REPORTABLE

IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.7208 OF 2009 (Arising out of SLP© No. 17630 OF 2005)

A.K. Lakshmipathy (Dead) & Ors.                            ..Appellants

Versus

Rai Saheb Pannalal H. Lahoti CharitableTrust & Ors.                               …Respondents

J U D G M E N T

TARUN CHATTERJEE,J.                                    

1. Leave granted.  

2. This appeal by way of a Special Leave Petition has been filed by  

the appellants to challenge the judgment and decree dated 23rd of  

February 2002 of the High Court of Andhra Pradesh at Hyderabad  

in C. C. C. A. no. 88/1993 and A.S no. 673 of 1995, which was  

filed by the defendants/respondents in so far as the direction given  

by  the  trial  Court  to  refund  a  sum  of  Rs.1,00,000/-  to  the  

plaintiffs/appellants,  which  they  had  paid  to  the  

defendants/respondents as an advance, was concerned.   

3. The relevant facts leading to the filing of this appeal are:-

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The dispute in this appeal involves a property marked no. 1-11-

251 in Begumpet, Hyderabad (hereinafter referred to as the ‘property  

in question’) which was owned by one Rai Bahadur Saheb Pannalal  

Lahoti.  By  a  Will,  he  bequeathed  all  his  properties  including  the  

property in question and appointed Respondent no. 2 B.M. Bhandari  

and one Bhima Bai as joint executors of his Will.  According to the  

Will of Rai Bahadur Saheb Pannalal Lahoti, one-fourth of the fund of  

his estate was to be used for hospitals and educational institutions in  

equal  shares  as the executors  would  deem fit.  After  the  death  of  

Bhima Bai, who was one of the joint executors of the Will, her heirs  

Govind Bai Vinani and Suresh Chandra Lahoti (Respondents no. 2  

and 5 respectively) came into the picture. By a trust deed as per the  

wishes  of  the  Late  Rai  Bahadur  Saheb Pannalal  Hiralal  Lahoti,  a  

Charitable  Trust  by the  same name was  set  up.  The trust  owned  

properties  in  Hyderabad,  Andhra  Pradesh  and  Hingoli  in  

Maharashtra.  The  registered  office  was  in  Kolkata,  West  Bengal.  

Respondent no. 2 on behalf of the trust entered into a written contract  

for sale with appellant no. 1 on 6th of December 1978 agreeing to sell  

the  property  in  question  measuring  9400  sq.  yards  along  with  

constructions  thereon.  The  contract  contained  certain  terms  and  

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conditions. The first of such condition was that Appellant no. 1 would  

advance a sum of Rs.1 lakh and the rest of the balance amount, i.e.,  

Rs.5 lakhs would be paid by the appellants on or before 5th of June  

1979. Under the contract,  the appellants also agreed to obtain the  

necessary permission or  exemption from the competent  authorities  

under the Urban Land (Ceiling and Regulation) Act, 1976 (hereinafter  

referred to as “the ULC Act”). It was also alleged that the respondents  

shall  cooperate  with  the  appellants  in  getting  all  such  necessary  

permissions from the competent authority under the ULC Act. Clause  

10 of the Contract emphatically mentioned that time was the essence  

of the contract. It reads as under:

““Time will be of essence of the contract.”

4. The said contract also mentioned that in case of failure of the  

appellants to pay the balance amount within the stipulated time, the  

respondents would forfeit the balance amount.   

5. Thereafter,  the  competent  authority  under  the  ULC  Act  

informed the appellants of being granted exemption provided that the  

land was continued to be used for the purposes of the trust. Due to  

such intimation, the Appellants sought clarifications from Respondent  

no.  2  regarding  procurement  of  permissions  from the  Endowment  

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Department in a telegraphic notice on 29th of  May 1979. This was  

followed by a registered notice on 31st of May 1979. Respondent no.2  

sent a reply to the appellants on 4th of June 1979 without clarifying  

the doubts raised on procurement of permission from the Endowment  

Department.  In  response,  the  appellants  sent  a  detailed  

communication to the respondent enquiring about the state of affairs  

on 5th of June 1979. The respondent no. 2 sent a reply on 6th of June  

1979  informing  the  appellants  that  there  was  no  requirement  of  

obtaining permission from the Endowment Department as the laws of  

West Bengal, which were applicable in this case, did not require any  

particular procedure for alienation of the trust property.  

