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PETITIONER: K.  NARENDRA

       Vs.

RESPONDENT: RIVIERA APARTMENTS (P) LTD.

DATE OF JUDGMENT:       24/05/1999

BENCH: Sujata V.Manohar, R.C.Lahoti

JUDGMENT:

     R.C.  LAHOTI, J

     This  common  judgment  shall govern the  disposal  of Civil  Appeals Nos.  1928 and 1929 of 1993 between the  same parties and touching the same property.

     The  property in suit consists of a plot of Nazul Land known  as  6,  Tolstoy Marg, New Delhi  wherein  lease  hold rights  were  vested by the President of India in favour  of M/s.   Shiv  Ram, Mahashaya Krishna and K.  Narendra  (  the appellant  herein) in terms of a perpetual lease  commencing from 29th May, 1956.  The relevant and material terms of the lease are extracted and re-produced hereunder:-

     "  II  (5)  The Lessee will not without  the  previous consent  in writing of the Lessor or of such officer or body as  the  Lessor  may  authorise  in  this  behalf  make  any alterations  in or additions to the buildings erected on the said   demised  premises  so  as  to  effect  any   of   the architectural  or  structural features thereof or  erect  or suffer  to  be  erected  on any part  of  the  said  demised premises  any buildings other than and except the  buildings erected thereon at the date of these presents.

     (6)  The Lessee shall not without the written  consent of the Lessor or such officer or body as he may authorise in this behalf construct any well of any description, or instal any private system of supplying water whether for irrigation or for drinking.

     (7)  The  Lessee  will  not without  such  consent  as aforesaid  carry  on  or permit to be carried  on  the  said premises any trade or business whatsoever or use the same or permit  the same to be used for any purpose other than  that of  a  single  storey  residential building  for  a  private dwelling  house  for  one or two families in all  or  do  or suffer  to be done thereon any act or thing whatsoever which in  the  opinion  of the Lessor or such officer  as  he  may authorise  in this behalf may be an annoyance or disturbance to  the President of India or his tenants in the New Capital of Delhi".

     xxx xxx xxx

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     (13)  The  Lessee  shall   before  any  assignment  or transfer  of  the said premises hereby demised or  any  part thereof  obtain  from the Lessor or such Officer or body  as the  Lessor may authorise in this behalf approval in writing of  the  said assignment or transfer and all such  assignees and  transferees and the heirs of the Lessee shall be  bound by  all  covenants  and conditions herein contained  and  be answerable in all respects therefor.

     xxx xxx xxx

     (IV)  If  there  shall at any time have  been  in  the option of the Lessor or such officer as may be authorised by him in this behalf whose decision shall be final, any breach by the Lessee or by any person claiming through or under him of  any  of  the covenants or conditions contained  in  sub- clauses  (5),  (9) and ( 10) of Clause III and if  the  said Lessee  shall  neglect or fail to remedy any such breach  to the  satisfaction  of the Lessor or such officer as  may  be authorised  by him in this behalf within seven days from the receipt  of a notice signed by the Lessor or such officer as may  be  authorised by him in this behalf requiring  him  to remedy  such breach it shall be lawful for the officers  and workmen  acting  under  the authority and direction  of  the Lessor to enter upon the premises hereby demised, and (a) to remove  or  demolish any alterations in or additions to  the buildings  erected  on the said premises, (b) to  remove  or demolish  any buildings erected on the said premises without the  previous  consent  in  writing of the  Lessor  or  duly authorised  officer(c)  to fill any excavation or carry  out any  repairs  that may be necessary and all such moneys  and expenses as may be laid out and incurred by the Lessor or by his  order  shall  be paid by the said Lessee;   and  it  is hereby  expressly  declared that the liberty  herein  before given  is not to prejudice in any way the power given to the President of India by Clauses V and VI hereof."

     xxx xxx xxx

     On  25th  July, 1972 , the appellant entered  into  an agreement to sell, transfer and assign all his rights, title and  interest in the said property along with all structures out  houses  plants  etc.  in favour of the  respondents  in consideration of a sum of Rs.  8,97,740/- for the purpose of constructing a multi-storeyed building by the respondents on the  said property.  In terms of the agreement a sum of  Rs. 50,000/-  was  to be paid at the execution of the  agreement vide  demand  draft  dated 25th July, 1972 which  was  done. Another  sum of Rs.2,75,000/-was to be paid by a  post-dated cheque  dated 25th January, 1973 which was to be encashed by the  appellant after the plans of multi-storeyed building as submitted  by  the respondents were passed and  cleared  for construction by N.D.M.C.  and L.& D.O.  or earlier by mutual agreement  and the balance amount of Rs.  5,72,740/- was  to be  paid  after  the completion of the  said  multi-storeyed building.   There  are  a  few   relevant  clauses  of   the agreement,  material for the purpose of these appeals  which are extracted and re-produced hereunder:-

