time was not of essence as
the sellers had received payments, without protest, even after the final
date fixed for the performance of the Agreement. After analysing the
documents on record, the High Court observed that the buyer was
ready and willing and found no reason which disentitled her from the
discretionary relief of specific performance.
ARGUMENTS
8. Mr. Dwivedi, learned senior counsel for the sellers, argued that the
impugned judgment is completely flawed and hence, the appeal
deserves interference.
8.1 Firstly, Mr. Dwivedi contended that the terms of the Agreement
clearly provided that leaving aside the sum paid as advance, the
time period for making payment of the balance sale
consideration would be four months commencing from the date
of such Agreement, i.e., 20th January, 2005. Admittedly, the
buyer did not make the payment as agreed by and between the
parties and time being the essence of the contract, the Trial
9
Court was justified in dismissing the suit (although on the point
of time being the essence of the contract, it had held otherwise).
8.2 Secondly, Mr. Dwivedi invited our attention to the letter dated
23rd February, 2006 sent by the sellers to the buyer whereby the
sellers cancelled the Agreement and refunded the advance
amount. The relevant part of the said letter is reproduced below:
“…….You failed to pay the balance sale consideration
within the period of 4 months and get the sale deed
executed.”In reply to the above, the buyer sent a letter dated 24th February,
2006 to the sellers. Nowhere in this reply letter did the buyer
expressly mention that the period of four months is to be
counted from the date of vacation of the property by the tenants.
Hence, the assertion that the period of four months was to be
counted from the date of vacation is merely an afterthought.
8.3 Thirdly, Mr. Dwivedi asserted that vide telegram dated 11th
March, 2006, the sellers gave one last opportunity to the buyer
to pay the balance amount and register the sale deed before 24th
March, 2006. It has come on record that the buyer, despite being
present in Coimbatore, falsely represented in her reply dated
18th March, 2006 that she was out of station and, hence, was
disabled to respond immediately. The conduct of the buyer,
therefore, does not inspire confidence and certainly such conduct
was sufficient to deny her equitable relief.
10
8.4 Fourthly, Mr. Dwivedi contended that the buyer was never ready
and willing to perform her part of the bargain and hence she was
not entitled to the relief of specific performance. To show the
reluctance of the buyer to go ahead with the transaction, various
communications by and between the parties were referred to.
The reply dated 24th February, 2006 was first referred wherefrom
it would be evident that the buyer was aware of the fact of
vacation of the property by the last remaining tenant. Vide
telegram dated 11th March, 2006, the sellers called upon the
buyer to hand over the pay order and gave time till 24 th March,
2006 to pay the balance sale amount and register the sale deed.
Despite this, the buyer did not initiate any positive action as
evidence of her readiness and willingness. Again, vide letter
dated 23rd March, 2006, the sellers informed the buyer that they
had applied for the encumbrance certificate, even though
provision of such certificate was not a term of the Agreement.
The sellers again called upon the buyer to execute the sale deed
within 7 (seven) days from the date of receipt of the certificate.
Even then, the buyer did not take steps to complete the sale.
The sellers sent the encumbrance certificate as requested vide
letter dated 06th April, 2006, and asked the buyer to execute the
sale deed within 5 (five) days; however, even then, the buyer
did not do the needful. Ultimately, having no other option, the
sellers finally had to cancel the Agreement vide letter dated 26th
11
April, 2006. Thereafter, the buyer maintained silence for four
months. There is no reasonable justification for such silence.
8.5 Fifthly, Mr. Dwivedi submitted that the buyer has nowhere
pleaded that she had purchased the stamp papers for execution
of the sale deed. This further suggests that the buyer was not
ready and willing to perform her part of the obligations under
the Agreement.
8.6 Sixthly, Mr. Dwivedi argued that the buyer had taken
prevaricating stands and, therefore, is not entitled to the
discretionary relief of specific performance. He drew our
attention to the letter dated 24th February, 2006 wherein the
buyer stated:
“It appears that only few days ago, the tenant has
vacated and the portion is kept under lock and key.”
This shows that the buyer was aware of the fact of vacation ofthe property by the last tenant days prior to 24 th February,
2006. However, in her letter dated 18th March, 2006, she stated
that:
“You have vacated all the tenants only on 02.02.2006
and it has been officially intimated to me only on
04.03.2006 by your letter dated 02.03.2006”.
