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PETITIONER: M/S.P.R. DEB AND ASSOCIATES

       Vs.

RESPONDENT: SUNANDA ROY

DATE OF JUDGMENT:       01/03/1996

BENCH: MANOHAR SUJATA V. (J) BENCH: MANOHAR SUJATA V. (J) FAIZAN UDDIN (J)

CITATION:  1996 AIR 1504            1996 SCC  (4) 423  JT 1996 (2)   684        1996 SCALE  (2)551

ACT:

HEADNOTE:

JUDGMENT:                             WITH                CIVIL APPEAL NO. 4631A OF 1993 Sunanda Roy V. M/s.P.R.Deb and Associates                       J U D G M E N T Mrs. Sujata V.Manohar. J.      Civil Appeal  No.4631A of 1993 is by original defendant to the  suit challenging  the decree of specific performance which has  been passed  in  appeal  by  the  High  Court  of Calcutta against  the appellant.  The judgment and decree of the High  Court in  appeal is dated 28th of August, 1991. By this judgment  and decree,  the judgment  and order  of  the trial court  dismissing the  respondent’s suit  for specific performance was  set aside.  The High  Court granted  to the respondent a decree for specific performance of the contract in question  and directed  the appellant to execute the deed of conveyance as set out therein on the respondent paying to the appellant  the  amounts  set  out  therein.  The  decree provided that  the respondent shall make these payments with interest as  specified therein  within  a  period  of  three months from  the date of the judgment; and the appellant was directed  to  execute  the  documents  within  three  months thereafter. The  respondent, however,  did not  make payment within specified  period which  expired on  27th of November 1991.  The   respondent,   however,   ultimately   made   an application dated  3rd of  February, 1992  before  the  High Court for  extension of  time for  making payment  under the decree by  a further  period of  three months. The appellant opposed this  application. The High Court by its order dated 26th of  May, 1993  has declined  to grant  any extension of time for  payment of  the said  amounts holding, inter alia, that in  the facts  and circumstances  of the  case it would cause hardship, serious prejudice and injury to the opposite party if  any further extension of time is given thereby re-

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opening the  decree. The  application of  the respondent for extension of  time has been dismissed by the High Court thus resulting in  the respondent’s suit for specific performance standing dismissed.      Civil  Appeal   No.  4631  of  1993  is  filed  by  the respondent from  the judgment  and order  of the  High Court dated 26th  of May,  1993. For  the sake  of convenience the appellant in  Civil Appeal  No.4631A of 1993, that is to say the original  defendant, is  referred to  as  the  appellant while the  respondent in Civil Appeal No.4631A of 1993, that is to  say the  original plaintiff,  is referred  to as  the respondent.      The  appellant   is  the  owner  of  certain  immovable property bearing  No.30, Gariahata  Road, South Calcutta. By the agreement  dated 24th  of October,  1977 the  appellant- agreed to sell to the respondent the said property for a sum of Rs.9  lakhs on  the terms  and conditions  set out in the agreement of  sale dated  24th to  October, 1977.  Under the terms of  this agreement a sum of Rs.25,000/- was to be paid at the  time of execution of the agreement. A further sum of Rs.4 lakhs  was to  be paid within five months from the date of the  agreement and  the balance  amount was to be paid at the time  of conclusion  of the  Purchase, time-being of the essence of  the contract.  Under clause  4 of the agreement. after the  title  of  the  appellant  was  accepted  by  the respondent, the  respondent was  required  to  send  to  the appellant’s advocate  a draft  of the proposed conveyance in order to  enable the  appellant to  apply for and obtain the income tax  clearance certificate  under Section 230A of the Income Tax Act and for permission of the competent authority under the  Urban Lana  (Ceiling and  Regulation) Act,  1976. Under clause  6 of  the agreement the appellant was required to hand  over vacant  possession of  the  said  property  on completion of  sale except for possession of four shop rooms in the front portion. Clauses 11, 13 and 14 of the agreement are as follows:      "11. And  it is further agreed that      if ultimately  the Conveyance is to      be  executed   in   favour   of   a      Cooperative Housing  Society to  be      initiated by  the said  P.R. Deb  &      Associates  nominee   of  the  said      Purchaser  herein   and  a  further      Agreement  may   be  entered   into      between  the   Promoter   of   that      Housing Society  and the Vendor and      the said Agreement be registered at      the   Office    of   the   District      Registrar at  Alipore,  24-Parganas      and the  Vendor shall  have to give      necessary  consent  letter  to  the      Cooperative Housing  Society to the      effect that  she has agreed to sell      the land  and the buildings thereon      to the Cooperative Housing Society.      13.  On the  Vendor’s making  out a      marketable  title   to   the   said      property free from all encumbrances      whatsoever  and  on  her  complying      with  the  obligations  under  this      Agreement, if  the’ purchaser fails      to complete the purchase within the      time and in the manner hereinbefore      mentioned,  the   Vendor  thereupon      shall  have   the  full   power  of