     "  (3) That the purchaser shall get the permission for such  a  conveyance  from the Land Development  Officer  and shall  pay  all  the charges and  expenses  whatsoever,  for

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execution  and  registration of the sale-deed, its  stamping and  the charges to the Land & Development Office on account of  unearned increase payable by the Seller for getting  the necessary  permission  as  provided in the  perpetual  lease dated 11th September, 1961.

     (4) That the purchaser shall have the building planned in their absolute discretion and after having the plans duly sanctioned  construct and sell flats in the said building as per their terms and conditions without any let or hindrances from the seller any sort whatsoever.  xxx xxx xxx

     (6)  That only after the payment of the  consideration in  full  to the seller the purchasers shall be entitled  to convey,  sell  or  transfer the flats and the plot  of  land bearing No.  6, Tolstoy Marg, New Delhi.

     (7)  That  the  vacant   physical  possession  of  the premises  is hereby given to the purchaser who will nowforth be in actual possession of the premises.

     (8)  That  the purchaser shall be at liberty to  store their  construction  materials,  make storage,  sheds,  keep chowkidars  and  make  room  for them in  the  rear  of  the Bungalow  No.  6, Tolstoy Marg, New Delhi at their own  cost without  any  let  or hindrance from the  seller  or  anyone claiming  through  or  under him  provided  as  specifically agreed   that  in  case  the   post  dated  cheque  for  Rs. 2,75,000/- stated above, is not honoured by the bankers, the possession shall immediately be returned to the seller.

     (9) That the seller shall execute an irrevocable Power of  Attorney in favour of the purchasers authorising them to do  all the every act for constructing the said building  on this land.  xxx xxx xxx

     (13)  That  in  the  event  the  Government  of  India acquires  or  requisitions whole or part of the property  or prohibits  the transfer of the said property under any Urban Property  Ceiling Law enforced the said property before  the date  of  the sanction of the plans for the construction  of the  proposed  multi-storeyed building, then in  such  event the,  sellers shall refund the amount paid by the purchasers and the purchasers shall simultaneously hand over vacant and peaceful possession of the premises to the sellers.  xxx xxx xxx

     (16)   The  purchaser  undertakes   to  complete   the construction  of the said building within a period of two to three  years from the date the plans for the said  buildings are  sanctioned and released by the appropriate  authorities subject to strike, war, natural calamity and force major and Civil Commotion.

     (17)  That  on  possession of the said  plot  and  the building thereon being given to the purchaser by the seller, the  former shall be entitled to dismantle the buildings now standing  on  the said plot of land and utilise  the  debris thereof for such purpose as the purchaser may decide and the seller shall not claim any compensation for the same.

     xxx xxx xxx

     On  26th  July  1972,  the  parties  entered  into  an agreement  supplementary to the agreement dated 25.7.72  and

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to  some  extent  modified the terms and conditions  of  the original   agreement.    According  to   the   supplementary agreement,  the  parties agreed that instead of the  balance consideration  of  Rs.  5,72,740/- being paid in  cash,  the respondent would give to the appellant flats on 2nd, 3rd and 4th  floors  measuring  8,182 sq.  ft.  at the rate  of  Rs. 70/- per sq.ft.  valued at Rs.5,72,740/-.  The area of 8,182 sq.  ft.  could be reduced or increased by 5 to 6 percent at the discretion of the respondents.

     An amount of Rs.  50,000/- was paid by the respondents to   the  appellant  on   25.7.72  simultaneously  with  the execution  of the agreement.  A post-dated cheque for a  sum of  Rs.  2,75,000/- was also delivered by the respondents to the appellant.  Though this cheque was to be encashed by the appellant  in terms of the agreement only after sanction  of the  building plans of the proposed multi-storeyed  building by  the  local  authority i.e.  N.D.M.C.  and the  Land  and Development  Office, however, the cheque for the said amount of  Rs.  2,75,000/- was encashed by the appellant though the building  plans had not been sanctioned by the NDMC and L  & DO.

