Research › Search › Judgment

Karnataka High Court · body

2000 DIGILAW 389 (KAR)

Girish v. Mallikarjun Durgaram Kamble (Major)

2000-06-08

M.F.SALDANHA

body2000
ORDER M.F. Saldanha, J.—This appeal which is directed against a judgment and decree passed by the III Additional Civil Judge and C.J.M., Belgaum in O.S. No. 211 of 1986 concerns the interesting question as to whether a Court will enforce specific performance in the case of a time-bound contract relating to immovable property if the Vendee gives notice virtually at the eleventh hour and conversely, as to whether a Court which passes a decree for specific performance on a suit that has been instituted after a considerably long delay is required to take into account the change of circumstances during the intervening period and the consequences thereof. Particular accent is required to be focused on the second of these two points which for one reason or the other has hardly ever been specifically considered and acted upon by the Courts. 2. The brief facts that have given rise to the present appeal are that the original Plaintiff was residing along with his father who was the tenant in respect of a building situated on R.S. No. 1365/A/1 at Sadashivanagar in Belgaum City bearing C.T.S. No. 10928 and 10927 ad-measuring 60 and 576 square yards respectively. The Plaintiff and the Defendants 1 and 2 through their power of attorney holder entered into an agreement to sell the suit property to the Plaintiff for a consideration of Rs. 1,45,000/- on 16.5.1983. An amount of Rs. 50,000/- was paid to the Vendors on that date as an advance by way of part payment and the agreement stipulated that the remaining amount of Rs. 95,000/- was to be paid at the time of execution of the sale deed within a period of one year. The agreement in question was registered on the same date. The Plaintiff's case is that he attempted to meet the Defendants on two occasions and he was unable to do so and therefore on 9.4.1984 which is virtually seven days before the time limit for the compliance, he addressed a notice which is Ex.P.4 to the power of attorney holder of the Defendants 1 and 2 calling upon him to comply with the requisite formalities namely to get the sale deed executed and accept the balance consideration of Rs. 95,000/-. 95,000/-. There is on record a reply to this notice which is dated 12.5.1984 but the Plaintiff has succeeded in demonstrating that the reply was despatched only on or about 18.4.1984 i.e. two days after the prescribed deadline and the allegation is that it was deliberately anti-dated. The Defendants have denied that the Plaintiff tried to approach them earlier and have also contested what was pointed out in the notice dated 9.4.1984 whereby they were required to complete the conveyance after taking steps to ensure that the property was free of encumbrance. The Defendants in effect contended that the Plaintiff has approached them too late and that consequently, if they are required to sell the property to some other person they would hold the Plaintiff liable for the loss if any that occurred, deduct the same from the advance payment of Rs. 50,000/- and refund the balance. There was a long silence thereafter and almost one year later i.e. on 15.4.1985 the Defendants served the notice on the Plaintiff which is Ex.P-6 repudiating the agreement and effectively blaming the Plaintiff for what had happened. On 3.5.1985 the Plaintiff sent a reply to this notice which is Ex.P-7 contending that one Sri Uppin was residing in a portion of the house, that the Defendants were obliged to get that area vacated, that the Plaintiff had been waiting for this to happen and he reiterated that he was ready and willing to perform his obligations as soon as this was completed. He also contended that the agreement is subsisting and insisted on due compliance. Almost one year lapses again and it was only on 26.5.1986 that the Plaintiff filed a suit in Court praying for a decree for specific performance. 3. Before the Trial Court, the Defendants' plea was that this was a time-bound agreement and that time was of the essence of the contract. The Defendants contended that it was the purchaser's duty to complete the transaction within the prescribed period of one year i.e. before 16.5.1984. They contended that the Plaintiff had only sent a notice a few days before the deadline without taking necessary steps which he was obliged to do, namely making provision for the stamp paper and furthermore, the Defendants denied that any attempts had been made to contact them earlier on. They contended that the Plaintiff had only sent a notice a few days before the deadline without taking necessary steps which he was obliged to do, namely making provision for the stamp paper and furthermore, the Defendants denied that any attempts had been made to contact them earlier on. Their contention was that time being of the essence which was admittedly known to the Plaintiff, that he deliberately and mischievously sent a notice seven days before the expiry of one year importing the new condition namely that the tenant had to be vacated which was never part of the original agreement knowing fully well that this could never be done within the limited time available and it was contended that the conduct of the Plaintiff during that year in not having complied with his obligations within the prescribed period and in not having taken steps to do so even thereafter was the clearest indication of the fact that there was no readiness and willingness