6. Thereafter,  the  appellants  sent  a communication enclosing  a  

Photostat copy of a cheque of Rs. 5 lakhs, certified by the banker as  

“good for payment”, thus showing their readiness and willingness to  

complete  the  contract  with  the  balance consideration  but  with  the  

condition  that  the respondent  had to  obtain  a  certificate  from,  the  

Endowment  Department.  In  reply,  on  7th of  June  1979  the  

respondents sent a Photostat copy of a cheque of Rs. 1 lakh towards  

return of the advance amount simply terminating the agreement and  

threatening to forfeit the advance amount. The written communication  

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mentioned  that  Respondent  no.  2  was  kind  enough  to  offer  the  

earnest amount back to the appellants on the condition that the latter  

would not agitate the matter further. The appellants were directed to  

collect  the  amount  within  three  days  of  the  receipt  of  the  letter;  

otherwise  the  earnest  money  would  be  forfeited.  The  said  letter  

mentioned that by this communication the respondents would not be  

waiving any of their rights to pursue the matter further.   

7. The appellants then filed a suit being O.S. No. 317/1985 in the  

Court of The Principal Subordinate Judge, R.R. District, Hyderabad  

for specific performance of the said contract for sale by the seller-

respondents. The trial court framed no less than 17 issues in all. After  

examining  witnesses,  hearing  arguments  of  both  the  parties  and  

deliberating upon the issues, the Trial Court, inter alia, held that the  

appellants  by  insisting  upon  the  trustees  to  perform  additional  

conditions  were  not  ready and  willing  to  perform their  part  of  the  

contract  and  also  holding  that  time  was  not  the  essence  of  the  

contract.  Accordingly,  the  Trial  Court  on  25th of  August  1993  

dismissed  the  suit  for  specific  performance  but  passed  a  decree  

directing refund of Rs 1 Lakh of earnest money to the appellants.  

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8. Thereafter,  the  appellants,  aggrieved by  the  decree,  filed  an  

appeal before the High Court of Andhra Pradesh at Hyderabad being  

C.  C.  C.  A.  no.  88/1993  and  the   respondents  had  filed  another  

appeal A.S. No. 673 of 1995 against the said decree, to the extent  

that  the  Trial  Court  had  directed  the  respondents  to  refund  the  

advance amount of Rs. 1 lakh. On 23rd of February 2003, the High  

Court  by its  judgment and decree affirmed the decree of  the Trial  

Court and held that time was the essence of the contract.  Feeling  

aggrieved,  the appellants  filed  a  Special  Leave Petition  which,  on  

grant of leave, was heard in presence of the learned counsel for the  

parties.

9. Having  heard  the  learned  counsel  for  the  parties  and  after  

examining  the  materials  on  record  including  the  judgment  of  the  

courts below, the following questions need to be decided for proper  

disposal of this appeal which are as follows :-

(i) Whether  the  insistence  of  the  appellants  to  get  the  

clearance of the Endowment department of the State of  

Andhra Pradesh at  Hyderabad was the condition to be  

incorporated in the agreement itself for the purpose of a  

decree for specific performance of the contract for sale  ?  

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(ii) Whether  in  the facts  and circumstances of  the present  

case the appellant could be found to be not ready and  

willing to perform their part of the contract ?

(iii) Whether  in  the facts  and circumstances of  the present  

case, the High Court was in error in holding that time was  

the essence of the contract for sale?

(iv) Whether  in  the facts  and circumstances of  the present  

case, the respondents are entitled to forfeit the advance  

amount paid by the appellants-purchasers?

10. Let us now turn to the questions at hand. The learned counsel  

for  the  appellants  argued  that  the  appellants  had  shown  their  

willingness  and  readiness  to  perform their  part  of  the  contract  by  

sending a photostat copy of a cheque within the stipulated time. Mr.  