     As  agreed, the appellant also executed an irrevocable Power  of  Attorney which was duly registered with the  Sub- Registrar  Delhi on 26th July, 1972 in favour of Shri  Inder P.    Choudhary,  Managing  Director   and   Ms.    Minakshi Choudhary,  Director  of the respondent company  authorising them  to represent the appellant before the NDMC and L & D.O ,  the  office  of  the   local  Government  and  any  other Government  Department  or authority in connection with  the affairs connected with and pertaining to the construction of multi-  storeyed  building  to be constructed  on  the  said property.

     On  7/11-9-72 the respondent submitted to the N.D.M.C. building  plans  for bringing up a Group Housing Project  by the  name of "Girnar" on the said property.  The plans  were for the construction of a Housing Project consisting of an 8 storeyed  building  and  2  blocks  of  5-storeyed  building comprising  of  18 flats of three bed rooms and 23 flats  of two   bed  rooms  each   apart   from   incidental/ancillary constructions  such as power sub-station, pump house,  lifts etc.   On  6.11.1972 the plans were rejected mainly  on  the ground  that  plot  in question formed a part  of  the  zone marked  as  re-development area as per the zonal  plan  D-3. This  was in exercise of the power conferred by section  193 (2) of the Punjab Municipalities Act.

     On  9.11.72 the respondent requested the NDMC to  keep the  building  plans  pending and put them up  for  sanction after  certain clarification awaited from Delhi  Development Authority was received.

     On 31.10.72 the Government of India served a notice on the  appellant calling upon him to show cause as to why  the lease  be  not  cancelled  followed  by  re-entry  upon  the premises  by the lessor in view of the appellant having sold the  property  to  the respondents without  obtaining  prior approval of the lessor and thereby having committed a breach of clause II (13) of the lease deed.

     On  9.11.72  the respondents gave a reply to the  L  & D.O.   to  the letter dated 31.10.72 sent to  the  appellant which  apparently  was  passed on by the  appellant  to  the

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respondents for the needful further action.  The respondents submitted  that there was no breach of clause II (13) of the lease  deed inasmuch as there was only an agreement to  sell entered into by the appellant authorising the respondents to build  on  that property but there was no sale as such.   It appears,  that the respondents had raised certain structures on  the property which were objectionable.  The  respondents stated  that the objectionable structures as pointed out  by the  L  & D.O.  had been removed.  On 22.11.73 the  N.D.M.C. once  again  informed  the  respondents that  the  case  for sanction of the building plans was considered by the NDMC on 21.9.1973  and  the  plans  were rejected  for  the  reasons annexed  with the letter.  The principal of the reasons  was that  the  area was earmarked as re-development area in  the master/zonal  plan and further because the size of the  plot was  less than one acre whereas minimum size of the plot  of group housing was required to be one acre.  The master/zonal plan referred to by the NDMC was one approved by the Central Government  under Section 9 (2) of the Delhi Development Act and  hence having a statutory effect.  Efforts were repeated for  the sanction of the building plans but as is borne  out from  the  communications dated 12.8.85 and 19.11.90 by  the NDMC,  building  plans  were not sanctioned  and  were  only rejected.

     Sanction  has  however been granted on 4.6.1991  valid upto  29.4.1993 which is subject to about 13 conditions  and provides  that the sanction will be void ab initio if any of the auxiliary conditions mentioned therein were not complied with.   The correspondence with the NDMC indicates that  the NDMC  was  persuaded to grant such permission on account  of the  suit  having  been decreed on 15.12.1990 by  the  Trial Court and the decree containing a direction to the appellant to  obtain  all  necessary permission from  all  authorities including  Revenue,  local or central authorities so  as  to effectuate the agreement.

     Before  we may proceed to notice the facts relevant to initiation of litigation between parties, we may also notice certain  facts  relevant  to  the   Urban  Land  Ceiling   & Regulation Act, 1976 (hereinafter ULCRA, for short).