To show the alleged wrongful conduct of the buyer, our
attention was drawn to another instance. In her reply dated
18th March 2006 to the telegram, the buyer stated:
“…………………I am in receipt of your telegram dated
11.03.2006 which has been received by my office and12
due to my non-availability in the town I could not take
immediate action in this……………….”However, when the buyer was confronted with Exs. B1 and B2
being news items appearing in Tamil dailies dated 15th March and
16th March, 2006 (wherein the buyer was seen receiving an
award at Coimbatore), she admitted that between 11th March
and 18th March, 2006 she was coming to and going out of
Coimbatore. This fact was neither mentioned in her plaint nor in
her sworn affidavit before the High Court. Having come with
unclean hands by suppressing such material facts, the buyer
disentitled herself to the relief of specific performance.
8.7 Seventhly, Mr. Dwivedi urged that the Agreement having stood
cancelled at the instance of the sellers, not once but twice, it was
necessary for the buyer to seek declaration that the cancellation
was bad and not operative and binding qua her and in the
absence of such a prayer, the suit itself was not maintainable in
law. However, Mr. Dwivedi fairly pointed out that no such point
having been raised by the sellers in their written statement, the
Trial Court did not frame an issue on such aspect. Nevertheless,
it was argued that this was a substantial point of law concerning
the Court’s very jurisdiction, which ought to weigh in the mind
of the Court while considering whether, at all, the relief of specific
performance could be granted in favour of the buyer on the face
of her omission/neglect to claim appropriate relief.
13
8.8 Eighthly, while inviting our attention to several documents on
record, more particularly the cross-examination of the buyer
wherein she admitted that she did not have enough money in
either of her bank accounts to pay the balance sale price and
asserted that she had the money in cash, Mr. Dwivedi contended
that the buyer did not have the capacity to go ahead with the
sale transaction.
8.9 Ninthly, it was the submission of Mr. Dwivedi that the property
was sold by the sellers to the subsequent purchaser after stay,
prayed in connection with the first appeal of the buyer, was
refused by the High Court. A property which was being sold for
Rs.2.3 crore had fetched a price of Rs.8 crore and that relief of
specific performance being an equitable relief, the facts and
circumstances were not such so as to decree the suit of the buyer
particularly having regard to her conduct.
8.10 Finally, Mr. Dwivedi appealed that it was a fit and proper case
where the impugned judgment of the High Court ought to be
reversed and that of the Trial Court restored.
9. Mr. Rana Mukherjee, learned senior counsel for the subsequent
purchaser adopted the submissions of Mr. Dwivedi and submitted that
that the conduct of the buyer disentitles her from claiming the relief of
specific performance; therefore, the Trial Court rightly dismissed the
suit. That apart, the subsequent purchaser being a bona fide purchaser
of the property for value, this Court may not disturb the status quo.
14
10. Mr. Guru Krishna Kumar, learned senior counsel for the buyer, argued
that the view taken by the High Court is correct, well-reasoned, not
perverse and a plausible view; hence, it does not warrant interference.
10.1 First, Mr. Kumar contended that both the Trial Court and High
Court have concurrently found that time is not the essence of
the contract. While inviting our attention to several documents
on record, Mr. Kumar contended that the following conduct of
the sellers itself evinced that for them, time was not of the
essence:
i. the sellers received payments on 5th June 2004 and 24th July
2005, which is after the final date that they say was fixed for
performance of the Agreement, i.e. 19th May 2005;
ii. even though they purportedly cancelled the Agreement vide
telegram dated 11th March 2006, in their subsequent letters
dated 23rd March 2006, 24th March 2006 and 6th April 2006,
they have given extensions to the buyer in a piecemeal
manner;
iii. and the sale deed could not have been executed by the
sellers unless they evicted all tenants. Since such eviction is
an uncertain event, time could not have been of the essence.
10.2 Secondly, Mr. Kumar submitted that the sellers have delineated
a conduct full of blemishes, elaborated below, which disentitles
them from discretionary relief of specific performance:
15
i. vide their letter dated 23rd February 2006, sellers purportedly
cancelled the Agreement, then taking a volte face, vide letter
dated 11th March 2006, the sellers conveyed that they were
ready to sell the property;
ii. the sellers never furnished the original title deeds for
inspection by the buyer;
iii. though the sellers returned the pay order of Rs. 25 lakh vide
letter dated 11th February 2006, it was sent to a wrong
address;
iv. and the sellers never obtained and produced any document
from their bank, viz. M/s Vijaya Bank, showing the status of
the pay order issued by the buyer, even though the same
could have been obtained by them and this they did
deliberately, so that the court can conclude that either the
buyer has encashed the same or that the buyer never
returned the same to sellers.