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    rescinding this Agreement by giving      notice in  writing to the Purchaser      or its  said Advocate  and the said      earnest money  of Rs.25,000/- shall      in  that   event  stand  absolutely      forfeited by  the Vendor  as and by      way of  liquidated damages  and the      Vendor shall have further rights to      sue  the   purchaser  for  specific      performance of  this Agreement  and      for other reliefs.      14.  It is  clearly understood  and      agreed  that   further  payment  of      Rs.4,00,000/- will  not be  treated      as earnest  money for the operation      of  this   clause.  In   case   the      transaction falls  through the said      sum of  Rs. 4,00,000/-  has  to  be      refunded                forthwith."      Under the  terms of  the said  agreement the respondent was required  to pay  Rs.4 lakhs within five months, that is to say,  on or before 23rd of March, 1978. As the respondent failed  and   neglected  to   pay  this  amount  within  the prescribed period, the appellant addressed to the respondent her solicitor’s  letter dated 12.4.1978. In this letters the appellant pointed  out that  the part  payment of Rs.4 lakhs had not  been made by the respondent to the appellant within the prescribed  period under  the agreement.  It was further pointed out that the respondent was aware that the appellant was residing  in the said property. The appellant had agreed to give  vacant possession of this property on completion of sale. The payment of Rs.4 lakhs was required under the terms of the  agreement to  enable  the  appellant  to  acquire  a suitable residence  by utilizing  this sum.  the letter also records that in fact the appellant had inspected a number of properties and  approved two of them for purchase: but owing to the  default on  the part of the respondent in paying the sum of  Rs.4 lakhs the appellant was not able to proceed any further.  On   account  of  the  default  committed  by  the respondent the  appellant had  the option  to terminate  the agreement. However  without  prejudice  to  her  rights  she called upon the respondent to pay the said sum of Rs.4 lakhs within seven  days failing  which  the  appellant  would  be compelled to  take further  steps against  the respondent as she may  be advised.  Despite  this  notice  the  respondent failed and neglected to pay the sum of Rs.4 lakh .      The respondent  contends that  under clause  11 of  the said agreement.  the appellant  was required to enter into a further agreement  with the  promoter of  a proposed housing society being  formed by  the respondent and was required to give a consent letter to the co-operative housing society as set out  in clause 11. The respondent contends that although meetings were  held between  the solicitors of the appellant and the  respondent, the appellant did not give such consent or enter  into arrangement  with the  proposed  co-operative housing  society   which  was  then  being  set  up  by  the respondent. It  is the  respondent’s case  that he could not raise the  sum of  Rs.4 lakhs  since the  appellant did  not consent to  and/or execute  an argument  in  favour  of  the proposed housing society in supersession of the agreement of 24th of  October. 1977. In this connection, the respondent’s solicitors have  addressed two  letters to  the  appellant’s solicitors. One is a letter dated 5th of June, 1978, written long after the expiry of the date for payment of Rs.4 lakhs, in which  the respondent  has called  upon the  appellant to