     It  is  not  disputed that the  land  forming  subject matter of the agreement to sell between the parties includes an  excess land to the extent of 368.23 sq.mtrs.  as per the provisions  of ULCRA.  Time and again permission sought  for sale of the land was denied by the competent authority.  The application  dated  14.9.1976 under Section 20 of the  ULCRA filed  by  the respondents projecting a plea that  though  a group  housing  scheme did not come within the ambit of  the Act, an application for exemption from the provisions of the Act was being filed by way of precaution, was turned down by Delhi   Administration  on  2.5.1979.    On  9.8.1976,   the appellant  had  moved  an   application  for  the  requisite exemption  whereon vide letter dated 1.1.1978 the  appellant was  informed  that  as  per  the  existing  guidelines  the application  for  exemption proposing to construct a  multi- storeyed building was likely to be rejected by the competent authority.  On 16.8.1978 the appellant reiterated his prayer for  exemption banking upon a plea that as sanction of  sale was  not possible under the Act, the agreement to sell could be  deemed  to  have become infructuous  and  therefore  the requisite  exemption may be granted for the appellant’s  own scheme of group housing.

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     On  26.4.1985 the competent authority passed an  order under  Section  20(1) (a) read with Section 22 of the  ULCRA exempting  the  excess vacant land to the extent  of  368.23 sq.mtrs.   from the provisions of Chapter III of the Act  to undertake  group housing on the said plot subject to certain terms and conditions inter alia :-

     "3.   The  building  plan for group  housing  will  be strictly  in  conformity with the development  controls  and restrictions/regulations   recommended  by   the   erstwhile N.D.R.A.C.   for the Zone.  xxx xxx xxx 5.  The construction should  be  completed within two years from the date of  the approval  of the building plan or the date of issue of  this order,  whichever  is  later.  6.  The plinth area  of  each dwelling unit in the building shall not exceed 300 sq.mtrs.

     7.   A  person  shall  be entitled  to  own  only  one dwelling  unit in this scheme.  It is clarified that for the purpose  of  this clause a Company shall be deemed to  be  a person.

     xxx xxx xxx

     9.   No transfer/substitution of a dwelling unit shall be   effected  without  obtaining   prior  approval  of  the Administrator  of  Delhi.   For  this   purpose  a  list  of intending  buyers  along  with   copies  of  the  agreements executed  or  intended  to be executed  with  the  intending buyers  and affidavits individually from them to the  effect that  he/she  does  not own any dwelling unit in  any  group housing  scheme or a residential property or a house site or has  a  share in any joint ancestral property  exceeding  80 sq.yds.,  either in his/her name or in the name of unmarried minor  children  in  the Union Territory of Delhi  shall  be filed  with  the  Secretary (L &  B)  Delhi  Administration, Delhi."

     Here  itself, we may state that the agreement to  sell entered  into  between  the parties was incapable  of  being honoured  in the light of the stringent terms and conditions subject  to which the abovesaid permission was granted.   In terms  of  the supplementary agreement entered into  between the parties the appellant was to be allotted flats measuring 8182 sq.ft.  on several floors of the proposed building as a part  of the consideration for the agreement, but the  order dated  26.4.1985 would not permit the appellant to have more than  one  dwelling  unit  in  the  scheme.   Secondly,  the building  plan for group housing unit must be in  conformity with  other restrictions/regulations applicable for a  zone. In  this  context,  we propose to set  out  the  controversy centering  around  the question whether the suit land  forms part  of  LUTYEN’s bungalow zone (LBZ, for short).   If  the property  be  the  part of LBZ, the construction  of  multi- storeyed  building  on  the said plot is absolutely  out  of question.   The communication dated 8.2.1988 from the  Joint Secretary   (Urban  Development)  made   to  various   local authorities  of  Delhi describes one of the restrictions  as under :-

     "The  new  construction of dwellings, on a  plot  must have  the same plinth area as the existing bungalow and must have  a  height not exceeding the height of the bungalow  in

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place  or, if the plot is vacant, the height of the bungalow which is the lowest of those on the adjoining plots."

     It  was vehemently disputed by the learned counsel for the  respondents if the suit land at all forms part of  LBZ. On  the material available on record of the case, it is  not possible  to  record a categorical finding in  that  regard. However, still we may refer to a document or two.

     It  appears  that a piece of the land forming part  of the  suit  property  was   acquired  by  notification  dated 5.9.1991  for the purpose of road widening.  Award  no.6/92- 93  made  by  the  Land  Acquisition  Collector  (DS)  Delhi specifically  refers  to plot no.6, Tolstoy Marg apart  from other properties acquired.  It states inter alia :-

     "Besides this other properties 2,4,6 & 8 Tolstoy Marg, 13,  Barakhamba Road and 12 min Kasturba Gandhi Marg fall in residential  zone  and as per present record available  only property  No.6  Tolstoy Marg has sanction for group  housing construction,  which was obtained from DDA & NDMC before the extension  of  Lutyen’s Bungalow zone over Hailey  Road  and Tolstoy  Marg, which means this plot bearing 6, Tolstoy Marg has future potentiality to be used as commercial one."

