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CASE NO.: Appeal (civil)  4527 of 2000

PETITIONER: SMT. SWARNAM RAMACHANDRAN & ANOTHER              

RESPONDENT: ARAVACODE CHAKUNGAL JAYAPALAN                    

DATE OF JUDGMENT: 25/08/2004

BENCH: ASHOK BHAN & S.H. KAPADIA  

JUDGMENT: J U D G M E N T

KAPADIA, J.

       Being aggrieved by the suit for specific performance  being decreed, the defendants-vendors have filed this appeal by  special leave against judgment and order passed by the Division  Bench of the Bombay High Court dated 17.6.2000 in Appeal  No.813 of 1994 confirming the judgment of the learned Single  Judge dated 3.10.1994.

       The facts giving rise to this civil appeal, briefly, are as  follows:\027         By an agreement for sale dated 18.2.1981 entered into  between appellants as vendors and respondent as purchaser, the  appellants agreed to sell all that piece or parcel of land  admeasuring 481.25 square metres bearing plot no.423-C out of  the larger piece of land bearing City Survey No.1285 (Part) of  Suburban Scheme-III of Chembur with bungalow bearing  Municipal No.1137 (2) standing thereon. (hereinafter for the  sake of brevity referred to as "the suit property") for lump sum  consideration of Rs.10,00,000/-.  Prior to the execution of the  agreement, the respondent paid Rs.1,00,000/- as earnest money.   Under clause (1) of the said agreement, a sum of Rs.1,25,000/-  was to be paid by the respondent within two months from the  date of the agreement i.e. by 18.4.1981 and the balance of  Rs.7.75,000/- was payable by him on completion of the sale i.e.  by 31.8.1981.  Under clause (8) of the agreement, the sale was  to be completed on or before 31.8.1981.  However, there was a  proviso to clause (8) under which an option was given to the  appellants to extend the date of sale up to 31.12.1981.           On 31.3.1981, the respondent herein paid Rs.50,000/- by  cheque to the appellants.  By letter dated 3.9.1981, addressed  by the appellants, it was alleged that Rs.1,25,000/- was payable  by the respondent on or before 18.4.1981; that the full amount  was not paid; that the respondent was, therefore, called upon to  make the balance payment of Rs.75,000/- within three days  from the date of receipt of the said letter.  However, by the said  letter, time to complete the sale was extended by the appellants  under clause (8) up to 31.12.1981.  In reply, the respondent  stated that out of Rs.1,25,000/-, a sum of Rs.50,000/- had been  paid on 31.3.1981, when it was agreed by and between the  parties that the balance amount of Rs.75,000/- would be paid by  30.9.1981.  By letter dated 12.9.1981, the appellants denied  having agreed to receive the balance amount of Rs.75,000/-,

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payable on or before 18.4.1981, by 30.9.1981.  At the same  time, by the same letter dated 12.9.1981, the appellants agreed  to accept the amount of Rs.75,000/- on or before 30.9.1981 and  purported to make time the essence for such payment.  On  30.9.1981, the respondent’s advocate forwarded two cheques to  the appellants i.e. cheque dated 29.9.1981 for Rs.30,000/- and  another cheque dated 15.10.1981 for Rs.45,000/- (post-dated  cheque).  In the said letter, it was pointed out that the cheque  for Rs.45,000/- was post-dated as the respondent would be  realizing the effects of certain cheques deposited by him in his  account.  By letter dated 3.10.1981, the appellants alleged that  time to pay balance amount of Rs.75,000/- by 30.9.1981 was  made the essence of the contract; that since the respondent had  failed to pay the said amount, the agreement for sale stood  terminated.  Consequently, the appellants forfeited the amounts  paid by the respondent under the agreement.  By letter dated  17.10.1981, respondent herein contended that time was not the  essence of the agreement; that the agreement had been  terminated with malafide intentions; that the respondent had  complied with all his obligations and that he was ready and  willing to perform his obligations under the said agreement.   