P.S. Patwalia, the learned senior counsel for the respondents, argued  

that  the  appellants  were  on  one  hand  supposedly  ready  with  the  

balance  amount  and  on  the  other  hand  were  imposing  additional  

conditions, which is not permissible and which is beyond the terms of  

the contract. To address this question, a look at the contract for sale  

is  pertinent.  From a bare perusal  of  clauses 4,  7,  8  and 9 of  the  

Contract  for  sale,  it  would  be  evident  that  the  onus  is  on  the  

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appellants to obtain clearance from the competent authorities under  

the ULC Act. The respondents were nevertheless bound to extend  

their full cooperation to the vendees and to sign all necessary papers  

and  documents.  In  clauses  7  to  9  of  the  said  contract,  the  

respondents  agreed  to  obtain  non-encumbrance  and  clearance  

certificates from the Income Tax Department  and also to settle  all  

payments  to  be  made  towards  Municipal  taxes,  water  tax,  non-

agricultural  land assessment  tax,  etc.  In  the Contract,  there  is  no  

such clause where the certificate from the Endowment Department  

was also to be taken for specific performance of the contract. The first  

appellant  who  was one  of  the  executors  of  the  said  contract  had  

admitted  in  his  evidence  that  the  transaction  was  finalized  in  the  

presence of a real estate broker and neither he nor any of the other  

appellants  had asked  the  respondent  to  get  permissions  from the  

Endowment  Department  at  that  juncture.  The  first  appellant  had  

further deposed that he started entertaining doubts about the motives  

of the sellers from 28th of May, 1970 because there were allegedly  

other brokers approaching the respondent. Further P. Ws. 1 and 3  

had affirmed at the Trial Court level that they had entered into the  

agreement only after having satisfied themselves of the title of the  

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sellers. The important admission that was made was that they were  

ready to go ahead to complete the contract.  

11. Nevertheless,  it  must  be  recognized  that  it  is  generally  the  

prerogative of the buyer to find out the defects in a property before  

buying it and also to make the seller rectify such defects. The rights  

of the buyer to seek reasonable clarifications and raise reasonable  

doubts have been statutorily recognized by Section 55 of the Transfer  

of  Property  Act,  1882  (hereinafter  referred  to  as  the  T.P.  Act).  

Section 55 runs as under :-

“Rights and liabilities of buyer and seller- In the  absence of a contract to the contrary,  the buyer  and the  seller  of  immoveable  property  respectively  are  subject  to  the  liabilities,  and  have  the  rights,   mentioned in the rules next following, or such of them  as are applicable to the property sold:  (1) The seller is bound— (a) To disclose to the buyer any material defect in the   property [or in the seller's title thereto] of which the  seller is, and the buyer is not, aware, and which the  buyer could not with ordinary care discover;  (b)  To  produce  to  the  buyer  on  his  request  for   examination  all  documents  of  title  relating  to  the  property  which  are  in  the  seller’s  possession  or   power;  (c)  To answer to the best of his information all   relevant  questions  put  to  him  by  the  buyer  in   respect to the property or the title thereto”  

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12.   In  this  case,  sub-section (c)  of  Section 55 of  the T.P.  Act  is  

pertinent.  According to the appellants and keeping in view of sub-

section (b) and (c) of Section 55 of the T.P. Act, it was open to the  

appellants  to  seek  clarifications  regarding  the  procurement  of  

clearance  or  exemption  from  the  Endowment  Department  which  

should  be  a  reasonable  clarification.  A  reading  of  the  provisions  

under Section 55 of the T.P. Act which starts with “In the absence of  

a contract to the contrary’ would clearly mean that Section 55 (1) (b)  

and (c) of the T.P. Act would become applicable only in the absence  

of these words ‘contract to the contrary’.  