Mr. Kumar cited the decision of this Court in Ferrodous Estates
(P) Ltd v P. Gopirathnam12 and relied on the following
paragraph:
“54. …As has been found earlier in this judgment, the Sellers
were held to have taken up dishonest pleas and also held to
have been in breach of a solemn agreement in which they were
to obtain the Urban Land Ceiling permission which, if not
obtained, would, under the agreement itself, not stand in the
way of the specific performance of the agreement between the
parties. He who asks for equity must do equity. Given the
conduct of the defendants in this case, as contrasted with the
12
2020 SCC Online 82516
conduct of the appellant who is ready and willing throughout to
perform its part of the bargain. We think this is a fit case in
which the Division Bench judgment should be set aside. As a
result, the decree passed by the Single Judge is restored. Since
the appellant itself offered a sum of Rs. 1.25 crores to the
Division Bench, it must be made to pay this amount to the
respondents within a period of eight weeks from the date of
this judgment.”
(emphasis supplied)
10.3 Thirdly, Mr. Kumar asserted that the buyer was always readyand willing to perform her part of the bargain. In fact, the
buyer’s obligation to pay the balance consideration was to be
fulfilled only after the sellers had performed their part of the
bargain, which was to be ready to hand over the vacant
possession of the property by evicting the tenants. Hence,
without first performing their reciprocal promises, the sellers
could not have called upon the buyer to pay the balance sale
consideration. On the contrary, it was the sellers who were not
ready to perform their part. Vide letter dated 22nd April 2006,
the buyer demanded the sellers to produce the original title
deeds which was refused by the sellers vide their letter dated
26th April 2006. Even though there was no express condition in
the Agreement for production of original title deeds, but such
condition is implied in the Agreement. Hence, without the
sellers having first complied with their promise, they could not
have called upon the buyer to perform her part and later claim
that the buyer was not ready and willing.
17
10.4 Taking the above into consideration, Mr. Kumar submitted, that
the High Court has rightly granted the discretionary relief of
specific performance in favour of the buyer.
QUESTION
11. The sole question that we are tasked to decide is, whether the
impugned judgment of the High Court warrants any interdiction in
exercise of our appellate jurisdiction.
JUDICIAL PRECEDENTS
12. Before embarking on the aforesaid task, it would only be just and
proper to remind ourselves of certain well-settled principles that have
evolved through judicial precedents laid down by this Court on certain
points which invariably arise in specific performance suits and which
are relevant for the purpose of a decision on these appeals.
ON WHETHER TIME IS THE ESSENCE OF THE CONTRACT:
13. A Constitution Bench of this Court in Chand Rani v. Kamal Rani13
surveyed previous decisions on the question as to whether or not time
is the essence of the contract in transactions of sale of immovable
properties and appears to have made a slight departure from earlier
principles by ruling as under:
13
(1993) 1 SCC 519
18
“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
performed in a reasonable time if the conditions are:
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.”
14. An instructive discussion is found in Saradamani Kandappan v. S.
Rajalakshmi14 of how the principle of time not being the essence of
the contract in transactions relating to sale of immovable properties
took shape and how with changing times, the outlook of the courts in
pleas claiming specific performance should be. We consider it
appropriate to reproduce the same hereunder:
“36. The principle that time is not of the essence of contracts
relating to immovable properties took shape in an era when
market values 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)…..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
14
(2011) 12 SCC 1819
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’.……………
***
42. 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 a 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 Rani2 and other cases. Be that as it may.
43. Till the issue is considered in an appropriate case, we can
only reiterate what has been suggested in K.S. Vidyanadam:
(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. The 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 that 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 the 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.”
(emphasis supplied)
20
CONSIDERATIONS IN GRANT OR REFUSAL:
15. A three-Judge Bench of this Court in Prakash Chandra v. Angadlal15
held, the ordinary rule is that specific performance should be granted.
It ought to be denied only when equitable considerations point to its
refusal and the circumstances show that damages would constitute an
adequate relief.
16. This Court in N.P. Thirugnanam v. R. Jagan Mohan Rao (Dr)16
while reiterating that the remedy of specific performance is equitable
in nature and that granting or refusing specific performance is within
the discretion of the court, had the occasion to observe:
“5. It is settled law that remedy for specific performance is an
equitable remedy and is in the discretion of the court, which
discretion requires to be exercised according to settled
principles of law and not arbitrarily as adumbrated under
Section 20 of the Specific Relief Act, 1963 (for short ‘the Act’).
