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2011 DIGILAW 1383 (BOM)

Rakesh Gulshanlal Sehgal v. Modern Products

2011-11-16

D.G.KARNIK

body2011
Judgment : 1. Heard learned counsel for the parties. 2. This motion is taken out by the defendant in the decreed suit No.2838 of 1984, under section 28 of the Specific Relief Act 1963 (for short “the Act”). 3. On 4 August 1984, the defendant agreed to sell to the plaintiffs the suit property for a total consideration of Rs.4,06,000/on the terms and conditions mentioned therein. The plaintiffs filed a suit (Suit No.2838/84) for specific performance of the agreement of sale. On 19 December 1984, the parties settled the matter and filed consent terms in the suit. By an order dated 21 December 1984, the court passed a decree in terms of the consent terms. As per the said consent terms, the defendant agreed and admitted that till date of the signing of the consent terms, it had received the sum of Rs.2,56,000/. The defendant further agreed to receive the balance consideration of Rs.1,42,000/by monthly instalments of Rs.4,000/. The consent terms specify that the “consent terms” were to operate as a conveyance and there was to be a charge of balance consideration of Rs.1,42,000/in the suit property until it was paid in full. Clause no.4 of the decree also provide that in the event the balance payment was not paid, the defendant shall be entitled to apply to the court for appointment of court receiver for sale of the suit property and apply the sale proceeds for payment of the balance consideration of Rs.1,42,000/or unpaid part thereof. 4. According to the defendant, part of the balance consideration of Rs.1,42,000/was not paid by the plaintiffs. The defendant has therefore taken out the motion for rescission of the decree in terms of a right conferred upon it under section 28 of the Act. By filing an affidavit in reply and supplementary affidavit in reply, the plaintiffs have contended that the contention of the defendant that part of the money has not been paid is incorrect. Plaintiffs have paid the entire balance consideration of Rs.1,42,000/. Photo stat copies of the receipts for payment issued by the defendant are annexed as Exhibit A1 to A38 to the further affidavit in reply dated 25 April 2011. Plaintiffs have paid the entire balance consideration of Rs.1,42,000/. Photo stat copies of the receipts for payment issued by the defendant are annexed as Exhibit A1 to A38 to the further affidavit in reply dated 25 April 2011. By filing a rejoinder the defendant has denied the receipt of balance consideration of Rs.1,42,000/and has contended that three of the cheques of Rs.4,000/each issued by the plaintiff have been dishonored by the bank and thus, there is a short payment of Rs. 12,000/. Counsel for the defendant further submitted that some of the instalments were not paid in time and that is also a ground for rescission under section 28 of the Act. In response, counsel for the plaintiffs submitted that Rs.12,000/in respect of three cheques which were dishonored has been paid in cash and the receipts for payment of cash are produced at Exhibit A12, A14 and A6. 5. In my view, the defendants are not entitled for rescission of the contract under section 28 of the Act for the reasons indicated below. 6. Sub-section (1) and (2) of section 28 are relevant for our purpose and read thus: (1) Where in any suit a decree for specific performance of a contract for the sale or lease of immovable property has been made and the purchaser or lessee does not, within the period allowed by the decree or such further period as the court may allow, pay the purchase money or other sum which the court has ordered him to pay, the vendor or lessor may apply in the same suit in which the decree is made, to have the contract rescinded and on such application the court may, by order, rescind the contract either so far as regards the party in default or altogether, as the justice of the case may require. (2) Where a contract is rescinded under sub-section (1), the court (a) shall direct the purchaser or the lessee, if he has obtained possession of the property under the contract, to restore such possession to the vendor or lessor, and (b) may direct payment to the vendor or lessor of all the rents and profits which have accrued in respect of the property from the date on which possession was so obtained by the purchaser or lessee until restoration of possession to the vendor or lessor, and, if the justice of the case so requires, the refund of any sum paid by the vendee or lessee as earnest money or deposit in connection with the contract. Sub-section (1) of Section 28 provides that where in any suit a decree for specific performance of a contract for sale of immovable property has been made and the purchaser does not, within the period allowed by the decree or such further period as the court may allow, pay the purchase money, the vendor may apply in the same suit in which the decree is made, to have the contract rescinded and on such application the court may, by order, rescind the contract either so far as regards the party in default or altogether, as the justice of the case may require. Subsection (2) of section 28 provides that where a contract is rescinded under subsection (1), the court may direct payment to the vendor of all the rents and profits which are accrued in respect of the property from the date on which possession was so obtained by the purchaser until restoration of possession to the vendor and, if the justice of the case so requires, the refund of any sum paid by the vendee or lessee as earnest money or deposit in connection with the contract. 