Research › Search › Judgment

Karnataka High Court · body

2000 DIGILAW 538 (KAR)

C. NAZEER AHMED v. S. JAHAN ARA

2000-07-28

body2000
THAKUR, J. ( 1 ) THIS is a defendant's appeal against the judgment and decree passed by the court of civil judge, chickmagalur in a suit for specific performance filed by the respondent. The controversy arises in the following circumstances:- by an agreement dated 3rd of December 1982, the defendant in the suit and appellant herein agreed to sell in favour of the plaintiff- respondent certain immovable property described in the schedule to the agreement for a total consideration of rs. 3,25,000/ -. A sum of Rs. 20,000/- was received by the defendants-seller at the time of execution of the agreement while a further amount of Rs. 30,000/ was to be paid by the purchaser within 45 days thereafter. The agreement provided that the remaining consideration of Rs. 2,76,000/- shall be paid to the seller at the time of registration of the sale deed within six months from the date the additional amount of Rs. 30,000/- was paid. It is not disputed that the appellant-seller received a sum of more than Rs. 50,000/- in instalments at different points of time. the amount so received was sought to be forfeited by the seller in terms of a notice dated 7th of September 1983 sent to plaintiff-purchaser, in which the seller accused the purchaser of failure to pay the balance amount and to have the sale deed executed in her favour. The purchaser promptly sent a reply to the said notice, in which the allegation that she had failed to pay the balance amount and have the sale deed executed in her favour was denied. It was also alleged that the execution of the sale deed and the making of the final payment were postponed till the end of March 1994 at the request of the seller for the reason that he had not till 5th of may 1983 when he received a sum of Rs. 15,000/ succeeded in getting the tenanted portion of the suit property vacated from the tenants in occupation. This position was denied by the seller, who asserted in a rejoinder sent on 21st of September 1983 that there were no tenants in occupation of the property and that the same being in his possession could be vacated within one week from the date a demand to that effect was made by the purchaser. This position was denied by the seller, who asserted in a rejoinder sent on 21st of September 1983 that there were no tenants in occupation of the property and that the same being in his possession could be vacated within one week from the date a demand to that effect was made by the purchaser. Suffice it to say that the" positions which the parties took made as s'uit for special performance inevitable. In the written statement filed by the appellant- seller several contentions were raised besides a challenge to the agreement executed between the parties on the ground that it required the seller to perform an act impossible of performance viz. , evicting his tenants within six months. The trial court framed seven issues in all. While deciding issue no. 1, it held that the plaintiff was at all times ready and willing to perform her part of the contract. Issue No. 2 was also decided in favour of the plaintiff-purchaser with the finding that the defendant had agreed to receive the final payment before the end of March 1994. While deciding issues nos. 3 to 6 the court below held that the defendant-seller had agreed to evict the tenants before the registration of the sale deeds and that the plaintiff was entitled to a decree for specific performance. The additional issue relating to the validity of the agreement between the parties, was also decided against the defendant-seller and the suit decreed, aggrieved whereof, the seller-appellant has preferred the present appeal as already noticed earlier appearing for the appellant Sri amaresh strenuously argued that the agreement that time was the essence of the agreement executed between the parties. He laid considerable stress on the terms incorporated in the agreement especially para-10 thereof, which according to him did not envisage any extension for payment of the balance money and consequent registration of the sale deed beyond seven months from the date fixed for payment of the sum of Rs. 30,000/- under para-3 of the agreement. He argued that the failure of the purchaser to arrange the payment of the balance amount would result in an automatic cancellation of the agreement, which was, according to the learned counsel, a clear enough indication that time was the essence of the agreement. 30,000/- under para-3 of the agreement. He argued that the failure of the purchaser to arrange the payment of the balance amount would result in an automatic cancellation of the agreement, which was, according to the learned counsel, a clear enough indication that time was the essence of the agreement. Payment of the balance amount not having been made within the period stipulated under para-10 of the agreement, the suit filed by the purchaser could not have been decreed. The finding recorded by the court below in regard to issue no. 2 was also assailed on the ground that the same was not supported by any evidence. The legal position as regards time being the essence of contract for transfer of immovable property is fairly well settled. The initial presumption is that time is not the essence of such contracts. The mere fixation of a period within which the contract may have to be performed also does not make any such stipulation as the essence of the contract. The intention to treat time as the essence of the contract may however be evidenced by circumstances that are strong enough to displace the initial presumption. Even a stipulation in the agreement that time is the essence of the contract has to be read along with other Provisions of the contract to determine whether the completion of the transaction within the time specified was intended to be a fundamental requirement. In Jamshed Khodaram Irani VS. Burjori hunjibhai, the judicial