on the part of the Plaintiff to comply with his legal obligations. The Defendants resisted the passing of a decree for specific performance on the ground that they were legitimately entitled to repudiate the agreement which they did after waiting for one full year after the deadline and they contended that the Plaintiff is disqualified from obtaining a decree for specific performance against them. The trial Court decreed the suit holding that under the agreement in question since the Plaintiff had demonstrated readiness and willingness well within the prescribed period of one year that there was no ground on which the Defendants could have refused to execute the sale deed. The Court accordingly directed the execution of the sale deed on the Plaintiff's paying the balance amount of Rs. 95,000/- plus the costs for stamp and registration. I am informed at the Bar that pursuant to the passing of the decree, the Plaintiff has deposited a sum of Rs. 1,10,000/- in the Trial Court. In the meanwhile, the Defendants have filed the present appeal assailing the validity of the decree passed against them. 4. At the hearing of the appeal, Mr. Shastri, learned Counsel who represents the Appellants vehemently submitted that this being a case of sale of immovable property in the city of Belgaum that the question inevitably arises as to the upward revision of values of such properties with the passage of time. 4. At the hearing of the appeal, Mr. Shastri, learned Counsel who represents the Appellants vehemently submitted that this being a case of sale of immovable property in the city of Belgaum that the question inevitably arises as to the upward revision of values of such properties with the passage of time. He submitted that there was very valid ground for the provision in the agreement that the transaction had to be completed within one year and it is his submission that this was the outer deadline. Learned Counsel submitted that time was of the essence of this contract and that consequently if the Plaintiff was serious about enforcing his rights and buying the property that he was obliged to take the necessary steps that were required of him within a reasonable time before 16.5.1984 which was the cut off date. He points out that the Plaintiff ought to have procured the requisite stamp paper or tendered to the Defendants the purchase price thereof well before the deadline along with due notice of the fact that the Plaintiff intended to pay off the balance amount and get the sale deed executed before 16.5.1984. This presupposes the fact that if there are any other formalities apart from the time required for drafting and finalising the sale deed that allowance must be made for this and it is his submission that having regard to the time-frame required for all of these procedures that the Plaintiff was obliged to have set them in motion atleast not less than fifteen days before the deadline. I need to mention here that there was considerable debate between the learned Counsel on both sides with regard to the question of the income tax clearance certificate. Mr. Shastry's submission was that only on receipt of the notice from the Vendee that he was in fact coming forward to pay the balance consideration and complete the transaction, that the Defendants were obliged to approach the authorities and obtain the certificate and he points out that even with all the possible expedition that this could never have been obtained from the department in less than a couple of weeks. The Respondents learned Counsel vehemently submitted that having entered into the agreement, the Defendants' should have on their own taken steps to obtain the income tax clearance certificate and kept it ready for production at the time when the sale deed was executed and that his client was under no obligation to give advance notice in this regard. In my considered view, the correct position is that the Plaintiff was equally obliged to consider what would be a reasonable time-frame and to have made allowance for the Defendants to obtain the income tax clearance certificate after they were informed that the Plaintiff was desirous of completing the transaction and they were under no obligation to apply at any time earlier because the agreement provided for a full year and a tax clearance certificate that was many months old would not have held good at the stage of registration. I shall however consider the implications of this aspect of the case subsequently. 5. On the important question of readiness and willingness, the Appellants' learned Counsel submitted that merely because the Plaintiff addressed notice dated 9.5.1984 that it is no indication of readiness and willingness. He relied heavily on the evidence from which he demonstrated that the Plaintiff's father has unequivocally admitted that in May 1984 he did not have the amount of Rs. 95,000/- in his bank account nor for that matter did his sister have any such amount in her bank account and that he has no documents from which he could establish that he was then in possession of this amount. I need to add however that the Plaintiff has made out the case that his father who was a Sub- Registrar had recently retired from service and according to him, the amount was to be jointly contributed by the Plaintiff, his sister who was gainfully employed with the bank and his father all of whom were residing together in the premises. 