     Fair  market  value of the property was determined  at Rs.33,400/-   per  sq.mtr.   The   amount  of   compensation determined  at  the abovesaid rate along with the amount  of solatium and interest was received by respondents.

     During  the course of hearing our attention was  drawn to  a  communication dated 17.6.1993 from L & D.O.   to  the parties  whereby  the  sanction for construction  of  multi- storeyed group housing building on the suit premises offered to  the  respondents  on 18.9.1992 has  been  withdrawn  and cancelled on the ground of non-compliance with the terms and conditions of the sanction.

     Some  controversy  between  the parties  also  centres around  the  fact whether possession over the suit  property was  handed over by the appellant to the respondents or not. The  agreement to sell recites delivery of possession by the appellant  to the respondents.  The learned Trial Judge  has recorded  a finding that the recital in the agreement as  to delivery  of possession was not true and that the  appellant had delivered possession of an area of 45 sq.yards merely to the  respondents for the purpose of storing the material, on which   area  the  respondents   did  raise  some  temporary structures;   the physical possession was to be handed  over after the necessary permissions/sanctions were granted.  The Division  Bench  in  appeal  has  however  referred  to  the contents  of  the agreement and formed an opinion  that  the vacant  possession  of the suit premises was handed over  by the   appellant  to  the   respondents  on  25.7.1972  which possession  was a ‘legal possession’ of the respondents  and as   the  appellant  had  got   encashed  the   cheque   for Rs.2,75,000/-,  therefore, the appellant was obliged now  to handover  physical  possession  of the portion of  the  suit premises  which  was in his occupation to  the  respondents. The  finding  recorded  by the Division Bench,  to  say  the least, is laconic and oscillating.

     From  the evidence and the contents of  correspondence

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exchanged between the parties it is also writ large that the parties were well known to each other from much before.  The appellant  had  confidence in the respondents as a  builder. The appellant was not in a position to develop the property. He  did  not  have the requisite finance.   He  also  lacked confidence  if  he would be able to manage for  the  several sanctions and permissions pre-requisite to materialising any building plan on the suit property such as the permission of the  lessor  (L & D.O.), the exemption under the ULCRA,  the sanction  of the building plan from the NDMC.  That is  why, he  entered  into an agreement to sell the property  to  the respondents.  The appellant executed an irrevocable power of attorney  in  favour  of  the respondents  giving  wide  and sweeping  powers.  The underlying object behind execution of such  power  of  attorney was manifestation  of  appellant’s expectations  from  and confidence in the  respondents  that they   would  be  in  a   position  to  secure  the  several permissions  and  sanctions.  However, the expectations  did not  materialise.  The intention of the parties as evidenced by  the terms and conditions of the agreement and subsequent correspondence  between the parties was that the respondents should  have been in a position to secure performance of the terms  and  conditions of the agreement within a  reasonable time  which has been belied.  In the meantime, the value  of the  land has sky-rocketed.  In the year 1972, the appellant had entered into an agreement to sell the property for a sum of  Rs.   8,97,740/-.   The  total   area  of  the  land  is approximately  4000  sq.mtrs.  meaning thereby the  property was  agreed  to  be sold roughly at the rate of  Rs.225  per sq.mtr.   In  the year 1991, consequent upon a part  of  the property  having  been  acquired  for the  purpose  of  road widening,  the  Land Acquisition Officer has  estimated  the value  of  the acquired property at Rs.33,400/- per  sq.mtr. Going  by  the  standard  adopted by  the  Land  Acquisition Collector,  which is always on the lower side, the value  of the property had risen astronomically.

     If  such circumstances taken together should the Court exercise  its  jurisdiction  in   favour  of  decreeing  the specific performance?

     It is true that the agreement to sell dated 25th July, 1972  does not specifically provide for a time limit  within which  the agreement was to be performed or its  performance secured.   The  Constitution Bench has held in the  case  of Smt.   Chand  Rani  (dead) by LRs.  vs.   Smt.   Kamal  Rani (dead) by LRs.  AIR 1993 SC 1742:-.lm15 .rm55

     "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."