13.    Mr.K.K.Venugopal, learned senior counsel for the appellants  

relying on sub-section (b) and (c) of  Section 55 (1) of the T.P.Act  

sought  to  contend  that  it  was  open  to  the  appellants  to  seek  

clarifications regarding the procurement  of  clearance or  exemption  

from the Endowment Department and in view of the fact that such  

exemption was not taken by the respondents from the Endowment  

Department, the terms and conditions of the contract entered into by  

the parties were not satisfied and, therefore,  the question of refusing  

a decree for specific performance of the contract for sale could not  

arise at  all  on this  ground alone.   This  submission of  the learned  

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senior counsel appearing for the appellants was, however, contested  

by  Mr.P.S.Patwalia,  learned  senior  counsel  appearing  for  the  

respondents.  According  to  the  learned  senior  counsel  for  the  

respondents,  since the clearance or  exemption of  the Endowment  

Department  was  not  a  condition  to  be  fulfilled  by  the  parties  to  

execute the agreement for sale, it was not open to the appellants to  

say that before such clearance or exemption from the Endowment  

Department was not taken, the question of executing the deed of sale  

in respect of the property in question could not arise at all. We have  

carefully  examined  the  rival  submissions  of  the  learned  senior  

counsel appearing for the parties on this question.  Before we go into  

this question, whether sub-section (b) & (c) of Section 55(1) of the  

T.P. Act would be applicable in the facts and circumstances of the  

case,  it  would  be  appropriate  to  refer  to  sub-section  (b)  &  (c)  of  

Section 55(1) of the T.P. Act, as noted herein earlier.  Section 55 of  

the T.P. Act deals with rights and liabilities of buyer and seller. Sub-

section (b) of Section 55(1) clearly says that it would be open to the  

buyer to ask the seller to produce for examination all documents of  

title relating to the property which are in the possession of the seller  

or  buyer.  A plain  reading of  this provision would amply  show that  

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documents  of  title  relating  to  the  property  in  respect  of  which  

agreement for sale was entered into must be in the possession or  

power  of  the  seller  which  should  be  produced  to  the  buyer  for  

examination.  So far as the present case is concerned, the condition  

regarding  the  clearance  or  exemption  from  the  Endowment  

Department is not a document of title relating to the property which  

would benefit the buyer for examination for the purpose of completing  

the agreement for sale. Sub-section (c) of Section 55(1) of the T.P.  

Act also equally cannot be applicable in the facts and circumstances  

of the present case. That apart, it is evident from a plain reading of  

Section 55 that this section becomes applicable only in the absence  

of  the  contract  to  the contrary.  In  this  case,  there  is  admittedly  a  

contract for sale which clearly lays down the terms and conditions to  

govern  the  sale  transaction.  We are  in  agreement  with  the  views  

expressed by the High Court in the impugned judgment holding that  

since  the  Head Office  of  the  Trust  is  registered  at  Kolkata  which  

would  be  enough  to  show  that  the  relevant  law  applicable  to  a  

charitable trust would be that of the state in which the Head Office of  

the  Trust  is  registered.  [See:  State  of  Bihar  &  Ors.  Vs.  Smt.  

Charusila Dasi, AIR 1959 SC 1002 and Anant Prasad vs. State of  

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Andhra  Pradesh  [AIR  1963  SC  853]. In  addition  to  this,  the  

respondents had fulfilled their part of the obligation when respondent  

No.2 sent a reply dated 6th of June, 1979 intimating the appellants  

that there was no need to obtain any permission from the Endowment  

Department for the purpose of transferring the title in respect of the  

property in question as the laws of the West Bengal applicable in this  

case, were not required to take such permission for alienation of trust  

property.  In view of the above,  we are,  therefore,  of  the view that  

there  was  no  obligation  on  the  part  of  the  respondents  to  get  

clearance  of  permission  or  exemption  from  the  Endowment  

Department of the State for the purpose of transferring the title of the  

property in question.

14.    It was next contended by Mr Venugopal, learned senior counsel  

appearing for the appellants, that the High Court was in error in not  

giving  any  due  regard  to  all  the  clauses  of  the  contract  for  sale  

especially Clause 11 of the agreement for sale. We do not find any  

merit  in  this  contention  of  the  learned  senior  counsel  for  the  

appellants.  From a mere glance through the judgment of the High  

Court, it would be evident that the entire agreement was reproduced  

verbatim and  the  High  Court  in  the  impugned order  truly  went  in  

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depth into the discussion of the terms and conditions embodied in the  

contract for sale. We are in agreement with the High Court that its  

analysis  was  impregnable.   This  submission  of  Mr.Venugopal,  

learned senior counsel for the appellants, cannot be said to have any  

merit and is accordingly rejected.