6. Again, Mr. Shastry went on to demonstrate that quite apart from the aforesaid admissions that there are several other factors to indicate that the Plaintiff did not have the capacity to pay up the amount of Rs. 95,000/- in May 1984 and in this regard, he points out that when action was taken against the Plaintiff's father for non-payment of rent from the year 1979 onwards that some belated payments of Rs. 95,000/- in May 1984 and in this regard, he points out that when action was taken against the Plaintiff's father for non-payment of rent from the year 1979 onwards that some belated payments of Rs. 3,000/- and 2,000/- were made in the year 1983 and he pointed out that, once again, there was a default and that a decree was passed in respect of arrears of payment of rent against the Plaintiff's father in the year 1985 and his submission is that this amply demonstrates the fact that the Plaintiff's father was not in a position to even pay the small amount due against the arrears of rent and that it was therefore manifestly false that he would have been able to provide the bulk of the funds for the purchase. Mr. Shastry has relied on this evidence because his submission was that while construing the legal concept of readiness and willingness the consideration of the Court is not confined to mere oral statements or written statements indicative of intention but the Court is required to delve deeper and actually find out as to whether the party actually had the capacity to back up the intention with due performance by producing the money. His submission is that where, even several years later when the evidence was recorded the Plaintiff was unable to conclusively indicate to the Court that he was ready with the actual money in May 1984, that the Court ought not to attach any credence to the mere offer of completing the sale transaction. This is really the crux of the entire controversy and Mr. Shastry relied on the Division Bench decision of this Court reported in ILR 1993 Karnataka Page 427 (Saraswathi Ammal case) where the Court had occasion to examine this concept in depth and held that unless the Court is completely satisfied that there was genuine readiness and willingness to perform that a decree for specific performance cannot be passed. He also drew my attention to a decision of the Supreme Court reported in K.S. Vidyanadam and Others Vs. He also drew my attention to a decision of the Supreme Court reported in K.S. Vidyanadam and Others Vs. Vairavan, AIR 1997 SC 1751 in support of his extended argument that where the purchaser has not taken any steps long after the expiry of the deadline that it is very clear that the party was not at all serious about finalisation of the sale deed and that it was an empty offer only in order to safeguard the earnest money and keep the contract alive. He illustrated that in a particular case where the purchaser took no steps that the Supreme Court has held that no decree for specific performance should be passed. As a follow-up to this submission, he also relied on the decision reported in AIR 1999 SC Weekly page 2378 wherein the Court held that if a suit is filed after a considerable delay that alone was a good ground to refuse a decree for specific performance and that the Court will have to take into account factors such as change of circumstances and more importantly, the abnormal rise in the value of the property and since it was demonstrated that the purchaser had not complied with the obligations within a reasonable time that a decree for specific performance could not be passed. Mr. Shastry reiterated the fact that the Plaintiff did absolutely nothing after the receipt of the Defendants reply dated 12.5.1984 for more than one year and that even the reply Ex.P.7 from the Plaintiff's Advocate was after the Defendants had repudiated the agreement by their notice dated 15.4.1985. His submission is that the conduct of the Plaintiff goes heavily against his contention that he was ready and willing to perform his obligations and that in this background, the trial Court was very much in error in having passed a decree for specific performance and that too, ordering the Defendants to execute the sale deed on the original terms. It was pointed out to me that there has been a radical change in property values in the city of Belgaum over the years and that there is virtually no comparison between the price of that property in May 1983 when the agreement was entered into and even in the year 1993 when the decree was passed. In totality, he therefore submitted that this Court ought to interfere and set aside the decree in question. 7. In totality, he therefore submitted that this Court ought to interfere and set aside the decree in question. 7. The Respondent's learned Counsel has seriously assailed this position. He states that his client was obliged to perform his obligations within the prescribed period of one year, that he was unable to meet the Defendants on two earlier occasions which was why he sent them formal notice on 9.5.1984 requesting them to complete the sale deed. Learned Counsel submitted that it is an obligation of every Vendor to sell the property free of encumbrance and according to him, the Defendants were obliged to give vacant possession of the property which was why the Plaintiff stipulated this in the notice dated 9.5.1984. He submits that having entered into the agreement for sale that the Plaintiff has proved his bonafides by paying a substantial amount of Rs. 50,000/- as advance consideration and that there was no ground on which the Vendors could have even assumed that the Plaintiff would not complete