committee of the privy council was examining the Provisions of Section 55 of the Contract Act in the context of the law of equity prevalent in england as regards contracts to sell immovable property. Their lordships declared that equity which governs the rights of the parties in case of specific performance of contracts to sale their estate, looks to the substance of the agreement and not its letter in order to ascertain whether the parties really intended more than, that the transaction should be completed within a reasonable time. The court declared that equity treated the importance of time limits for performance of contracts as being subordinate to the main purpose of the parties and specific performance could be enjoined notwithstanding that from the point of view of a court of law the contract had not been literally performed by the plaintiff as regards the time limit specified. The court declared that equity treated the importance of time limits for performance of contracts as being subordinate to the main purpose of the parties and specific performance could be enjoined notwithstanding that from the point of view of a court of law the contract had not been literally performed by the plaintiff as regards the time limit specified. The following passage is in this regard instructive:- "section 55 does not lay down any principle which differs from those which obtain under the law of england as regards contracts to sell land. Under that law equity, which governs the rights of the parties in cases of specific performance of contracts to sell real estate, looks not at the letter but at the substance of the agreement in order to ascertain whether the parties, notwithstanding that they named a specific time within which completion was to take place, really and in substance intended more than that it should take place within a reasonable time. The special jurisdiction of equity to disregard the letter of the contract in ascertaining what the parties to the contract are to be taken as having really and in substance intended as regards the time of its performance may be excluded by any plainly expressed stipulation. Prima facie, equity treats the importance of such time limits as being subordinary to the main purpose of the parties, and it will enjoin specific performance notwithstanding that from the point of view of a court of law the contract has not been literally performed by the plaintiff as regards the time limits specified," following the above decision, the Supreme Court in Fomathinayagam Pillai and others VS. Palaniswami Nadar, declared that fixation of the period within which contract is to be performed does not make time as the essence of the contract nor could the default clause in the contract evidence the intention of the parties to make time as the essence. Circumstances sufficiently strong could however displace the ordinary presumption that in any contract for sale of land a stipulation as to time, is not of. Essence. To the same effect is the decision of the Supreme Court in Govind Prasad Chaturvedi VS. Hari Dutt Shastri and another, where the court observed :-"the fixation of the period within which the contract has to be performed does not make the stipulation as to time the essence of the contract. Essence. To the same effect is the decision of the Supreme Court in Govind Prasad Chaturvedi VS. Hari Dutt Shastri and another, where the court observed :-"the fixation of the period within which the contract has to be performed does not make the stipulation as to time the essence of the contract. When a contract relates to sale of immovable property it will normally be presumed that the time is not the essence of the contract. The intention to treat time as the essence of the contract may be evidenced by circumstances which should be sufficiently strong to displace the normals presumption that in a contract of sale of land stipulation as to time is not the essence of the contract. "reference may also be made to M/s. Hind construction contractors by its sole proprietor Bhikamchand Mulchand Jain (dead) by LRS. VS. State of Maharashtra, where their lordships held whether or not time was the essence of the contract would essentially depend upon the intention of the parties and the terms of the contract. The court observed:-"even where the parties have expressly provided that time is of the essence of the contract such a stipulation will have to be read along with other Provisions of the contract and such other Provisions may, on construction of the contract, exclude the interference that completion of the work by a particular date was intended to be fundamental, for instance, if the contract were to include clauses provided for extension of time in certain contingencies or for payment of fine or penalty for every day or week the work undertaken remains unfinished on the expiry of the time provided in the contract such clauses would be construed as rendering ineffective the express provision relating to the time being of the essence of contract. "in Smt. Chand Rani (dead) by Lrs. , VS. Smt. Kamal Rani (dead) by LRS. Also, the legal position summed up in the earlier decisions was reiterated with the following observations:-"in the case of sale of immovable property there is no presumption as to time being the essence of the contract. "in Smt. Chand Rani (dead) by Lrs. , VS. Smt. Kamal Rani (dead) by LRS. Also, the legal position summed up in the earlier decisions was reiterated with the following observations:-"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. "the question then is whether the agreement executed between the parties in the instant case treated completion of the sale transaction within a period of six months from the date specified therein as a fundamental requirement. The agreement does not say so in so many words. What was argued on behalf of the appellant was that the absence of a specific stipulations notwithstanding, the agreement sufficiently reflected the intention of the parties that the sale transaction shall be finalised within the outer period of seven months from the date the additional payment of Rs. 30,000/- is made in terms of clause 3 of the agreement. It is at this stage useful to extract clauses 4 and 10 of the agreement upon which counsel for the appellant placed reliance in support of his submissions. "4. The remaining consideration of Rs. 2,75,000/- (rupees two lakhs seventy five thousand) to be paid at the time of registration within six months from the date of second payment of Rs. 30,000/- said above. 