Under Section 20, the court is not bound to grant the relief just
because there was a valid agreement of sale. Section 16(c) of
the Act envisages that plaintiff must plead and prove that he
had 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 those terms the performance of which has
been prevented or waived by the defendant. The continuous
readiness and willingness on the part of the plaintiff is a
condition precedent to grant the relief of specific performance.
This circumstance is material and relevant and is required to be
considered by the court while granting or refusing to grant the
relief. If the plaintiff fails to either aver or prove the same, he
must fail. To adjudge whether the plaintiff is ready and willing
to perform his part of the contract, the court must take into
consideration the conduct of the plaintiff prior and subsequent
to the filing of the suit along with other attending
circumstances. The amount of consideration which he has to
pay to the defendant must of necessity be proved to be
available. Right from the date of the execution till date of the
decree he must prove that he is ready and has always been15
(1979) 4 SCC 393
16
(1995) 5 SCC 11521
willing to perform his part of the contract. As stated, the factum
of his readiness and willingness to perform his part of the
contract is to be adjudged with reference to the conduct of the
party and the attending circumstances. The court may infer
from the facts and circumstances whether the plaintiff was
ready and was always ready and willing to perform his part of
the contract.”
(emphasis supplied)
17. In Nirmala Anand v. Advent Corpn. (P) Ltd.17, a Bench of three
Judges of this Court discussed what are the considerations that need
to be kept in view while considering grant or refusal of a decree of
specific performance in the following words:
“6. It is true that grant of decree of specific 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.”17
(2002) 8 SCC 14622
18. In Kamal Kumar v. Premlata Joshi18, one finds the following
instructive passage:
“7. It is a settled principle of law that the grant of relief of
specific performance is a discretionary and equitable relief. The
material questions, which are required to be gone into for grant
of the relief of specific performance, are:
7.1. First, whether there exists a valid and concluded contract
between the parties for sale/purchase of the suit property.
7.2. Second, whether the plaintiff has been ready and willing to
perform his part of contract and whether he is still ready and
willing to perform his part as mentioned in the contract.
7.3. Third, whether the plaintiff has, in fact, performed his part
of the contract and, if so, how and to what extent and in what
manner he has performed and whether such performance was
in conformity with the terms of the contract;
7.4. Fourth, whether it will be equitable to grant the relief of
specific performance to the plaintiff against the defendant in
relation to suit property or it will cause any kind of hardship to
the defendant and, if so, how and in what manner and the
extent if such relief is eventually granted to the plaintiff;
7.5. Lastly, whether the plaintiff is entitled for grant of any other
alternative relief, namely, refund of earnest money, etc. and, if
so, on what grounds.
8. In our opinion, the aforementioned questions are part of the
statutory requirements [See Sections 16(c), 20, 21, 22, 23 of
the Specific Relief Act, 1963 and Forms 47/48 of Appendices A
to C of the Code of Civil Procedure]. These requirements have
to be properly pleaded by the parties in their respective
pleadings and proved with the aid of evidence in accordance
with law. It is only then the Court is entitled to exercise its
discretion and accordingly grant or refuse the relief of specific
performance depending upon the case made out by the parties
on facts.”
19. Quite recently, Kamal Kumar (supra) has been followed in P.
Daivasigamani v. S. Sambandan19.
WHO CAN BE SAID TO BE ‘READY AND WILLING’?
18
(2019) 3 SCC 793
19
(2022) 14 SCC 793
23
20. In C.S. Venkatesh vs. A.S.C. Murthy20, this Court on consideration
of various decisions culled out what is implied by the words “ready and
willing”. It was held:
“16. The words ‘ready and willing’ imply that the plaintiff was
prepared to carry out those parts of the contract to their logical
end so far as they depend upon his performance. The
continuous readiness and willingness on the part of the plaintiff
is a condition precedent to grant the relief of performance. If
the plaintiff fails to either aver or prove the same, he must fail.
To adjudge whether the plaintiff is ready and willing to perform
his part of contract, the court must take into consideration the
conduct of the plaintiff prior, and subsequent to the filing of the
suit along with other attending circumstances. The amount
which he has to pay the defendant must be of necessity to be
proved to be available. Right from the date of the execution of
the contract till the date of decree, he must prove that he is
ready and willing to perform his part of the contract. The court
may infer from the facts and circumstances whether the plaintiff
was ready and was always ready to perform his contract.