the transaction and he therefore submits that the Defendants were obliged to obtain the requisite income tax clearance certificate in anticipation of the completion of the sale and if they had not done so, it is his contention that for their own default they could not then enforce the time deadline. He disputes the position that time was of the essence of the contract in so far as what he points out is that it is true that the parties agreed to complete the transaction within one year but that there were equal obligations on the Vendors and it is his submission that if due to any reason the Vendors overshot the time limit that there was nothing sacrosanct about 16.5.1983 in so far as the Vendors could always have executed the sale deed even a few days later to which his client would have had no objection. He has alleged malafides against the Defendants by pointing out that even when the notice dated 9.5.1984 was addressed and from the Defendants reply dated 12.5.1984 it is clear that it had been received in good time, that the Defendants deliberately delayed the reply till after 16.5.1983 and only despatched it on 18.5.1983 and then falsely contended that they were not obliged to honour the contract because the deadline had passed. On these facts, he submits that it was very clear that there was no intention on the part of the Defendants to honour the contract. Learned Counsel added that if the Defendants felt that the notice given to them was too short that they could have honestly stated so if they intended to honour the contract. He has found fault with the reply and he submitted that the breach that has been committed was unjustified and that the Defendants are squarely responsible for it. 8. On the question of readiness and willingness, the learned Counsel pointed out that the notice dated 9.5.1984 in terms states that the Plaintiff was ready and willing to pay the balance consideration and execute the sale deed and his submission is that the Plaintiff was not required to collect money and deposit it in his bank account and that it was perfectly permissible for him to have pooled his resources with those of his sister and father and made up the amount. He points out that the Plaintiff's father had held the post of Sub-Registrar and recently retired and having regard to the fact that the Plaintiff was gainfully employed and so was his sister that there is no justification to conclude that between the three of them it would not have been possible to raise and pay the amount of Rs. 95,000/-. On the other hand, he submitted that the Defendants never asked for the money nor did they take steps to execute the sale deed and having committed these breaches that they cannot be heard to question the source from where the Plaintiff would have raised the requisite funds. Furthermore, he has explained the subsequent time-lag by referring to the statements in the Defendants notices dated 9.5.1984 and 3.5.1985 and he contends that when the reference was made to the effect that the property should be free of encumbrance that the Plaintiff inter alia meant that the tenant Uppin should also be evicted from the premises and that there should have been no other encumbrances also. He alleges that even in this regard, the default was committed by the Defendants for which they are squarely liable. Dealing with this last aspect of the matter, I need to observe that it does not really help either of the parties because Mr. He alleges that even in this regard, the default was committed by the Defendants for which they are squarely liable. Dealing with this last aspect of the matter, I need to observe that it does not really help either of the parties because Mr. Shastry is right when he points out that the agreement very clearly referred to attornment of tenancy which only meant that the Defendants were only obliged to get the tenants to acknowledge the new landlord and were not required to evict the tenant from that portion of the house. On the other hand, the Respondent's learned Counsel is also justified in his submission when he points out that apart from that aspect, the Vendors were required to convey the property free of encumbrance which meant that there was a clear title and there is nothing on record to indicate that they had taken necessary steps in this regard. 9. The Respondent's learned Counsel referred to an earlier decision of this Court reported in 1984 KLJ (V) Page 357 wherein the Court had occasion to observe that while considering the question of readiness and willingness to perform the obligations undoubtedly, the question as to whether the requisite consideration was available with the Vendee or in other words, whether the intention was backed up by the ability to translate it into concrete action is material but the Court noted that if the Vendee has the ability to raise the funds even if the Vendee actually does not possess thus, it would be sufficient. Similarly, in a decision of the Delhi High Court reported in Sant Lal vs. Shyam Dhawan, AIR 1986 Delhi 275 with regard to the issue relating to capacity to pay, it was observed that the Court must be reasonably satisfied that it was the Defendants readiness and ability that was spread over the entire period during which the obligation would have to be discharged. The learned Counsel also pointed out to me that this Court in the decision reported in ILR 1991 Karn 1670 had considered the argument that is pleaded as a defence when everything else fails in this class of litigation, that the property values have shot up immensely during the interim period and that an order to sell the property at the pre-existing rate would involve a lot of hardship to the Vendor but the Court unequivocally observed that this is no valid defence and that the issue is wholly inconsequential. 