15.   It was next contended by Mr. Venugopal that although there is a  

specific clause in the agreement, namely, clause 10 where one of the  

conditions  has  been  embodied  that  “time  is  the  essence  of  the  

contract” even then it is well settled that in many instances, a mere  

clause in the agreement to be insufficient as a sole reason to lead  

one to the conclusion that “time was to be of essence of the contract”.  

This  submission  of  Mr.Venugopal  was  hotly  contested  by  

Mr.P.S.Patwalia,  learned  senior  counsel  appearing  for  the  

respondents. In order to decide this question, it would be relevant for  

us  to  look  into  the  clauses  in  the  agreement  entered  into  by  the  

parties because they are of utmost importance. In our view, the High  

Court has rightly pointed out that there are many instances in the said  

contract where the fact that time is to be of essence of the contract  

has been specifically mentioned. Clause 10 of the Agreement of Sale  

which reads : “Time will be of essence of the contract”, therefore, has  

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been clearly mentioned in the agreement for sale. However, it is well  

settled proposition of law by now that time is not to be of essence in  

case of sale of immoveable property. In Chand Rani vs. Kamal Rani  

[AIR 1993 SC 1742], this Court clearly held that in the case of sale of  

immoveable property, there is no presumption as to time being the  

essence of the contract.  

16. Keeping this principle in mind, we now turn to the clauses of the  

contract for sale entered into by the parties. Clause 3 and 5, in our  

view, of the contract for sale are of no inconsiderable importance. So  

far as clause 10 of the agreement for sale is concerned, we have  

already  referred  to  the  same  earlier.   At  this  juncture,  we  now  

reproduce clause 3 of the agreement for sale  which reads :-

“Payment  of  the  balance  amount of  Rs.  5,  00,000/- (Rupees  5  lacs  only) on  or  before  6-6-1979  is  the  essence of the agreement. If the vendees fail to pay the  balance  amount  in  time  as  aforesaid  for  whatsoever  reason,  the  advance  earnest  amount  paid  today  shall   stand  forfeited  and  the  vendees  shall  have  no  right   whatsoever in the scheduled property and they shall not   in any case be entitled to ask for refund of the earnest   money which by his non payment of the balance amount   as afore-said shall irrevocably stand forfeited.”

17.       A reading of this clause, namely, clause 3 of the agreement  

for sale would clearly show that what was the intention of the parties  

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to make time to be the essence of the contract. If we read clause 3  

and clause 10 of the agreement for sale conjointly, it would not be  

unsafe for us to conclude that the intention of the parties to enter into  

the agreement for sale incorporating clauses 3 and 10 in the same for  

the purpose of making the time being the essence of the contract.  

Mr.Venugopal, however, in support of his contention that “time was  

not the essence of the contract” strongly relied on a decision of this  

Court  in  the case of  Swarnam Ramachandram (Smt) & Anr..  v.   

Aravacode Chakungal Jayapalan [(2004) 8 SCC 689] and argued  

that even if clause 10 clearly stipulates that time was the essence of  

the  contract,  then  also,  in  the  surrounding  circumstances,  it  can  

always  be  held  that  the  agreement  must  be  performed  within  a  

reasonable time and time was not the essence of the contract. In our  

view, this decision of this Court would not be applicable in the facts  

and  circumstances  of  the  present  case.  It  is  true  that  it  was  

conclusively held in the aforesaid decision of this Court on facts that  

time was not  to be of the essence of  the contract  except  in a re-

conveyance or renewal of lease, the facts and circumstances of that  

case were totally different from the one at hand. In the said case,  

there was a specific proviso to one of the clauses in the contract for  

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sale which clearly stipulates that if payment was not made in time, the  

appellants who were the vendors could extend such date. Hence, in  

that decision, this Court in the facts of that case held that time was  

not to be of essence of the contract which was determined by this  

Court in the said decision on the intention of the parties as well as the  

written terms of the agreement. Clauses 3 and 10 of the contract for  

sale in this case clearly indicate that time was always meant to be of  

prime importance in the contract. In fact P.W. 1, V.A. Gupta who was  

examined as a witness for the appellants admitted in his deposition  

(Annexure P9) that time was always the essence of the contract and  

the  appellants  were  aware  of  this  even  before  entering  into  the  

contract. From the contract for sale also, we can very well see that  

time was repeatedly mentioned to be of prime importance and it was  

stated quite clearly that under all circumstances, the appellants would  

have to definitely deposit the balance amount of Rs.5 lakhs by the  

date  stipulated  in  the  contract  for  sale.  Hence,  this  submission  

advanced by Mr.Venugopal,  that  time was not  the essence of  the  

contract cannot at all be accepted and, therefore, we reject the same.  