21. Requisite pleadings and proof that are required of a plaintiff to succeed
in a suit for specific performance are succinctly captured in this Court’s
decision of recent origin in U.N. Krishnamurthy v. A.M.
Krishnamurthy21. The relevant passage reads:
“24. 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 of20
(2020) 3 SCC 280
21
(2023) 11 SCC 77524
adequate funds for timely compliance with the terms and
conditions of a contract involving payment of money.”ABSENT A PRAYER FOR DECLARATORY RELIEF THAT TERMINATION OF THE AGREEMENT IS
BAD IN LAW, WHETHER A SUIT FOR SPECIFIC PERFORMANCE IS MAINTAINABLE?
22. This question has been considered by this Court in I.S. Sikandar v.
K. Subramani22 and answered in the following words:
“37. As could be seen from the prayer sought for in the original
suit, the plaintiff has not sought for declaratory relief to declare
the termination of agreement of sale as bad in law. In the
absence of such prayer by the plaintiff the original suit filed by
him before the trial court for grant of decree for specific
performance in respect of the suit schedule property on the
basis of agreement of sale and consequential relief of decree
for permanent injunction is not maintainable in law.”
23. I.S. Sikandar (supra) was followed by this Court in Mohinder Kaur
v. Sant Paul Singh23 where, on facts, it was also held that the relief
of specific performance being discretionary in nature, the respondent
cannot be held to have established his case for grant of such relief.
24. However, in the interregnum, I.S. Sikandar (supra) was also
considered by this Court in A. Kanthamani v. Nasreen Ahmed24 and
it was held that the former decision turns on the facts involved therein
and is, thus, distinguishable. In the latter decision, this Court also held
that it is a well-settled principle of law that the plea regarding the
maintainability of suit is required to be raised in the first instance in
the pleading (written statement) and then only such plea can be
22
(2013) 15 SCC 27
23
(2019) 9 SCC 358
24
(2017) 4 SCC 654
25
adjudicated by the Trial Court on its merits as a preliminary issue under
Order 14 Rule 2 CPC. Once a finding is rendered on the plea, the same
can then be examined by the first or/and second appellate court. It is
only in appropriate cases, where the court prima facie finds by mere
perusal of plaint allegations that the suit is barred by any express
provision of law or is not legally maintainable due to any legal
provision, a judicial notice can be taken to avoid abuse of judicial
process in prosecuting such suit. However, such was not the case
therein.
25. What follows from A. Kanthamani (supra) is that unless an issue as
to maintainability is framed by the Trial Court, the suit cannot be held
to be not maintainable at the appellate stage only because appropriate
declaratory relief has not been prayed.
ON INCONSISTENT CLAUSES IN AN AGREEMENT
26. It is not an infrequent happening that two or more clauses in a contract
could, in some measure, be inconsistent with each other, – the
inconsistency arising because the clauses cannot sensibly be read
together. Lord Wrenbury in Forbes v. Git 25 applied the following
principle:
“The principle of law to be applied may be stated in a few words.
If in a deed an earlier clause is followed by a later clause which
destroys altogether the obligation created by the earlier clause,
the later clause is to be rejected as repugnant and the earlier
clause prevails. In this case the two clauses cannot be
reconciled and the earlier provision in the deed prevails over
the later. Thus if A covenants to pay … 100 and the deed
25
[1922] 1 A.C. 25626
subsequently provides that he shall not be liable under this
covenant, that later provision is to be rejected as repugnant
and void, for it altogether destroys the covenant. But if the later
clause does not destroy but only qualifies the earlier, then the
two are to be read together and effect is to be given to the
intention of the parties as disclosed by the deed as a whole.
Thus if A covenants to pay … 100 and the deed subsequently
provides that he shall be liable to pay only at a future named
date or in a future defined event or if at the due date of payment
he holds a defined office, then the absolute covenant to pay is
controlled by the words qualifying the obligation in manner
described.”
27. The aforesaid principle of law was approved by this Court in Radha
Sundar Dutta v. Mohd. Jahadur Rahim26, where a bench of three
Judges held that it is a settled rule of interpretation that if there be
admissible two constructions of a document, one of which will give
effect to all the clauses therein while the other will render one or more
of them nugatory, it is the former that should be adopted on the
principle expressed in the maxim “ut res magis valeat quam pereat”.
Following it up, it was also observed that if, in fact, there is a conflict
between the earlier clause and the later clauses and it is not possible
to give effect to all of them, then the rule of construction is well
established that it is the earlier clause that must override the later
clauses and not vice versa.