10. The trial Court, as indicated by me earlier, decreed the suit and the short question is as to whether the findings of the trial Court require any interference with. That the parties have entered into an agreement to sell the property on 16.5.1983 is established and that the consideration was Rs. 1,45,000/- out of which Rs. 50,000/- has been paid on 16.5.1983 is also undisputed. That the agreement provided for the balance payment and execution of the sale deed within one year i.e. by 16.5.1984 is also abundantly clear. It is also not disputed that the Plaintiff served a notice on 9.4.1984 calling upon the Defendants to execute the sale deed and receive the balance consideration. Undoubtedly, this was hardly one week before the period expired and even though a Court would always hold that in transactions relating to immovable property where the formalities would require a considerable period of time that the notice ought to have been longer, I am constrained to observe here that the Defendants did not take up this plea at that point of time. From the fact that they did not comply and that they did not also reply until the deadline has elapsed clearly indicates that they were trying to back out of their obligations. At the same time, I have taken equal note of the fact that the Plaintiff unnecessarily introduced a new term regarding vacant possession which clearly provided a handle to the Defendants to joint issue because the original agreement did not provide for the Defendants getting the existing tenant out of a portion of the house. At the same time, I have taken equal note of the fact that the Plaintiff unnecessarily introduced a new term regarding vacant possession which clearly provided a handle to the Defendants to joint issue because the original agreement did not provide for the Defendants getting the existing tenant out of a portion of the house. I am not prepared to accept that this was accidental because it is very clear to me from the conduct of the Plaintiff that the sole purpose of doing this was only in order to play for time knowing fully well that it will either lead to a dispute or more importantly, that the process would take considerable time and the Plaintiff would thereby get the benefit of not having to pay the balance consideration until those proceedings were over. I am supported in this conclusion by the fact that the Plaintiff has admitted in his cross-examination that neither he nor his sister were in physical possession of the balance amount of Rs. 95,000/- and this was an instance where the Plaintiff was already in possession of the premises and was therefore in no hurry to complete the transaction. I refer to these aspects of the case because the present dispute presents a new facet and dimension of the law which this Court will have to take cognizance of in view of the recurrent habit that has now almost reached epidemic proportions whereby parties enter into agreements to sell with impunity and thereafter resile from them purely because the prices have gone up and they are interested in a higher consideration. Conversely, this Court needs to take cognizance of the reverse possession wherein parties pay a token amount and enter into an agreement to sell, do not complete the sale for abnormally long periods of time and prejudice the Vendor who is precluded from selling the property to others and in such situations, whether or not the guilty party should be penalised is something which the Courts have hitherto not either pronounced upon or decided. In this case, as indicated, there was a two way fault at the initial stage but to my mind, even though it was Defendants who did not comply with the terms of the agreement, it was the Plaintiff who had also given cause for it. 11. In this case, as indicated, there was a two way fault at the initial stage but to my mind, even though it was Defendants who did not comply with the terms of the agreement, it was the Plaintiff who had also given cause for it. 11. We then come to the question of whether the Plaintiff in law can be said to have been ready and willing to perform his obligations. As long as the party has conveyed the readiness and willingness in writing or on a given occasion orally, and as long as the act is bonafide, the law will take cognizance of it. In the present instance, the argument is that it was an empty offer because it has been demonstrated that the Plaintiff did not have the requisite money with him. This condition cannot be upheld for two reasons, the first being that as has been observed in several of the decisions the capacity to pay would include the Vendee's ability to raise the funds and nothing has been brought on record to establish that the Plaintiff would not have been able to raise the funds from other quarters if asked to do so. The second and more important aspect of the case is that the Defendants did not test the genuineness of his offer by asking him to come forward with the money within a prescribed period of time and not having done so, they cannot be heard to say that he would have been unable to comply. The trial Court was therefore justified in holding that the Plaintiff has established that he was ready and willing to perform his part of the obligation. 