10. If under any circumstance the purchaser could not avail of the balance of consideration within the time fixed in para 4 supra, the purchaser has to pay interest on the balance at 6% per annum over the extended time and the extended time will not be more than one month at any rate. In default of this condition, the agreement automatically conies to an end. " it would appear from the above that although the parties had stipulated the period within which the remaining amount of Rs. 2,75,000/- was to be paid by the purchaser, there is nothing in the said stipulation to suggest that the same was fundamental to the completion of the transaction. " it would appear from the above that although the parties had stipulated the period within which the remaining amount of Rs. 2,75,000/- was to be paid by the purchaser, there is nothing in the said stipulation to suggest that the same was fundamental to the completion of the transaction. Just because the agreement contains a stipulation as to the period within which the transaction should be completed cannot itself make time as the essence of the contract. The argument that clause 10 of the agreement did not envisaged execution of a sale deed beyond the period of seven months from the date the purchaser paid the additional sum of Rs. 30,000/- under clause 3 has not impressed us. A careful reading of clause 10 would show that the same deals with a situation in which the purchaser is for any reason unable to arrange the balance of sale consideration within the time stipulated. The clause does not necessarily imply that time for completion of the transaction was the essence of the contract. "in Govind Prasad Chaturvedl VS. Hari Dutt Shastri and another (supra), their lordships were examining whether a stipulation to the effect that the purchaser "must get the sale deed executed within two months i. e. , upto 24th may 1964" could constituted a stipulation making time as the essence of the contract. Repelling the argument their lordships observed thus:-"the relevant clause is clause 4 which provides that the appellant must get the sale deed executed within two months i. e. upto 24th of may, 1964, and in case the appellant did not get the sale deed registered within two months form the earnest money amounting to Rs. 4000/- paid by the appellant shall stand forfeited without serving any notice. The clause further provides that in case the respondents in some way evade the execution of the sale deed then the appellant will be entitled to compel them to execute the sale deed legally and the respondents shall be liable to pay the costs and damages, incurred by the appellant. It is settled law that the fixation of the period within which the contract has to be performed does not make the stipulation as to time the essence of the contract. When a contract "relates to sale of immovable property it will normally be presumed that the time is not the essence of the contract. It is settled law that the fixation of the period within which the contract has to be performed does not make the stipulation as to time the essence of the contract. When a contract "relates to sale of immovable property it will normally be presumed that the time is not the essence of the contract. It may also be mentioned that the language used in the agreement is not such as to indicate in unmistakable terms that the time is of the essence of the contract. "the trial court was therefore justified in holding that time was not the essence of the contract in the instant case. That conclusion is supported even by the conduct of the parties, which would be a material circumstance for discovering the true intention of the parties in the matter of fixation of time for making of payment and completion of the transaction. It is at this stage pertinent to refer to clause 3 of the agreement, which reads as under:-"in pursuance of this agreement, the seller and the purchaser covenant as follows :- the seller this day has received an amount of Rs. 20,000/- (rupees twenty thousand only) as advance from the purchaser, towards sale consideration. The purchaser has to pay rs. 30,000 (rupees thirty thousand) within 45 days from this date. " if time was intended to be the essence of the contract, the question of the seller-appellant herein accepting any payment beyond the period of 45 days stipulated in clause 3 would not arise. It is not however disputed that the payment referred to in clause 3 was not tendered by the purchaser within the period of 45 days as mentioned in the clause extracted above. The said amount was payable latest by 18th of January 1983 when the stipulated period of 45 days would expire. It is evident from the endorsement made by the seller on the agreement to sell ex. p1 that a sum of Rs. 10,000/- was received by him towards payment of Rs. 30,000/- on 27th of January 1983 followed by a further amount of Rs. 15,000/- paid on 1st of February 1983 and yet another instalment of rs. 15,000/- paid to him on 5th of may 1983. p1 that a sum of Rs. 10,000/- was received by him towards payment of Rs. 30,000/- on 27th of January 1983 followed by a further amount of Rs. 15,000/- paid on 1st of February 1983 and yet another instalment of rs. 15,000/- paid to him on 5th of may 1983. The tender and receipt of these payments, which in terms of clause 3 were required to be made before the 18th of January 1983 clearly signifies that the parties never treated the period stipulated for payment of the money or completion of