       In the circumstances, on 2.12.1981, the respondent herein  instituted suit no.1985 of 1981 on the original side of the  Bombay High Court.  In the suit, the respondent alleged that  sometime in the last week of March, 1981, he was informed  that the appellants desired to extend the date of completion of  sale till 31.12.1981, to which he agreed; that on that occasion  he paid Rs.50,000/-; that it was agreed that in view of the  postponement of the sale, the part payment of Rs.75,000/- be  made by 30.9.1981.  That, in terms of the said arrangement, on  30.9.1981, the respondent forwarded his two cheques for  Rs.30,000/- and Rs.45,000/-;  that cheque for Rs.45,000/- was  post dated as respondent would be realizing the effects of  certain cheques deposited by him by 15.10.1981.  That contrary  to the said arrangement, the appellants vide notice dated  3.10.1981 illegally terminated the agreement alleging that time  to pay the balance amount by 30.9.1981 was the essence of the  contract as indicated by the letter dated 12.9.1981; that  respondent was always ready and willing to perform his part of  the contract and in the circumstances, he was entitled to the  decree for specific performance.  

       In the written statement, the appellants pleaded that there  was delay in payment of Rs.1,25,000/- on or before 18.4.1981;  that although time was the essence of the contract and the same  was communicated to the respondent, he committed default  and, therefore, the appellants were entitled to terminate the  agreement for sale and that the respondent was neither entitled  to the specific performance of the contract nor damages, as  prayed for.

       On examination of the evidence on record, both  documentary and oral, the High Court found that on the plain  reading of the agreement, the same did not provide for time to  be the essence; that circumstances did not exist enabling the  appellants herein to make time the essence of the contract.  That  there was no ground, whatsoever, made out in the  correspondence or in the written statement to suggest that the  behaviour of the respondent was such as to prompt the  appellants to make time the essence of the contract.  That if  causing delay was the grievance, how could the appellants  justify their behaviour of extending the time for completion of  the sale till 31.12.1981 vide clause (8) of the agreement.  That  the very letter dated 12.9.1981, which made time the essence

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for payment of Rs.75,000/- by 30.9.1981, extended time for  completion to 31.12.1981.  That the appellants had failed to  prove that the respondent was guilty of such grave defaults  entitling the appellants to make time of the essence.  That  although several suggestions were made to the respondent,  during his cross-examination, as to the oral agreement between  the parties, about time being made the essence of the contract,  no evidence was led by the appellants.  The appellants failed to  rebut the assertion of the respondent of the circumstances under  which Rs.50,000/- was paid and the oral arrangement to extend  the time for payment of Rs.75,000/- up to 30.9.1981.  In the  circumstances, it was held that time was not made the essence  of the contract; that the appellants were not justified in making  time of the essence in the matter of payment of Rs.75,000/-.   

       Before the learned Single Judge, it was argued that the  respondent has failed to prove, though he has so pleaded, that  he was ready and willing to perform his part of the contract.  In  this connection, it was urged that the respondent had sent a post  dated cheque for Rs.45,000/- dated 15.10.1981 which indicated  that he had no funds on the due date i.e. on 30.9.1981 and,  therefore, he had failed to prove that he was ready and willing  to perform his part of the contract.  This plea of the appellants  was rejected as the High Court found on evidence that time to  pay Rs.1,25,000/- was extended to 30.9.1981; that it cannot be  argued that there was non-compliance on the part of the  respondent when the appellants themselves extended the  completion date to 31.12.1981.  The learned Single Judge found  that taking into account the overall conduct of the respondent, it  can be said that the respondent was ready and willing to  perform his part of the contract; that the agreement was  wrongly terminated on 3.10.1981 and the present suit was filed  on 2.12.1981, which indicates that the respondent was eager to  complete the transaction.  In the above circumstances, the suit  was decreed.

       Aggrieved, the appellants herein instituted LPA No.813  of 1994, which was dismissed by the impugned judgment.   Hence, this civil appeal.