     Intrinsic  evidence  is  available  in  the  agreement itself  spelling out the intention of the parties to perform the contract within a reasonable time.  Vide clause 1 (b), a cheque  for  Rs.2,72,000/-, which was post-dated  25.1.1973, was  given  by  the respondents to the  appellant  with  the stipulation  that the same was to be encashed by the  seller after  the plans of multi-storeyed buildings as submitted by

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the  purchaser  were passed and cleared for construction  by the  NDMC  and L&DO or earlier by a mutual  agreement.   The cheque  was  neither a blank nor an undated cheque.  It  was dated  25.1.1973.   The  validity of the cheque  would  have expired  on  24.7.1973  on expiry of  six  months.   Meaning thereby  the  sanction of the plans from NDMC and  clearance from  the  L&DO, the obligation to secure which was  on  the purchaser, were expected by the parties to be secured within the  period  of six months.  So also clause 16 provided  for completion  of  the  construction of the building  within  a period  of  two  to three years from the date of  the  plans being  sanctioned and released by the appropriate authority. Thus,  the  intention  was to have the  agreement  performed within  a  period of about 2-1/2 to 3-1/2  years  calculated from 25.1.1973.

     In  the background of the abortive efforts made by the parties  at  securing  the sanction and the  clearances,  on 16.8.1975  the appellant wrote a letter to the  respondents. A  reading of the letter shows it to have been written  with innocence  and  simplicity  without any legal  advise.   The appellant  made  an  humble appeal to  the  respondents  for fulfilling  their obligations under the contract and to take the  appellant in the right spirit while reading the letter. The appellant indicated the high hopes which he had from the respondents  while entering into the agreement, which  hopes were  belied.   The  appellant then states in  no  uncertain terms:-

     "In  view of all this, I would request you, therefore, to  place  yourself  in a position to  get  the  transaction completed     by     obtaining      necessary     sanctions, permissions,completions  and other formalities within  three months  from the date of receipt of this letter.  You  would also  appreciate that in the absence of your efforts to  get the transaction completed within this period, it will not be taken amiss if I also desire to exercise my legal rights and enforce them."

     This  letter is then followed by a legal notice  dated 25.1.1979.  Having emphasized the failure on the part of the respondents   in  securing   sanctions/clearances  and   the insurmountable difficulty created in the way of the transfer by  ULCRA,  the  appellant declared that the  agreement  had become  void  and  unenforceable and hence  respondents  may vacate about 405 sq.ft.  of the property in their possession within  a  period of two weeks failing which  the  appellant would  be  constrained  to initiate legal  proceedings.   On 3.5.1979,  the appellant filed a suit seeking a decree for a declaration  that  the agreement dated 25.7.1972 had  become null and void and impossible of performance and a decree for delivery  of  possession of a portion of the land  measuring about  45  sq.yards  shown  in the plan  attached  with  the plaint.

     On 14.3.1980, the respondents filed a suit against the appellant  seeking specific performance of the contract  for sale,  a  mandatory  injunction directing the  appellant  to handover  vacant possession of the premises/part of the  old building  in possession of the appellant as described in the map  and in the alternative to grant a decree for the refund of  Rs.3,25,000/- with interest calculated @ 18% p.a.  and a decree for compensation.

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     Section  20 of the Specific Relief Act, 1963  provides that  the  jurisdiction  to decree specific  performance  is discretionary  and  the  court is not bound  to  grant  such relief merely because it is lawful to do so;  the discretion of  the  court  is not arbitrary but  sound  and  reasonable guided by judicial principles and capable of correction by a court of appeal.  Performance of the contract involving some hardship  on  the defendant which he did not  foresee  while non-performance involving no such hardship on the plaintiff, is  one of the circumstances in which the court may properly exercise discretion not to decree specific performance.  The doctrine  of comparative hardship has been thus  statutorily recognized   in   India.   However,   mere   inadequacy   of consideration  or the mere fact that the contract is onerous to  the  defendant or improvident in its nature , shall  not constitute  an  unfair advantage to the plaintiff  over  the defendant  or  unforseeable hardship on the defendant.   The principle  underlying Section 20 has been summed up by  this Court  in  Lourdu Mari David and others vs.  Louis  Chinnaya Arogiaswamy  and  others.  AIR 1996 SC 2814 by stating  that the  decree for specific performance is in the discretion of the Court but the discretion should not be used arbitrarily; the  discretion  should be exercised on sound principles  of law capable of correction by an appellate court.