7. In my view, section 28 contemplates existence of a decree for specific performance against the vendor. Furthermore, it contemplates that the decree remains unexecuted i.e to say that the conveyance is not executed in pursuance of a decree because once the conveyance is executed, the original contract for sale merges into the conveyance. Thereafter, there would be no occasion for the court to set aside the original contract. Furthermore, it contemplates that the decree remains unexecuted i.e to say that the conveyance is not executed in pursuance of a decree because once the conveyance is executed, the original contract for sale merges into the conveyance. Thereafter, there would be no occasion for the court to set aside the original contract. What would be required to be set aside is the conveyance which is not contemplated to be set aside under subsection (1) of section 28 of the Act. In the present case, the property has been conveyed. Clause no.6 of the consent terms is very specific in this regard and reads: “Ordered that this decree do operate as conveyance of the said property described in the schedule hereunder written together with all the rights, title and interest of the defendants in favour of the plaintiffs.” Thus, the decree was to operate as a conveyance. The initial contract for sale stood merged into the conveyance as the decree itself was to operate as a conveyance. There are two more clauses which indicate that the parties contemplated that the decree itself amounted to transfer of the title. Clause no.2 of the consent terms specifies that out of the total consideration of Rs.4,06,000/, Rs. 2,56,000/were already paid by the plaintiffs to the defendant and balance consideration of Rs.1.42,000/should be paid in instalments of Rs.4,000/per month. Last sentence of clause no.2 reads: “A charge or mortgage is hereby created over the said property for a sum of Rs.1,42,000/due and payable by plaintiff to defendants.” Clause no.2 thus contemplates creation of charge on the suit property in favour of the defendants. If the suit property was not conveyed and if the defendants were still the owners of the suit property, there could not have been a charge by the defendants on their own property in their own favour. Clause no.4 of the consent terms is also material and reads thus: “4. It is also further agreed and declared that if the Plaintiffs commit default in payment of instalments of Rs.1,42,000/(Rupees One Lac and forty two thousand) as stated hereinabove the defendants will be entitled to take out proceedings in the aforesaid suit for appointment of a court receiver or Receiver for taking possession of the suit property for selling out the same either by public auction or by private sale”. Clause 4 contemplates that in the even plaintiffs committed a default in making payments of the instalments of Rs.1,42,000/, the defendant would be entitled to apply to the court for appointment of a receiver and sale of the suit property for recovery of the balance of Rs.1,42,000/or the unpaid portion thereof. Clause 4 contemplates that the title has been vested in the plaintiffs and therefore, by sale of the suit property, the balance money was to be recovered and paid to the defendants. Apart from the statutory charge under section 100 of the Transfer of Property Act, a contractual charge was created in favour of the defendant by clause 4 of the consent decree. 8. In my view, section 28 of the Act does not prohibit contracting out. Clause 4 of the consent terms, in my view, is an agreement, express or implied, by which the parties have agreed to contract out of section 28 of the Act. Section 28 of the Act confers a right on the unpaid vendor to rescind the contract. In spite of that right, the parties by clause 4 of the consent terms agreed that the defendant (as an unpaid vendor) would have a right to put the property to an action at the hands of the court receiver and recover its dues. The parties specifically agreed that the right of the defendant as unpaid vendor was only restricted to the recovery of the unpaid consideration under clause 4 of the consent terms. The defendant therefore cannot claim a right of rescission under section 28 of the Act. 9. Last few words of subsection (1) of section 28 of the Act are material. They read as under: “the court may, by order, rescind the contract either so far as regards the party in default or altogether, as the justice of the case may require. (underlining supplied) Firstly, sub-section (1) of section 28 confers a discretion on the court by use of the word “may” and that discretion is to be used to meet the ends of justice. The ends of justice in the present case do not require me to pass an order of rescission of the contract. Even according to the defendants, all cheques except three have been encashed and therefore, at the most, there is a default of Rs. 12,000/. The ends of justice in the present case do not require me to pass an order of rescission of the contract. Even according to the defendants, all cheques except three have been encashed and therefore, at the most, there is a default of Rs. 12,000/. Even if I were to reject the contention of the plaintiffs that they have paid Rs.12,000/in cash, still at the most Rs. 12,000/are due out of total consideration of Rs.4,06,000/This is an insignificant part of less than 3% of the total consideration. Further more, the parties itself contemplated that in case of a default, the defendant as vendor would only be entitled to have a charge on the suit property and would be entitled to recover the balance by sale of the suit property through receiver. The parties did not contemplate that the contract for sale could be rescinded to the defendant. In this view of the matter, in my view, I am not inclined to exercise the discretion conferred by section 28 of the Act in favour of the defendants but rather exercise it in favour of the plaintiffs. 10. There is yet another reason for not exercising the discretion in favour of the defendant. The consent decree is of the year 1984. The amount of Rs.1,42,000/was to be paid by monthly instalments of Rs.4,000/i. e it was to be paid in about for about 36 instalments i.e. upto 1987. The motion is taken out in the year 2010. This gross delay disentitles the plaintiff from exercising the right. In my view, the motion is also barred by limitation. 11. The motion is barred by limitation. Application under section 28 of the Act must be made within 3 years of the accrual of cause of action. Since no period of limitation is provided it would be governed by Article 137 of the Limitation Act. In the present case, cause of action agreed to the defendant in any event in the year 1987 or earlier. The present motion which is taken out in the year 2001 is hopelessly barred by limitation. Even if another view regarding the limitation is permissible, the long delay and latches disentitles the defendant from exercise of a discretion in their favour. 12. For these reasons, there is no merit in the motion which is hereby rejected with costs.