the sale transaction to be the essence of the contract. So much so, the purchaser has tendered a further sum of Rs. 10,000/- on 14th of June 1983 although he was in term's of the agreement not required to make any payment in excess of what was payable in terms of clause 3 of the agreement. "there is yet another angle from which the question can be approached. According to the plaintiff, the defendant had not till 5th of may 1983 been able to get the tenanted portion of the property vacated from the tenants. Since delivery of possession of the tenanted part of the property was also one of the conditions, subject to which the sale transaction was to be finalised the defendant had according to the plaintiff came forward with a proposal to extend the period for final payment till the end of March 1984, which proposal the plaintiff had agreed to, no matter the latter was all times ready and willing to complete the transaction. The trial court has upon appreciation of evidence adduced, come to the conclusion that the plaintiff's version about the extension of time fixed for payment of the balance amount had been proved. The only criticism offered by the appellant against the said finding is that if there really was any such extension, the plaintiff ought to have got the same recorded in the form of an endorsement on the agreement instead of leaving the same oral and at large. The only criticism offered by the appellant against the said finding is that if there really was any such extension, the plaintiff ought to have got the same recorded in the form of an endorsement on the agreement instead of leaving the same oral and at large. There is indeed no doubt that an endorsement extending the period for payment of the balance amount could have been made in which event it would have furnished the best evidence in support of the extension, yet just because no such endorsement is found on the agreement would not in itself mean that the parties could not have arrived at any such arrangement. In the light of the material placed on record and the facts and circumstances of the case, the plaintiff's version that the period for payment of the balance amount was extended at the request of the defendants-seller cannot be brushed aside. The next question then is whether the plaintiff was ready and willing to perform his part of the contract at all material times. It was argued on behalf of the appellant that the plaintiff did not have the necessary wherewithal for paying the balance amount to complete the transaction. A similar contention urged before the trial court was repelled on the basis of material adduced by the purchaser to show that he had the requisite resources from which he could raise the balance amount payable to the appellant-seller. We see no error or perversity in the reasoning given by the trial court in this regard. The material adduced in the form of fixed deposit receipt held by the plaintiff, the sale proceeds of Rs. 73,000/- of premier padmini car and the vikas cash certificates amounting to rs. 1,10,000/ clearly established that the plaintiff had the requisite resource from out of which he could very easily raise the balance amount payable by him. The contention that the plaintiff did not have hard cash available with him for payment has not impressed us. What is important is not whether the plaintiff had the amount in hand but whether he was ready and witling to perform his part of the contract. To establish his readiness and willingness, the purchaser is not required to produce the money or to vouch a concluded scheme for financing the transaction. Proof of ones capacity to raise or generate findings necessary for completing the sale should suffice. To establish his readiness and willingness, the purchaser is not required to produce the money or to vouch a concluded scheme for financing the transaction. Proof of ones capacity to raise or generate findings necessary for completing the sale should suffice. The decisions of the Privy Council In Bank of India Ltd VS. Jamsetji A. M. chinoy and messrs. Chinoy and co. And Nathulal VS. Phoolchand authoritatively settle the legal position in that regard. The contention that the non payment of the balance amount by the plaintiff would defeat his claim for a decree for specific performance must be rejected on yet another ground. The agreement executed between the parties provided that the appellant-seller shall hand over vacant possession of the scheduled property free of encumbrance including the tenanted portion which shall be got vacated for delivery to the purchaser before registration. Clause 7 of the agreement is in this regard relevant, which reads as under :- "the seller has to hand over vacant possession of the schedule property free of encumbrance, the tenanted portion should also be given vacant possession before registration. " the defendant had not admittedly fulfilled his obligation in regard to the eviction of the tenanted portion to the suit property. That failure was, according to the plaintiff, the main reason why the sale deed could not be executed and time for payment of the balanced extended till March 1984. The defendant's case in this regard has been contradictory. In the rejoinder dated 21st of September 1983- ex. d4 sent by him to the plaintiff's notice, the defendant had made a specific assertion that there were no tenants in occupation of the property agreed to be sold. The defendant could, according to the notice, vacate and hand over possession as the same was in his occupation and in the occupation of his relatives, the following lines are in this regard relevant:-"in fact my client had indicated to your client that he could vacate and hand over vacant possession within one week from the demand made by your client. Besides no tenants have occupied the property agreed to be sold. The property is in possession of my client and his close relations. "the above assertion is clearly opposed to the stipulation contained in para-7 of the agreement extracted earlier. In the written statement filed by him also the defendant took a contradictory stand. Besides no tenants have occupied the property agreed to be sold. The property is in possession of my client and his close relations. "the above assertion is clearly opposed to the stipulation contained in para-7 of the agreement extracted earlier. In the written statement filed by him also the defendant took a contradictory stand. This is evident from the assertion made in para- 4, where he stated as under :-"it is false that this defendant had agreed in the said agreement dated 3. 