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2007 DIGILAW 1097 (AP)

Shaik Mahaboob Saheb v. Kampasati Nageswara Rao

2007-11-07

L.NARASIMHA REDDY

body2007
JUDGMENT :- The plaintiff in O.S. No.92 of 1984, in the Court of District Munsif, Chintalapudi, is the appellant. He filed the suit against the respondent, for the relief of specific performance of an agreement of sale, dated 9.7.1981. Under the agreement, the respondent agreed to sell three different extents of land, admeasuring about Acs.9-00, for a consideration of Rs.9,000/-. On the date of agreement, a sum of Rs.3,500/- was paid as advance. Out of the balance, Rs.5,000/- was to be paid to the Co-operative Agricultural Development Bank, Chintalapudi, (for short "the Bank"), to liquidate the loan borrowed by the respondent, and Rs.500/- was to be paid, on or before 10.10.1981. 2. The appellant pleaded that the possession of the property was delivered under the agreement, and that he spent considerable amount, to bring it under the cultivation as well as, to put the fencing. It was also his case that ever since the date of agreement, he made number of attempts to remit the amount with the Bank and to pay Rs.500/- to the respondent, but due to non-co-operation, on the part of the Bank and the respondent, his attempts could not fructify. Reference was made to a registered notice, got issued through his Advocate on 25.10.1983, and a reply dated 29.10.1983. He expressed his readiness and willingness to perform his part of the contract. According to him, time was not the essence of the contract. 3. The respondent filed a written statement, denying the allegations of the appellant. He pleaded that the very purpose of offering the land for sale, was to clear the debts payable to the Bank and other agencies, and having paid an advance of Rs.3,000/-, the appellant did not pay any amount, in spite of repeated demands. It was alleged that the matter was taken before the mediators in September 1982, and though the appellant undertook to pay the balance amount within 15 days, he did not make any payment. Respondent has also stated that he was compelled to transfer the properties of his close relatives, to discharge the liability towards the Bank. Another contention advanced on behalf of the respondent was that one of the items agreed to be sold, was an assigned land and is not capable of being transferred. Respondent has also stated that he was compelled to transfer the properties of his close relatives, to discharge the liability towards the Bank. Another contention advanced on behalf of the respondent was that one of the items agreed to be sold, was an assigned land and is not capable of being transferred. He pleaded that time was the essence of the contract, and the appellant lost his right to seek specific performance of the same. It was contended that the appellant did not have means to pay the balance of consideration, and ultimately, it was prayed that the suit be dismissed. 4. Through a judgment, dated 11.8.1986, the trial Court decreed the suit. Respondent filed A.S. No.78 of 1996, in the Court of Additional District Judge, West Godavari at Eluru. The appeal was allowed on 7.2.1995. Hence, the second appeal. 5. Sri M V. Suresh, learned Counsel for the appellant, submits that time was not the essence of the contract, and there was no basis for the lower appellate Court, to take a different view. Placing reliance upon certain precedents, the learned Counsel submits that in an agreement of sale, involving an immovable property, the time can never be treated as essence of the contract, unless there is a clear stipulation to the contrary. He submits that the appellant made many attempts to remit the amount of Rs.5,000/- with the Bank, but on account of the instructions issued by the respondent, the Bank did not furnish the particulars and for that reason, the amount could not be deposited. 6. Sri M. Krishna Mohan Rao, learned Counsel for the respondent, on the other hand, submits that almost out of distress and acute indebtedness, the respondent offered to sell the property, and the same is evident from the recitals in the agreement of sale. He submits that the very fact that a substantial portion of the sale consideration was required to be remitted to the Bank, discloses the dire necessity of the respondent, and despite the same, the appellant did not honour his commitment. Learned Counsel points out that when a clear date is stipulated for payment of the balance, time becomes the essence of the contract. Learned Counsel points out that when a clear date is stipulated for payment of the balance, time becomes the essence of the contract. As regards the readiness and willingness; as well as the financial capacity of the appellant, the learned Counsel submits that there is unimpeachable and clinching evidence, to disprove the contention of the appellant, in the form of the deposition of PW.2. 7. The respondent did not dispute that he entered into an agreement of sale with the appellant, through Ex.A-l, nor the terms and conditions thereof. Inasmuch as there is a written agreement, much difficulty does not exist, in ascertaining the' terms thereof. Complaining that the respondent did not execute the sale deed, in spite of his repeated requests, the appellant filed the suit for specific performance. The respondent, on the other hand, pleaded several facts and contended that the appellant lost his right under the agreement of sale. On the basis of the pleadings before it, the trial Court framed the following Issues. (1) Whether the plaintiff has not paid Rs.3,500/- as contended by the defendant? (2) Whether the time is of essence of the contract? (3) Whether the plaintiff is entitled for specific performance of the contract? (4) Whether the plaintiff is in possession of the plaint schedule property, in accordance with the terms of the contract? 