28. A decision of recent origin of this Court in Bharat Sher Singh Kalsia
v. State of Bihar27 having taken note of the aforesaid decisions,
proceeded to hold:
“32. We are of the considered opinion that all three clauses are
capable of being construed in such a manner that they operate26
AIR 1959 SC 24
27
(2024) 4 SCC 31827
in their own fields and are not rendered nugatory. That apart,
we are mindful that even if we had perceived a conflict between
Clauses 3 and 11, on the one hand, and Clause 15 on the other,
we would have to conclude that Clauses 3 and 11 would prevail
over Clause 15 as when the same cannot be reconciled, the
earlier clause(s) would prevail over the latter clause(s), when
construing a deed or a contract. Reference for such proposition
is traceable to Forbes v. Git as approvingly taken note of by a
three-Judge Bench of this Court in Radha Sundar Dutta v. Mohd.
Jahadur Rahim. However, we have been able, as noted above,
to reconcile the three clauses in the current scenario.”
ANALYSIS AND REASONS
29. A suit for specific performance of a contract for sale, normally, is
premised on a written agreement between the contracting parties,
signifying a meeting of minds of two persons or more. Terms of the
agreement, which are reasonably ascertainable from the written
document, assume extreme relevance. After all, compliance with other
requisites takes the shape of a concluded contract and should there be
no vitiating factor, the parties are bound thereby.
30. The first point that we need to examine is the effect of the two clauses
of the Agreement and to apply the law laid down by this Court in
Radha Sundar Dutta (supra) and Bharat Sher Singh Kalsia
(supra). The said clauses read as follows:
“The Second party will have to pay the balance sale price within
four months from today and obtain a sale deed either in his
name or in the name of persons nominated by him at his own
expense.”“There are tenants in the property described below at present.
The First Parties agree to vacate the tenants and hand over
vacant possession to the Second Party at the time of obtaining
the sale.”28
31. On a bare reading of the aforesaid clauses, we do not find that the
latter clause destroys the effect of the former clause altogether so
much so that it has to be discarded. On the contrary, in this case, both
the clauses were such that the same had to be read together and given
effect upon ascertaining the intention of the parties as disclosed by the
Agreement as a whole. The latter clause could not have been read
divorced from the former, having regard to the intent of the parties
that is discernible. The latter qualified the former in the sense that
although it was obligatory for the buyer to pay the balance price within
19th May, 2005 and “obtain the sale deed”, this was on the assumption
that the property would be made free of tenants by the sellers by that
time. However, the situation therefor did not arise on 19 th May, 2005
since the tenant, who vacated the property last, did so sometime on
2nd February, 2006. Going by the latter clause, the buyer had time till
1st June, 2006 to complete the deal (four months of vacating of the
property by all the tenants to enable the sellers to hand over vacant
possession to the buyer). In our understanding, the Trial Court and the
High Court were right in concluding that time was not the essence
though the Agreement provided that “time mentioned in this
agreement shall be of the essence.”
32. We now turn our attention to the next point, which should clinch the
issue between the parties. It is, whether or not the buyer
demonstrated readiness and willingness to perform her part of the
contract and even if she did, is she entitled to the discretionary and
29
equitable relief of specific performance on facts and in the
circumstances.
33. For tracing an answer, one would necessarily have to bear in mind
sections 10, 16 and (unamended) section 20 of the Act. Scanning of
the evidence on record unmistakably points to the conclusion that the
buyer was not ready and willing to have the terms agreed by and
between the parties to be performed.
34. First, the conduct of the buyer does not inspire confidence in view of
the fact that despite being aware in February, 2006 of the property
having been vacated by all the tenants, she started raising the bogey
of failure of the sellers to share with her the ‘encumbrance certificate’.
Importantly, the Agreement did not record that the sellers were under
any obligation to share such certificate. Thus, in the absence of such
obligation, one has to presume that the buyer was duly satisfied with
the sellers’ title to the property and as such did not, consciously, insist
on making such obligation a part of the Agreement of sharing of the
‘encumbrance certificate’ prior to performance of the agreed terms. It
is common knowledge that none interested in buying an expensive
property would agree to terms leaving himself/herself at a potential
risk of facing litigation in future. Even in the absence of an express
term and if it were accepted that the obligation is an implied
requirement of the Agreement, the buyer would have done well to
close the deal if the sellers were taking advantage of the omission in
the Agreement, particularly when at the time she raised such objection
30
the entire money received in advance had been returned by the sellers
to her. This is one aspect of the matter.