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18.    Next is the question whether the appellants were ready and  

willing to complete their part of the agreement. It is well settled that in  

a suit  for  specific  performance of  a contract  for  sale,  it  has to be  

proved  that  the  plaintiff  who  is  seeking  for  a  decree  for  specific  

performance of the contract for sale must always be ready and willing  

to complete the terms of the agreement for sale and that he has not  

abandoned  the  contract  and  his  intention  is  to  keep  the  contract  

subsisting till  it  is executed. This readiness and willingness on the  

part of the appellants in the facts and circumstances of the case, in  

our view, cannot be found in favour of the appellants. In this case, not  

only the trial court as well as the High Court on concurrent findings of  

fact  and  on consideration  of  the  evidence on  record  came to  the  

conclusion that the appellants were not ready and willing to perform  

the terms and conditions of the agreement for sale.  In view of our  

discussions  made  herein  above  and  in  order  not  to  execute  the  

agreement for sale on the part of the appellants, it is evident from  

Exts.P3,  P5 and P7 which would show that  the appellants sought  

clarifications regarding the joining of all trustees in execution of the  

sale  deed,  asking  the  second  respondent  to  enter  into  another  

agreement by way of indemnifying the appellants for any loss due to  

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defect in the title, etc. We do not find any justification to say in the  

facts  and  circumstances  of  the  case  that  the  demands  of  the  

appellants  were  justified  and  reasonable.  On  the  other  hand,  this  

demand  on  the  part  of  the  appellants,  in  our  view,  was  not  only  

unjustified and unreasonable but it  was in fact imaginary as rightly  

pointed out by the trial court in its judgment. In order to show that the  

appellants  were  all  ready and willing  to  perform their  part  of  their  

obligation  to  complete  the  agreement  was  to  bear  the  remaining  

amount  of  the  contract  and  then  agitate  the  matter  for  specific  

performance before the court. This was also the view expressed by  

this Court in Chand Rani vs. Kamal Rani (supra) wherein this Court  

held  that  if  the  final  ultimatum  by  the  seller  has  been  given  for  

payment of balance amount then the best thing for the purchasers is  

to pay the amount and then take appropriate steps. Therefore, in our  

view, the appellants having failed to do so, they cannot be allowed to  

take advantage of their own mistake and conveniently pass the blame  

to  the  respondents.  In  the  case  of  K.S.  Vidyanam  and  Ors  v.   

Vairavan [(1997) 3 SCC 1], it has been held that in an agreement for  

sale of immoveable properties, the readiness and willingness of the  

parties to perform their part of the contract is essential. Hence, we  

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are of the view that the concurrent findings of fact arrived at by the  

High  Court  and  the  trial  court  on  the  question  of  readiness  and  

willingness to perform their part of obligation, so far as the appellants  

are concerned, cannot at all be interfered with.  Accordingly, we are  

of the view that the High Court has rightly confirmed the concurrent  

findings  of  fact  arrived  at  by  the  courts  below on the  question  of  

readiness and willingness on the part of the appellants to complete  

the agreement for sale.  

19. For the reasons aforesaid, we affirm the judgment of the High  

Court so far as the suit for specific performance of the contract for  

sale is concerned. Since no appeal has been filed by the respondent  

against the order regarding the forfeiture of the amount in question,  

we need not go into the question whether such forfeiture was proper  

or not.  

22. For the reasons aforesaid, the appeal is allowed to the extent  

indicated above. There will be no order as to costs.

………………………J. [Tarun Chatterjee]

New Delhi;           ………………………J. October 28, 2009.     [Aftab Alam]

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