8. The appellant examined PWs.1 to 5 as witnesses, and filed Exs.Al to A3. EX.A2 is the notice dated 25.10.1983, got issued by him, and EX.A3 is the reply thereof. On behalf of respondent, DWs.1 and 2 were examined and Exs.B 1 to B8 were marked. EX.B 1 is the D-form patta issued in favour of the respondent and Exs.B2 to B6 are the receipts issued by the Bank, for repayment of the loan. Exs.B7 and B8 are the land revenue receipts. 9. The trial Court answered all the issues in favour of the appellant and decreed the suit. In A.S. No.78 of 1986, the lower appellate Court framed only one point for its consideration, viz. "Whether the appellant is entitled for the relief of specific performance of agreement of sale?" and answered the same against the appellant. 10. 9. The trial Court answered all the issues in favour of the appellant and decreed the suit. In A.S. No.78 of 1986, the lower appellate Court framed only one point for its consideration, viz. "Whether the appellant is entitled for the relief of specific performance of agreement of sale?" and answered the same against the appellant. 10. In view of the contentions advanced on behalf of the parties, the following substantial questions of law arise for consideration: (a) Whether time cannot be the essence of the contract at all, where the subject-matter of the contract is an item of immovable property? (b) Whether the relief of specific performance of an agreement of sale can be granted in favour of a person, who did not honour the commitment under the agreement? 11. The trial Court framed a specific issue, as to whether time was the essence of the contract in the present case, and decided the same against the respondent. Though the lower appellate Court did not frame any specific point on this, it has undertaken extensive discussion, with reference to the decided cases, and concluded that time was the essence of the contract. However, it did not rest its conclusion on that finding alone. Though the contention of the learned Counsel for the appellant that time can never be the essence of the contract, where the subject matter is an immovable property, is too specious to be accepted. Whether or not time is the essence of the contract, would depend more upon the terms thereof, than the subject-matter. Here again, it must be noted that mere stipulation of a date for performance of an act, by itself, does not make the time, the essence of the contract. The decided cases are to the effect that time would become essence, if the consequences for non-compliance with the condition by a stipulated date are provided for. Being a pure contractual obligation, this again is subject to some limitations. For instance, if a party that can repudiate the contract, on the ground that other party did not fulfil his obligation within the stipulated time, chooses to waive it, either by accepting payment subsequent to that date, or any other similar acts, time which was otherwise essence of that contract, would cease to be so. 12. For instance, if a party that can repudiate the contract, on the ground that other party did not fulfil his obligation within the stipulated time, chooses to waive it, either by accepting payment subsequent to that date, or any other similar acts, time which was otherwise essence of that contract, would cease to be so. 12. In the instant case, it is no doubt true that there is stipulation in the agreement, that the balance of consideration shall be paid by 10.10.1981. However, no consequences are provided, in the event of any default. Further, the record discloses that the respondent also agreed and participated in a mediation, in September 1982, and expressed - his willingness to receive the balance, within 15 days from the date of mediation. Therefore, time cannot be treated as essence of the contract in stricto sensu, in this case. However, there exists a different angle to the same larger issue. 13. Merely because time is not essence of the contract, the party who seeks the remedy, does not have the liberty to approach the Court, at his convenience. There existed a view point, that the period of limitation, for recovery of the amount, viz. three years, can broadly be treated as the reasonable time, within which the relief of specific performance can be sought. In KS. Vidyanadam v. Vairavan, (1997) 3 SCC 1 , the Supreme Court analyzed the law on the subject as under: "10. It has been consistently held by the Courts in India, following certain early English decisions, that in the case of agreement of sale relating to immovable property, time is not of the essence of the contract unless specifically provided to that effect. The period of limitation prescnoed by the Limitation Act for filing a suit is three years. From these two circumstances, it does not follow that any and every suit for specific performance of the agreement (which does not provide specifically that time is the essence of the contract) should be decreed provided it is filed within the period of limitation notwithstanding the time limits stipulated in the agreement for doing one or the other thing by one or the other party. That would amount to saying that the time-limits prescribed by the parties in the agreement have no significance or value and that they mean nothing. That would amount to saying that the time-limits prescribed by the parties in the agreement have no significance or value and that they mean nothing. Would it be reasonable to say that because time is not made the essence of the contract, the time-limit(s) specified in the agreement have no relevance and can be ignored with impunity? It would also mean denying the discretion vested in the Court by both Sections 10 and 20. As held by Constitution Bench of this Court in Chand Rani v. Kamal Rani, (1993) 1 SCC 519 : "...it is clear that in the case of sale of immovable property there is no presumption as to time being the essence of the contract. Even if it is not of the essence of the contract, the Court may infer that it is to be performed in a reasonable time if the conditions are (evident ?) : (l) from the express terms of the contract; (2) from the nature of the property; and (3) from the surrounding circumstances, for example, the object of making the contract". In