     Chitty  on  Contracts ( 27th Edn.,1994, Vol.1,  at  p. 1296) states :-

     "Severe hardship may be a ground for refusing specific performance  even though it results from circumstances which arise after the conclusion of the contract, which affect the person  of  the defendant rather than the subject-matter  of the  contract,  and  for which the plaintiff is  in  no  way responsible." Very recently in K.S.  Vidyanadam & others vs. Vairavan 1997 (3) SCC 1, this court has held :

     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 prescribed  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 of  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.  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 a Constitution Bench of this Court in Chand Rani vs.  Kamal Rani (SCC p.528, para 25)

     "....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

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of  the  contract, the Court may infer that it is to be  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.  Now in the case  of  urban properties in India, it is  well-known  that their  prices  have been going up sharply over the last  few decades  - particularly after 1973." ( Para 10) Referring to the  principle  that  mere rise in prices is no  ground  for denying  the  specific performance the Court has  emphasized the  need  for  being  alive to the realities  of  life  and inflationary tendencies judicially noticeable and observed:

     Indeed, we are inclined to think that the rigor of the rule  evolved  by courts that time is not of 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." ( Para 11 )

     The Court has further proceeded to hold:-

     "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 )" (Para 11)

     Having  noticed  the  Constitution Bench  decision  in Chand Rani (supra), the Court has further held:-

     "  Even  where  time  is not of  the  essence  of  the contract,  the  plaintiffs  must  perform his  part  of  the contract within a reasonable time and reasonable time should be   determined   by   looking  at   all   the   surrounding circumstances  including  the express terms of the  contract and the nature of the property." (Para 14)

     In  our opinion, there has been a default on the  part of the respondents in performing their obligations under the contract.   The period lost between 25.7.1972 ( the date  of the  agreement)  and  the  years  1979  and  1980  when  the litigation  commenced, cannot be termed a reasonable  period for   which  the  appellant   could  have  waited   awaiting performance  by  the  respondents  though there  was  not  a defined  time  limit  for  performance   laid  down  by  the agreement.  The agreement contemplated several sanctions and clearances  which were certainly not within the power of the parties and both the parties knew it well that they were the respondents  who  were being depended on for  securing  such sanctions/clearances.   Part  of  the land  forming  subject matter  of  the  agreement  was an excess  land  within  the meaning  of ULCRA and hence could not have been sold.   Part of  the  land  has been acquired by the State  and  to  that extent   the  agreement  has   been  rendered  incapable  of performance.  The feasibility of a multi-storeyed complex as is  proposed and planned by the respondents appears to be an

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impracticality.   If  the respondents would not be  able  to construct  and deliver to the appellant some of the flats as contemplated by the novated agreement how and in what manner the remaining part of consideration shall be offered/paid by the  respondents to the appellant is a question that  defies answer  on  the material available on record.  Added to  all this  is the factum of astronomical rise in the value of the land  which none of the parties would have  forecontemplated at  the time of entering into the agreement.  We are not  in the least holding that the consideration agreed upon between the parties was inadequate on the date of the agreement.  We are  only noticing the subsequent event.  Possession over  a meagre  part of the property was delivered by the  appellant to  the  respondents, not simultaneously with the  agreement but subsequently at some point of time.  To that extent, the recital  in  the  agreement and the averments  made  in  the plaint  filed by the respondents are false.  On a major part of  the  property, the appellant has continued to remain  in possession.   As  opposed  to  this,  the  respondents  have neither  pleaded nor brought material on record to hold that they  have acted in such a way as to render inequitable  the denial of specific performance and to hold that theirs would be  a  case  of greater hardship over the  hardship  of  the appellant.   Upon  an  evaluation  of the  totality  of  the circumstances, we are of the opinion that the performance of the contract would involve such hardship on the appellant as he  did  not  foresee while the non  performance  would  not involve  such  hardship  on the respondents.   The  contract though  valid at the time when it was entered, is  engrossed into  such circumstances that the performance thereof cannot be  secured with precision.  The present one is a case where the  discretionary  jurisdiction  to   decree  the  specific performance  ought  not  to be exercised in  favour  of  the respondents.   During  the  course of  hearing  the  learned senior counsel for the respondents time and again emphasized and  appealed to the court that respondents were builders of repute  and  in the event of the specific performance  being denied, they run a grave risk of loosing their reputation as their  proposed building plan "Girnar" would not materialise and  they  will  not  be able to show their  face  to  their prospective  flat  buyers.  This is hardly  a  consideration which  can weigh against the several circumstances which  we have  set  out  herein above.  If a  multi-storeyed  complex cannot  come up on the suit property, the respondents’ plans are going to fail in any case.