12. 1982 that he would evict the tenant shafiulla who is running his business of electric installation contract work (national electricals) or that the defendants son-in-law and hand over the vacant possession before registration of the sale deed. "in para-10 (a) however he took a completely different stand and admitted that a portion of the suit property was tenanted, which the tenants had not vacated despite the efforts made by the defendant. The assertion runs thus :-"admittedly, one shafiulla and deceased son-in-law of the defendant are and were the tenants of the portions of the plaint schedule property under the defendant. Subsequent to the demise of the son-in-law of this defendant, his heirs are in possession and enjoyment of the same. The agreement in question stipulates that the defendant should evict the tenants and hand over vacant possession within 6 months from 17. 1. 1983. The defendant made all attempts and could not evict the tenants and as such, he was unable to execute the sale deed and hand over vacant possession of the plaint schedule property. " (emphasis provided) in his own statement before the trial court, the defendant admitted that the tenants were in occupation of a part of the suit premises, which he had failed to get vacated or delivery to the plaintiff. The conflicting stands taken at different stages apart, the admitted position is that the tenants were in occupation of a part of the suit premises, which the defendant had undertaken to get vacated, in which attempt he had failed. There was therefore a complete failure on the part of the defendant in discharging his part of the contract. The conflicting stands taken at different stages apart, the admitted position is that the tenants were in occupation of a part of the suit premises, which the defendant had undertaken to get vacated, in which attempt he had failed. There was therefore a complete failure on the part of the defendant in discharging his part of the contract. Payment of the balance amount stipulated in the agreement was in the very scheme of things due only if the defendant-seller was in a position to discharge his own obligations under the agreement in the form of surrender of vacant possession of the entire premises at the time of registration. This obligation the defendant was at no stage in a position to discharge. The result was that he could not demand the balance payment from the plaintiff nor could the non payment of the balance amount be treated as a failure on the part of the plaintiff. In Nathulal VS. Phoolchand, their lordships were considering a similar situation, in which phoolchand was held liable to pay the balance of the price only after nathulal had performed his part of the contract, under which he had to get the name of his brother removed from the revenue records and his own name entered in the same besides obtaining permission of the competent authority to sell the property. Even in Chand Rani VS. Kamal Rani, the purchaser was required to pay a sum of Rs. 98,000/-a towards the sale consideration, which he declined to pay till such time the seller delivered vacant possession of a part of the property agreed to be sold and obtained a clearance certificate from the income tax department. Their lordships held that payment of Rs. 98,000/- as not relatable to the conditions stipulated by the purchaser for making the same. The refusal of the purchaser to pay the amount till such time the seller delivered part possession of the property and obtained the income tax clearance certificate was held to signify that the purchaser was not ready and willing to perform his part of the contract. In the instant case, the eviction of the tenants from the property was an essential condition for the completion of the sale transaction. The payment of the balance of the price money could fall due and be demanded or the sale deed executed only when the said requirement was satisfied. In the instant case, the eviction of the tenants from the property was an essential condition for the completion of the sale transaction. The payment of the balance of the price money could fall due and be demanded or the sale deed executed only when the said requirement was satisfied. Since the defendant was admittedly in no position to evict the tenants and had taken no steps in that direction till the date fixed for execution of the sale deed, he could not make any grievance against nonpayment of the balance amount nor could the same be understood to mean that the plaintiff-purchaser was not ready and willing to perform his part of the contract. Counsel for the appellant did not pursue his challenge to the validity of the agreement on the grounds urged by him in para-10 (a) of the written statement. He submitted that even though one of the tenants had vacated the premises, yet another had been inducted in his place and that the defendant was in no position to evict the tenants now in occupation, which would mean that the plaintiff shall have to accept the property subject to the existing encumbrances in the form of tenancies over a part of the same. Learned counsel for the plaintiff-respondent on instructions submitted that plaintiff was prepared to buy the said property even with the encumbrance referred to above. The said submission is accordingly recorded. In the result, this appeal fails and is hereby dismissed, but in the circumstances without any orders as to costs. --- *** --- .