35. The other aspect is this. From the documents on record, it is clear that
there was no readiness and willingness on the buyer’s part to pay the
balance sale consideration and get the sale deed executed. The buyer,
despite multiple reminders, did not come forward for execution of the
sale deed. Vide letters dated 11th March, 2006, 23rd March, 2006, 06th
April, 2006, the buyer was given a deadline of 13 (thirteen), 7 (seven)
(counted from the date of receipt of ‘encumbrance certificate’) and 5
(five) days respectively; however, the buyer did not comply with any
of these. It is to be noted that the above communications are
subsequent to the reply letter dated 24th February, 2006 by the buyer
wherein she admitted her knowledge of the property having been
vacated by the last of the tenants. Hence, the conduct of the buyer in
not doing the needful, especially even after the property became free
of tenants, demonstrates her reluctance and diffidence to perform the
contract.
36. Moving further, a perusal of the buyer’s cross-examination reveals her
admission of not having enough fund in either of her bank accounts to
pay the balance sale price. This, in our opinion, is sufficient proof of
her financial incapacity to perform her part of the contract. The
husband of the buyer could be a wealthy man having sufficient balance
in his bank account but having perused the credit and debit entries,
we have significant doubts in respect thereof which we need not dilate
31
here in the absence of him being a party to the proceedings. Suffice is
to observe, the transactions evident from the bank accounts of the
buyer’s husband do little to impress us that the buyer had
demonstrated her financial capacity to make payment of the balance
sale price and close the deal.
37. Imperative and interesting it is to note, the buyer sought to return the
demand draft to the sellers on the last day of its validity. As discussed
above, along with letter dated 23rd February 2006 of the sellers
cancelling the Agreement, they returned the advance amount received
from the buyer vide demand draft dated 11th February 2006. This draft
was retained by the buyer and returned as late as 10th August, 2006
vide letter of even date (and not along with any of her previous
letters). However, the demand draft dated 11th February, 2006 being
valid only for a period of 6 (six) months, i.e., 10th August 2006, it has
intrigued us as to why the buyer would hold on to the demand draft
and not return it earlier if she was genuinely interested in purchasing
the property.
38. Such conduct of the buyer, seen cumulatively, does not inspire
confidence in granting her the discretionary relief of specific
performance.
39. The question posed for an answer is, thus, decided against the buyer.
40. Having held thus, allowing the appeal is the inevitable result. However,
before we part, there seems to be a discordant note struck by the
decision in A. Kanthamani (supra) while distinguishing I.S. Sikandar
32
(supra), which could create uncertainty and confusion. It is, therefore,
considered worthwhile to attempt and clear the same.
41. A comprehensive reading of the two decisions reveals that in a fact
scenario where the vendor unliterally cancels an agreement for sale,
the vendee who is seeking specific performance of such agreement
ought to seek declaratory relief to the effect that the cancellation is
bad and not binding on the vendee. This is because an agreement,
which has been cancelled, would be rendered non-existent in the eyes
of law and such a non-existent agreement could not possibly be
enforced before a court of law. Both the decisions cited above are
unanimous in their approval of such legal principle. However, as
clarified in Kanthamani (supra), it is imperative that an issue be
framed with respect to maintainability of the suit on such ground,
before the court of first instance, as it is only when a finding on the
issue of maintainability is rendered by trial court that the same can be
examined by the first or/and second appellate court. In other words,
if maintainability were not an issue before the trial court or the
appellate court, a suit cannot be dismissed as not maintainable. This
is what Kanthamani (supra) holds.
42. The aforesaid two views of this Court, expressed by coordinate
benches, demand deference. However, it is noticed that this Court in
Kanthamani (supra) had not been addressed on the effect of non-
existence of a jurisdictional fact (the existence whereof would clothe
the trial court with jurisdiction to try a suit and consider granting
33
relief), i.e., what would be its effect on the right to relief claimed by
the plaintiff in a suit for specific performance of contract.
43. In Shrisht Dhawan (Smt) v. Shaw Bros.28, an interesting discussion
on ‘jurisdictional fact’ is found in the concurring opinion of Hon’ble R.
M. Sahai, J. (as His Lordship then was). It reads:
“19. *** What, then, is an error in respect of jurisdictional fact?