     We  have  already  held that until the repeal  of  the ULCRA in the year 1999 the property agreed to be transferred was  incapable  of  being  transferred for  failure  of  the requisite  permission  under  the   ULCRA  which   situation continued to prevail for a period of about 16 years from the date  of agreement until the repeal of ULCRA.  In the  facts and circumstances of the case we do not think it appropriate to  extend the benefit of the subsequent event of repeal  of ULCRA  in favour of the respondent-plaintiffs after a  lapse of  16 years from the date of the contract.  Permission  for constructing  a  multi-storeyed complex on the premises  was refused  time  and  again  by the NDMC until  the  suit  for specific  performance came to be decreed by the Trial Court. On  none  of  the two events either of the parties  had  any control.  We are clearly of the opinion that at one point of time  the  contract  had stood frustrated  by  reference  to Section  56  of the Contract Act.  We do not think that  the subsequent  events  can  be  pressed  into  service  for  so reviving the contract as to decree its specific performance.

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     The learned counsel for the respondents submitted that in  spite  of  a  part area of the  property  agreed  to  be transferred having been rendered inalienable by the owner on account of its having been acquired by the State and part of the  property having been found to be inalienable on account of  being in excess of the ceiling limit provided by  ULCRA, the  respondents were prepared to have a sale deed  executed of such remaining part of the property as is available to be transferred  without insisting on a corresponding  reduction in the price agreed to be paid.  The learned counsel for the respondents  also  submitted  that  the  ULCRA  having  been repealed  by the Urban Land Ceiling and Regulation  (Repeal) Act,  1999,  the hurdle of the land being in excess  of  the ceiling  has been removed and this aspect of the matter  has lost its relevance.  We are not impressed by the submission. Though  the  respondents may on their part, in  the  changed circumstances,  be  agreeable to have even  lesser  property being  transferred  to them, but in our opinion that is  not permissible.   The  case  of   non-enforcement  except  with variation  is  statutorily  covered  by Section  18  of  the Specific  Relief  Act, 1963.  When the defendant sets  up  a variation   then  the  plaintiff   may  have  the   contract specifically  performed  subject to the variation so set  up only in cases of fraud, mistake of fact or misrepresentation or  where the contract has failed to produce a certain legal result  which  the contract was intended to do or where  the parties  have  subsequent to the execution of  the  contract varied  its  terms.   Obviously,  the case at  hand  is  not covered  by any of the situations contemplated by Section 18 abovesaid.

     However,  in our opinion the present one is a fit case where the respondents should be awarded some compensation in spite of its specific performance being refused.  Section 21 of   the  Specific  Relief  Act   provides  for   award   of compensation  either  in addition to or in  substitution  of such  performance.  The explanation appended to the  Section expressly  enacts  that  the  Court is  not  precluded  from exercising jurisdiction to award compensation even in a case where  the contract has been rendered incapable of  specific performance.   Compensation  to some extent is a  matter  of guess  work.  An amount of Rs.3,25,000/-, equivalent to  the amount  which  was paid by the respondents to the  appellant would  be  a reasonable amount of compensation in the  facts and  circumstances of the case which in our opinion deserves to   be  paid  by  the   appellant  to  the  respondents  in substitution  of  the decree for specific performance.   The respondents  have also in their plaint claimed the relief of compensation in addition to other reliefs.

     For  the  foregoing reasons, the appeals are  allowed. The  judgment  and  decrees passed by the  trial  court  and confirmed  in  appeal are set aside.  Instead the  following consolidated  decree  is passed in both the suits:   1)  the suit  for  specific performance of agreement to  sell  dated 25.7.1972  filed  by  the  respondents  is  directed  to  be dismissed;   2)  the  appellant shall return the  amount  of consideration  paid by the respondents to the appellant with interest  calculated @ 12% p.a.  from the date of payment to the  appellant  till the date of return by the appellant  to the respondents;

     3)  the  appellant  shall  also   pay  an  amount   of Rs.3,25,000/-  by  way of compensation in lieu  of  specific

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performance  to  the  respondents which amount  shall  carry interest  at the rate of 12 per cent per annum from the date of decree (that is, today) till realisation;

     4)   possession   over  the   part  of  the   property admeasuring  45 sq.yards (approximately) shown in red in the plan  attached with the plaint filed by the appellant  shall be delivered by the respondents to the appellant by removing structures, if any, raised by the respondents;

     5) the costs shall be borne by the parties as incurred throughout.