other words the Court should look at all the relevant circumstances including the time-limit(s) specified in the agreement and determine whether its discretion to grant specific performance should be exercised." The concept of Time being the essence of the contract' has a close proximity with the point of time, at which the relief is prayed for, and this, in turn, would have a direct bearing upon the manner in which the discretion of the Court is to be exercised. Adverting to this aspect, the Supreme Court further observed as under: "Indeed, we are inclined to think that the rigor of the rule evolved by Courts that time is not the essence of the contract in the case of immovable properties evolved in times when prices and values were stable and inflation was unknown - requires to be relaxed, if not modified, particularly in the case of urban immovable properties. It is high time, we do so. Learned Coupsel for the plaintiff says that when the parties entered into the contract, they knew that prices are rising; hence, he says, rise in prices cannot be a ground for denying specific performance. May be, the parties knew of the said circumstance but they have also specified six months as the period within which the transaction should be completed. Learned Coupsel for the plaintiff says that when the parties entered into the contract, they knew that prices are rising; hence, he says, rise in prices cannot be a ground for denying specific performance. May be, the parties knew of the said circumstance but they have also specified six months as the period within which the transaction should be completed. The said time-limit may not amount to making time the essence of the contract but it must yet have some meaning. Not for nothing could such time-limit would have been prescribed. Can it be stated as a rule of law or rule of prudence that where time is not made the essence of the contract, all stipulations of time provided in the contract have no significance or meaning or that they are as good as non-existent? All this only means that while exercising its discretion, the Court should also bear in mind that when the parties prescribe certain time-limit(s) for taking steps by one or the other party it must have some significance and that the said time-limit(s) cannot be ignored altogether on the ground that time has not been made the essence of the contract (relating to immovable properties)." 14. The Courts concede some latitude to the parties, in the matter of seeking remedies, where time is not essence of the contract. The extent of latitude, in turn, would depend upon the purpose for, and the circumstances, under which the transaction came into existence. If for instance, a person who was in dire need of money for undergoing a vital surgery, offers to sel1 his dwel1ing house, on a condition that the consideration must be paid within one week, but the purchaser fails to pay the amount, within that time, but files suit for specific performance, one year thereafter, the relief cannot be granted, on the assumption that the time was not essence of the contract. Even if the period of one year can be considered as reasonable in other circumstances, it cannot be treated so, where the purpose of the sale was to procure the money for a life saving operation, or something akin to it. 15. Even if the period of one year can be considered as reasonable in other circumstances, it cannot be treated so, where the purpose of the sale was to procure the money for a life saving operation, or something akin to it. 15. Therefore, though time cannot be treated as essence of contract in this case, the failure of the appel1ant to pay the amount within stipulated time, and the point of time, at which he approached the Court, seeking the remedy, would have their own bearing on the manner in which the discretion must be exercised. A detailed aspect of this would become manifest, in the discussion on the next question. 16. Coming to the second question, the discussion must start with the taking note of the contours of Section 22 of the Specific Relief Act. The Act itself made it clear that being an equitable remedy, the relief of specific performance is discretionary in nature. Having said so, the section proceeds to add that the discretion must be exercised in a proper and judicious manner and certain guidelines for exercise thereof, are also furnished. There exists substantial difference between the approach of British Courts, on the one hand, and Indian Courts, on the other hand, on this aspect. In Mademsetty Satyanarayana v. G. Yelloji Rao, AIR 1965 SC 1405 , the law was explained by Justice Subba Rao, as his Lordships then was, as under: "11. The result of the aforesaid discussion of the case law may be briefly stated thus: While in English mere delay or laches may be a ground for refusing to give a relief of specific performance, in India mere delay without such conduct on the part of the plaintiff as would cause prejudice to the defendant does not empower a Court to refuse such a relief But as in England so in India, proof of abandonment or waiver of a right is not a pre-condition necessary to disentitle the plaintiff to the said relief, for if abandonment or waiver is established, no question of discretion on the part of the Court would arise. We have used the expression "waiver" in its legally accepted sense, namely, "waiver is contractual and may constitute a cause of action; it is an agreement to release or not to assert a right"; see Dawson's Bank Ltd. v. Nippou Menkwa Kabushiki Kaisha, 62 Ind App 100 at p.108 = AIR 1935 PC 79 at p.82. It is not possible or desirable to lay down the circumstances under which a Court can exercise its discretion against the plaintiff. But they must be such that the representation by or the conduct or neglect of the plaintiff is directly responsible in inducing the defendant to change his position to his prejudice or such as to bring about a situation when it would be inequitable to give him such a relief." The same paragraph has been quoted with approval, in