A jurisdictional fact is one on existence or non-existence of
which depends assumption or refusal to assume jurisdiction by
a court, tribunal or an authority. In Black’s Legal Dictionary it is
explained as a fact which must exist before a court can properly
assume jurisdiction of a particular case. Mistake of fact in
relation to jurisdiction is an error of jurisdictional fact. No
statutory authority or tribunal can assume jurisdiction in
respect of subject matter which the statute does not confer on
it and if by deciding erroneously the fact on which jurisdiction
depends the court or tribunal exercises the jurisdiction then the
order is vitiated. Error of jurisdictional fact renders the order
ultra vires and bad (Wade, Administrative Law. In Raza Textiles
[(1973) 1 SCC 633] it was held that a court or tribunal cannot
confer jurisdiction on itself by deciding a jurisdictional fact
wrongly. ***”
(emphasis supplied)
44. Borrowing wisdom from the aforesaid passage, our deduction is this.
An issue of maintainability of a suit strikes at the root of the
proceedings initiated by filing of the plaint as per requirements of
Order VII Rule 1, CPC. If a suit is barred by law, the trial court has
absolutely no jurisdiction to entertain and try it. However, even though
a given case might not attract the bar envisaged by section 9, CPC, it
is obligatory for a trial court seized of a suit to inquire and ascertain
whether the jurisdictional fact does, in fact, exist to enable it (the trial
28
(1992) 1 SCC 534
34
court) to proceed to trial and consider granting relief to the plaintiff as
claimed. No higher court, much less the Supreme Court, should feel
constrained to interfere with a decree granting relief on the specious
ground that the parties were not put specifically on notice in respect
of a particular line of attack/defence on which success/failure of the
suit depends, more particularly an issue touching the authority of the
trial court to grant relief if the ‘jurisdictional fact’ imperative for
granting relief had not been satisfied. It is fundamental, as held in
Shrisht Dhawan (supra), that assumption of jurisdiction/refusal to
assume jurisdiction would depend on existence of the jurisdictional
fact. Irrespective of whether the parties have raised the contention, it
is for the trial court to satisfy itself that adequate evidence has been
led and all facts including the jurisdictional fact stand proved for relief
to be granted and the suit to succeed. This is a duty the trial court has
to discharge in its pursuit for rendering substantive justice to the
parties, irrespective of whether any party to the lis has raised or not.
If the jurisdictional fact does not exist, at the time of settling the
issues, notice of the parties must be invited to the trial court’s prima
facie opinion of non-existent jurisdictional fact touching its jurisdiction.
However, failure to determine the jurisdictional fact, or erroneously
determining it leading to conferment of jurisdiction, would amount to
wrongful assumption of jurisdiction and the resultant order liable to be
branded as ultra vires and bad.
35
45. Should the trial court not satisfy itself that the jurisdictional fact for
grant of relief does exist, nothing prevents the court higher in the
hierarchy from so satisfying itself. It is true that the point of
maintainability of a suit has to looked only through the prism of section
9, CPC, and the court can rule on such point either upon framing of an
issue or even prior thereto if Order VII Rule 11 (d) thereof is applicable.
In a fit and proper case, notwithstanding omission of the trial court to
frame an issue touching jurisdictional fact, the higher court would be
justified in pronouncing its verdict upon application of the test laid
down in Shrisht Dhawan (supra).
46. In this case, even though no issue as to maintainability of the suit had
been framed in course of proceedings before the Trial Court, there was
an issue as to whether the Agreement is true, valid and enforceable
which was answered against the sellers. Obviously, owing to dismissal
of the suit, the sellers did not appeal. Nevertheless, having regard to
our findings on the point as to whether the buyer was ‘ready and
willing’, we do not see the necessity of proceeding with any further
discussion on the point of jurisdictional fact here.
47. However, we clarify that any failure or omission on the part of the trial
court to frame an issue on maintainability of a suit touching
jurisdictional fact by itself cannot trim the powers of the higher court
to examine whether the jurisdictional fact did exist for grant of relief
as claimed, provided no new facts were required to be pleaded and no
new evidence led.
36
CONCLUSION
48. For the foregoing reasons, the appeals merit success and the same are
allowed. We set aside the first appellate judgment and decree of the
High Court and restore that of the Trial Court with the result that the
suit instituted by the buyer shall stand dismissed.
49. It is made clear that the buyer shall be entitled to return of the advance
sum of Rs.25 lakh by the sellers. If not already returned, the sellers
shall take steps in this behalf within a month from date. If the buyer
has made any deposit pursuant to any order of court, the same shall
also be returned to her with accrued interest, if any.
………..…………………J.
(DIPANKAR DATTA)
…………..………………J.
(SANJAY KAROL)
NEW DELHI;
NOVEMBER 21, 2024.
37