12. Much has been argued by the Appellants' learned Counsel on the question of the subsequent developments and to my mind there is some justification in this argument. Firstly, he demonstrates that after the reply from the Defendants in May 1984 that there was a long silence until 15.4.1985 when the Defendants through their notice repudiated the agreement. It was only in May 1985 in the Advocate's reply Ex.P-7 that the Plaintiff put forward the specious excuse that he was waiting for the Defendants to get the portion of the house occupied by tenant Uppin vacated. This was never a condition of the agreement and it is very clear that the reason is an after thought. It was only in May 1985 in the Advocate's reply Ex.P-7 that the Plaintiff put forward the specious excuse that he was waiting for the Defendants to get the portion of the house occupied by tenant Uppin vacated. This was never a condition of the agreement and it is very clear that the reason is an after thought. It is also indicative of the fact that even though the Plaintiff has subsequently stated that he was always interested in the purchase of the property, it is clear that his enthusiasm was lukewarm and the situation worsens thereafter because the Plaintiff takes no steps to enforce the terms of the agreement until 26.5.1986 when the suit has been filed. To my mind, if the Plaintiff was really serious about enforcing the obligations on the Defendants and purchasing the property he should have ensured that the transaction was completed in May 1984 when the one year period ended and it is clear to me from the fact that he did absolutely nothing for two years until May 1986 when the period of three years since the date of agreement had elapsed that he was seeking to take advantage of the time lag knowing full well that if he enforced the agreement that he would still get the property at the May 1983 price. At the same time, the Court needs to take cognizance of the fact that as far as the Vendors were concerned from the non-action on the part of the Plaintiff for more than two years after the deadline had expired and for more than a year after the agreement had been repudiated, the Defendants would have reasonably assumed that the Plaintiff was no longer interested in the sale. The unusual dimension that I have referred to centres around the question as to whether it is demonstrated that there have been lapses on the part of the Plaintiff and whether it has also been demonstrated that there has been abnormal delay on the part of the Plaintiff in approaching the Court where the Plaintiff can still get the undue advantage of strict enforcement of the contract at the old rates. In my considered view, a Court is always required to balance the equities and it is equally necessary for a Court to mould a relief in order to do justice to both the parties in the true sense of the term. Under these circumstances, while the basic finding of the trial Court which is to the effect that the Plaintiff is entitled to the plea for specific performance will have to be upheld, to my mind for the reasons set out by me above the law will have to be applied with a slight modification for purposes of balancing the equities and moulding the relief in order to ensure that the Plaintiff does not get the benefit of his own wrongs and that the Defendants are not unduly prejudiced because of the Plaintiffs faults. In this view of the matter, after having bestowed serious consideration of the position in law in my considered view the Court would have to virtually construe the position as it obtains on the date when the Plaintiff approached the Court for enforcing his remedy. It was the option of the Plaintiff to have asked for completion of the sale in time after 16.5.1983 and the first time he expressed the desire was on 9.5.1984. There is some reference to earlier attempts but that evidence will have to be discarded. When the Defendants did not comply, there was really no ostensible reason why the Plaintiff should have waited for two years and fifteen days thereafter before approaching the Court. Obviously, with the passage of time there would have been an upward revision of property prices and as on 26.5.1986 when the Plaintiff approached the Court, the value of the property would have been substantially higher than what it was in May 1983. To my mind, the Plaintiff is not entitled to this unfair advantage and consequently while passing the decree the Court will have to off-set all of these. As indicated by me, the Court is required to balance the equities and consequently, on a conservative estimate even having regard to the rate of interest that the Plaintiff himself has referred to in the plaint, the Court will have to hold that if the Plaintiff desires enforcement of the agreement that he will have to pay an additional amount of Rs. 50,000/-. 13. 50,000/-. 13. In this view of the matter, while the Appeal partially succeeds the decree passed by the trial Court is modified to the extent that the balance consideration payable by the Plaintiff would have to be construed at Rs. 1,45,000/- plus the stamp fee and the registration charges. In doing so, this Court has to take into account the fact that the Plaintiff had paid Rs. 50,000/- to the Defendants as long back as on 16.5.1983 which amount has been retained by them all through this period of time. Subject to this modification, the Appeal which partially succeeds to stand disposed of. In the circumstances of the case, there shall be no order as to costs.