several judgments, ever since then. 17. The very first sentence in EX.A-l discloses that the respondent agreed to sell the land to clear the loans due to the Bank and to other creditors. Further, the agreement provided for payment of Rs.5,000/- by the appellant directly to the Bank, on or before 10.10.1981. These two stipulations would indicate the circumstances, under which the agreement came to be executed. The record discloses that the appellant got issued a notice EX.A-2 dated 25.10.1983, i.e. nearly after two years, requesting the Business Manager of the Bank, to furnish the details of the loan account of the respondent. Neither from the pleadings, nor from Ex.A-2, it is evident that the appellant made any efforts to remit the amount and the Bank refused to receive the same. In his reply marked as Ex.A3, the respondent stated as under: "(4) At the mediation, the mediators fixed further time of 15 days for payment of the balance of consideration from the date of mediation convincing my client No.2 among your clients expressed his inability to pay the balance of sale consideration within the said time to my client to enable him to pay the loan to No.1 among you. My client is in no alternative cancelled the agreement of sale before the said mediators and also informed before them to No.2 among your client that he will borrow money on mortgage of the schedule land to discharge his loan. My client is in no alternative cancelled the agreement of sale before the said mediators and also informed before them to No.2 among your client that he will borrow money on mortgage of the schedule land to discharge his loan. Subsequently after information to No.2 among yours client before mediators, and to his knowledge, after canceling the agreement of sale, my client mortgaged the land belongs to his wife and borrowed the amount at higher interest and discharged the installment of loan to the said Bank. As a result of No.2 among your clients purchase and his failure to pay the balance of sale consideration, my client has suffered mental agony and borrowed money at higher interest with great difficulty at the eleventh hour." The suit was filed in the year 1984. No reply was issued to this. In his cross-examination, the appellant admitted as under: "It is true that the defendant sold the plaint schedule land for the purpose of discharging the loan of Agricultural Development Bank. It is true that there is no mention in EX.A-l that I have to pay the sale consideration to the Bank after registration of the sale deed." "It is true that I did not give any notice in writing that I am ready to pay Rs.5,000/- to the Bank and Rs.500/- to the defendant on or before 10.1 0.1981. But I orally informed him. It is true that I did not mention in EX.A2 about oral demands made to the defendant. I have not given any reply to Ex.A-3." As DWI, the respondent stated that on account of the default committed by the appellant, in remitting the amount of Rs.5,000/- to the Bank, he had mortgaged the other properties as well as those of his relations to clear the debt. Exs.B-2 to B-6 are the receipts that evidenced the payment by the respondent. The non-remittance by the appellant had naturally resulted in accumulation of interest and mounting of pressure upon the respondent. It was not even suggested that the payments covered by Exs.B-2 to B-6 are not genuine. These facts would have their own bearing, upon the manner in which the discretion of the Court, in granting the equitable remedy, must be exercised. 18. One important fact that militates against the appellant is the one, in relation to his readiness and willingness to perform his part of the contract. These facts would have their own bearing, upon the manner in which the discretion of the Court, in granting the equitable remedy, must be exercised. 18. One important fact that militates against the appellant is the one, in relation to his readiness and willingness to perform his part of the contract. Time and again, the Hon'ble Supreme Court held that the readiness, as contemplated under Section 16 of the Specific Relief Act, is not confined to the one, referable to the date on which the suit is filed. On the other hand, it must exist ever since the payment of the balance became due, and must subsist till the suit is filed, if not thereafter. The very fact that the appellant did not remit the amount with the Bank, upto the date of the filing of the suit, which is more than two years from the due date, is a strong indication that he was either not ready, or not willing to discharge his obligation. PW 4 is a witness examined by the appellant himself. From him, it was elicited in the cross-examination that he too sold an item of landed property to the appellant, under an agreement of sale, almost at the same point of time, and that on account of the failure of the appellant to pay the consideration, he had cancelled the agreement and resumed the land. The relevant portion of the evidence of PWA reads as under: "It is true that I and the defendants approached the plaintiff for payment of sale consideration of the land once. I do not know whether the plaintiff paid any amount to the defendant or not. I cannot say how many times the defendant pursued him It is true that I took possession of my land in 70 cents from the plaintiff as he failed to pay my sale amount." There cannot be a better piece of evidence than this, to demonstrate absence of readiness, or willingness, on the part of the appellant. 19. This Court is of the view that this is a typical case, where the discretion of the Court, vested under Section 22 of the Specific Relief Act, must be exercised to refuse the relief of specific performance, in favour of the appellant. The lower appellate Court had taken the correct view of the matter, and this Court is not inclined to interfere with the same. 20. The lower appellate Court had taken the correct view of the matter, and this Court is not inclined to interfere with the same. 20. The second appeal is accordingly dismissed. There shall be no order as to costs.