       Mr. T.L. Viswanatha Iyer, learned senior counsel for the  appellants contended that parties intended to make time the  essence of the contract, since the agreement stipulated specific  dates for the payment of the purchase price.  That the appellants  had validly made time the essence of the contract on 12.9.1981  and since part of the purchase price was not paid on or before  30.9.1981, the appellants were justified in terminating the  agreement dated 18.2.1981.  That the property in question  consisted of a house in an urban area whose price rose  continuously, which fact was relevant and which has not been  taken into account by the High Court.  It was urged that in the  aforestated circumstances, any delay on the part of the  respondent disentitled him from the relief of specific  performance.  In this connection, reliance was placed on the  judgment of this Court in the case of K. S. Vidyanadam &  others  v. Vairavan reported in [(1997) 3 SCC 1].  It was urged  that the appellants had made time essence of the payment of  Rs.75,000/- on or before 30.9.1981 of which the respondent  was made aware and, therefore, on failure to pay the said  amount on due date, the respondent herein had committed  breach for which the appellants were entitled to terminate the  agreement.  Learned counsel further submitted that the  respondent, on his own evidence, was aware that he had to pay  Rs.75,000/- on or before 30.9.1981 and yet on that day, the  respondent forwards two cheques for Rs.30,000/- dated

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29.9.1981 and the other for Rs.45,000/- dated 15.10.1981 which  showed that respondent agreed to the term of payment of  Rs.75,000/- on or before 30.9.1981 and at the same time, he  was not ready and willing to perform his obligation.  It was  further urged that in his evidence, the respondent herein had  conceded that he did not have funds to pay Rs.75,000/- on  30.9.1981 which indicated that he was not continuous ready and  willing to fulfil his obligations.  It was further urged that under  the agreement, an amount of Rs.1,25,000/- had to be paid by  18.4.1981; that the said amount was not paid and that this lapse  was sufficient ground for the appellants to make the time the  essence of the contract.  In the circumstances, it was urged that  the High Court had erred in decreeing the suit for specific  performance.  

       The key issue which is to be decided in this civil appeal  is : whether time was the essence for payment of Rs.75,000/- on  or before 30.9.1981 and whether the said term was breached.   This question does not depend only upon express stipulation  made by the parties, but it also depends upon the intention of  the parties.  Notwithstanding that a specific date was mentioned  in the agreement, one has not only to look at the letter but also  at the substance of the contract.  Whether time is of essence is a  question of fact and the real test is intention of the parties.  It  depends upon facts and circumstances of each case.

       According to Pollock & Mulla’s Indian Contract &  Specific Relief Acts \026 [(2001) 12th Edition page 1086], the  intention can be ascertained from: i)      the express words used in the contract; ii)     the nature of the property which forms the  subject matter of the contract;

iii)    the nature of the contract; and iv)     the surrounding circumstances.

       That time is presumed not to be of essence of the contract  relating to immovable property, but it is of essence in contracts  of reconveyance or renewal of lease.  The onus to plead and  prove that time was the essence of the contract was on the  person alleging it, thus giving an opportunity to the other side  to adduce rebuttal evidence that time was not of essence.  That  when the plaintiff pleads that time was not of essence and the  defendant does not deny it by evidence, the Court is bound to  accept the plea of the plaintiff.  In cases where notice is given  making time of the essence, it is duty of the Court to examine  the real intention of the party giving such notice by looking at  the facts and circumstances of each case.  That a vendor has no  right to make time of the essence, unless he is ready and willing  to proceed to completion and secondly, when the vendor  purports to make time of the essence, the purchaser must be  guilty of such gross default as to entitle the vendor to rescind  the contract.

       Applying the above principles to the facts of the present  case, we find that there was no justification in claiming, in the  circumstances, to treat time as of the essence.  At the outset,  referring to the original agreement dated 18.2.1981, there is  nothing in the express stipulation between the parties to show  that the intention was to make the rights of the parties  dependant upon the observance of the time limits.  Prima facie,  equity treats the importance of such time limits as being  subordinate to the main purpose of the parties. [See: Jamshed  Khodaram Irani v. Burjorji Dhunjibhai reported in [AIR 1915  PC 83].