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approve the draft agreement for sale between one M/s.Anirban Co-operative  Housing   Society  Ltd.  which  was  not  then registered and the appellant in supersession of the existing agreement along  with a  cheque  for  Rs.25,000/-  drawn  in favour of  the appellant  by the said proposed society. This cheque has  not been  encased. The  second letter  from  the respondent to  the  appellant’s  solicitors  is  dated  25th September, 1980  in which  it is,  inter alia, recorded that unless the  agreement was  executed between the proposed co- operative  society  and  the  appellant,  it  would  not  be possible for  the respondent to raise money and make payment of Rs.4  lakhs. The  letter also  records that the appellant had, during  the negotiations,  taken the  stand that unless the sum,  of Rs.4  lakhs was  paid the  appellant would  not execute the  fresh agreement  for  sale.  This  letter  also records that  after the  agreement between  the proposed co- operative  society   and  the  appellant  is  completed  the respondent will.  within a  month thereafter make payment of Rs.4 lakhs,  But unless  the agreement  is completed  it  is impossible to collect the money from the members of the proposed co-operative society.      On 10.11.1980, the respondent filed a suit for Specific performance  against  the  appellant  praying  for  specific performance of  the agreement  of 24th  of October 1977. The trial court  by its  judgment  and  order  dated  24.12.1985 dismissed the suit holding that the respondent was not ready and willing  to perform  his part of the contract. In appeal however the  High Court  has granted specific performance as prayed for  on terms  and condition which are set out in its judgment and  decree  dated  28.8.1991.  Hence  the  present appeal has been filed by the appellant.      Under the  agreement  of  sale  dated  24.10.1977,  the respondent was  required to  make part payment of Rs.4 lakhs within five  months of  the agreement of sale. The agreement has clearly  provided that  this payment  is not  by way  of earnest but  it is  part payment  of the purchase price. The purpose  of   this  payment   is  clearly  set  out  in  the appellant’s solicitor’s  letter dated 12.4.1978 addressed to the respondent’s  solicitors. Early payment of the amount of Rs.4 lakhs  was required  as the  appellant had  to purchase alternative residential  accommodation for  herself in order to carry  out her  obligation under the agreement of sale to deliver vacant  possession of the property to the respondent except for  the four shops set out in the said agreement. By her solicitor’s  letter of  12th April,  1578, the appellant had also  made it  clear that  she requires  payment of Rs.4 lakhs for  this purpose and gave notice to the respondent to pay this  amount within  a week of the said letter since the time for  payment had  already expired.  Clearly. payment of Rs.4 lakhs within a reasonable time was an essential term of the contract.  Because a  late payment  of this  amount  may affect the  appellant’s right to obtain suitable alternative residential accommodation property prices may increase, thus affecting the  appellant’s  right  to  purchase  a  suitable residential accommodation.  From the  reply which  has  been sent by  the respondent’s  solicitors, especially  the reply dated 25.9.1980,  it is  quite clear that the respondent was not in a position to pay the sum of Rs.4 lakhs either within the time  specified in  the agreement  of sale  or within  a reasonable time. In fact. he has clearly set out in the said letter that  unless he  is able  to enter  into  a  suitable arrangement with  a cooperative housing society. he will not be able to pay Rs.4 lakhs to the appellant. He has insisted, therefore. on the appellant first entering into an agreement with a proposed housing society which. admittedly never came

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into existence.  There  is  nothing  in  clause  11  of  the agreement of sale which requires the appellant to enter into an agreement  with a proposed cooperative housing society as a condition  precedent to  receiving part payment of the sum of Rs.4  lakhs. Clause 11 is independent of the right of the appellant to  receive a  sum to  Rs.4 lakhs.  The  agreement specifies the time within which the sum or Rs.4 lakhs was to be paid and the correspondence makes it quite clear that the respondent was  not in  a position to pay this amount within the agreed  period or  within any reasonable time thereafter because he  had, in  turn; to  collect this  amount from the expected  members   of  the  proposed  co-operative  housing society. There  is no  evidence in this case to show whether there were any members of this proposed co-operative housing society and  whether the  respondent was  in a  position  to collect this amount of Rs. 4 lakhs. In fact, the evidence is to the  contrary. The  proposed co-operative housing society was never registered and there is nothing to show that there were any  members  of  this  proposed  co-operative  housing society. Although  the respondent  and  his  solicitor  have given evidence  in the  case, they  have not stated that the respondent had the sum of Rs.4 lakhs at the material time or that the  respondent was  in a  position to  pay this amount within a  reasonable time. There is nothing in the agreement requiring the  appellant to enter into an agreement with the proposed co-operative housing society before the sum of Rs.4 lakhs is  released to  her. The  trial court, therefore, had rightly come to the conclusion that the respondent-plaintiff was not in a position to carry out the terms of agreement of sale. The  plaintiff, in  a suit  for specific  performance, must be  ready and  willing to  carry out  his part  of  the agreement at  all material times. Such is not the case here. In fact,  even after the decree of specific performance, the respondent was  not able to deposit the amounts specified by the High  Court within  the time  prescribed  Ultimately  he applied for  extension of  time for  deposit of amount which application was rejected.      In the case of Chand Rani (Smt.) (Dead)by Lrs. v. kamal Rani (Smt.)  (Dead) by  Lrs, (1993  (1) SCC 519), a Bench of Five Judges  of this  Court considered  a similar situation, where the  contract stipulated  that a  sum  of  Rs.98,000/- would be paid by the purchaser to the vendor within a period of ten  days only. Despite notices of the vendor, the vendee was not  willing  to  pay  the  said  amount  unless  vacant possession of a part of the property was given by the vendor to the  vendee. The  Court said  that in View of the express terms of  the contract  coupled  with  the  conduct  of  the vendee, it was clear that the time was of the essence of the contract and the Vendee was not ready and willing to perform the contract.  In these circumstances, this Court upheld the refusal of  the High  Court to  grant specific  Performance. This Court  has observed that although in the case of a sale of immovable  property time  is not  of the  essence of  the contract, it  has to  be ascertained whether under the terms of the  contract, when  the parties  named a  specific  time within with  completion was  to take  place, really  and  in substance it was intended that it should be completed within a reasonable time. It observed that the specific performance of a  contract will  ordinarily be  granted, notwithstanding default in  carrying out  the contract  within the specified period, if  having regard to the express stipulations of the parties,  nature   of  the   property  and  the  surrounding circumstances, it is not inequitable to grant the relief. If the contract relates to sale of immovable property, it would normally be presumed that the time was not of the essence of

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the contract.  But 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 it  the conditions  of  the  contract  so warrant. These  can be  inferred, (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 may  make it  clear that the agreement requires to be performed within a reasonable time. The  Court   said  that  the  stipulation  in  the  contract regarding payment of Rs.98,000/- within a period of ten days only showed  that the  failure to  pay the amount within the stipulated period would constitute a breach of contract.      The present  case is  similar. The  clause relating  to payment of  various amounts under the contract including the sum of  Rs.4 lakhs  states that  the time is of the essence. Moreover, by  his letter  of  12th  April,  1978,  also  the appellant has  made payment of Rs.4 lakhs within a period of seven days  from the  date of  notice, of the essence of the contract  pointing   out  the  circumstances  which  require payment of  Rs. 4  lakhs within  a reasonable  time. As  the respondent did not Comply and was unwilling and/or unable to comply with  this  term  of  the  agreement,  he  cannot  be considered as  ready and  willing to perform his part of the contract.      In the  case of Parakunnan Veetill Joseph’s  Son Mathew v. Nedumbara  Kuruvila’s Son  & Ors.  (1987 (Supp) SCC 340), this Court  has observed  that the court should meticulously consider  all   facts  and   circumstances  before  granting specific performance. The court should take care to see that it is  not used  as an  instrument of  oppression to have an unfair advantage.      In the  present case,  the right  of the  appellant  to purchase suitable  residential  accommodation  is  seriously affected by  non-payment of  Rs.4 lakhs  within a reasonable time. The  respondent had  failed to comply with the term of the agreement  relating to  payment of this amount. In these circumstances,  in   any  case,   a  decree   for   specific performance cannot  be granted  as it  would be  unfair  and unreasonable to  do so.  The High  Court, therefore, was not right in  setting aside  the judgment and order of the trial court.      We therefore.  allow Civil  Appeal No.4631A of 1993 and restore the  judgement and  order of  the trial  court while setting aside the judgment and decree of the High Court.      In view of Civil Appeal No.4631A of 1993 being allowed, as above,  nothing now  survives in  Civil Appeal No.4631 of 1993 which  is Against  the refusal  of the  High  Court  to extend time  for making  payment of  the amounts  under  the decree of  the High  Court which has now been set aside. The High Court  passed a  conditional decree  whereby  the  High Court has  ordered, inter  alia, that  in the  event of  the respondent herein  committing default  in making the payment to the appellant within the time as specified in the decree, the suit  for specific   performance  of the contract "shall and do  stand dismissed".  The respondent  contends that the High Court  has the  power to extend time for making payment despite this provision in the decree. While the  appellant contends that the court having become functions officio on  passing of  the  above  conditional  decree,  it cannot further  extend time.  The High Court has declined to extend time  in the  facts and circumstances of the case. We need not,  however, examine  the detailed contentions raised by both  the parties  in this  connection since this dispute has  now   become  redundant,   the  decree   for   specific performance having  been set  aside. Civil Appeal No.4631 of

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1993 is,  therefore, dismissed.  The respondent shall pay to the appellant costs of the appeals.      The respondent  will be  at  liberty  to  withdraw  the amount deposited  pursuant to  the orders  of the Court with accrued interest, if any.