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       In the present case, it was submitted on behalf of the  appellants that time to pay Rs.75,000/- on or before 30.9.1981  was made the essence of the contract by notice dated 12.9.1981  as the respondent was a chronic defaulter.  We do not find any  merit in this argument.  In his evidence, the respondent asserted  that when he paid Rs.50,000/- on 31.3.1981, the appellants  orally agreed to extend the time for payment of Rs.75,000/-  from 18.4.1981 to 30.9.1981; that at that time there was no  agreement to make time the essence of the contract.  This  assertion has not been rebutted by the appellants.  No evidence  in rebuttal has been led by the appellants.  Further, as rightly  held by the Courts below, the conduct of the respondent was  not a gross conduct so as to justify giving of notice making time  of the essence of the contract.  That on the contrary, time was  extended by the appellants in furtherance of clause (8) of the  agreement up to 31.12.1981.  In the circumstances, we are in  agreement with the conclusion that time was not of the essence.

       Mr. Iyer, learned counsel for the appellants placed  reliance on the judgment of this Court in V. Pechimuthu v.  Gowrammal reported in [(2001) 7 SCC 617] in support of his  above contention that time was the essence of the contract.  We  do not find merit in this argument.  Firstly, as stated above,  whether time is the essence of the contract would depend upon  facts and circumstances of each case.  It would depend on  intention of the parties.  Secondly, the facts of the above  judgment show that the matter dealt with an agreement for  reconveyance, which as stated above, presumes that time is of  essence.  We have referred to Contract Law by Mulla  hereinabove, which states that in cases of reconveyance or  renewal of lease, time is of essence as a matter of presumption  which is rebutable.  Lastly, in the case of  V. Pechimuthu  (supra), it has been held that rise in price of land agreed to be  conveyed may be a relevant factor in denying relief of specific  performance when Court is considering whether to grant decree  for the first time.  That it is not a relevant factor, however,  before the Supreme Court of India at SLP stage where all the  Courts below have granted decree.  It was, therefore, held that  judgment of this Court in K. S. Vidyanadam (supra) was  inapplicable.  In the present case, the appellants, in any event,  have not stepped into the witness box nor have they led  evidence on any of their allegations.  In the circumstances, we  do not wish to burden this judgment by citing various  authorities.

       Mr. Iyer, learned counsel for the appellants next  contended that the respondent has failed to prove that he was  always and that he continued to be ready and willing to fulfil  his obligations under the agreement as required by section 16 of  the Specific Relief Act.  It was urged that on 30.9.1981, the  respondent herein offered two cheques to the appellants for  Rs.30,000/- dated 29.9.1981 and a post dated cheque  for  Rs.45,000/- dated 15.10.1981.  That in his evidence, the  respondent had conceded that he had no funds on 30.9.1981.   That under section 16, the burden is on the respondent to show  that he was always ready and willing to comply with his  obligations.  Hence, it was urged that the Courts below erred in  granting specific performance to the respondent.

       We do not find any merit in the above arguments.  The  Courts below have examined the evidence on record and have  recorded a finding of fact that the respondent was in a position  to raise the wherewithal for implementing the contract.   However, on facts, it is clear that time to complete the sale was

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extended up to 31.12.1981.  That notice terminating the  contract was given by the appellants on 3.10.1981 and the  respondent had instituted the suit on 2.12.1981 which indicates  that respondent was eager to fulfil his part of the contract.  That  it is nobody’s case that post dated cheque had bounced.  That  there was no unreasonable delay in payment of consideration  and, therefore, it cannot be said that the respondent was not  ready and willing to perform his part of the contract.

       In the case of Nannapaneni Subayya Chowdary &  another v. Garikapati Veeraya & another reported in [AIR  1957 AP 307] it has been held, after examining various  authorities, that in the suit for specific performance, all that is  necessary for the purchaser to show is that he was ready and  willing to fulfil the terms of the agreement; that he had not  abandoned the contract; that he had kept the contract subsisting.   Applying the above tests to the facts of the present case, we are  of the view that the Courts below were right in their conclusion;  that the respondent was always ready and willing to comply  with his obligations under the contract.  In the circumstances,  the Courts below were right in decreeing the suit for specific  performance.

       Before concluding, it may be pointed out that under the  impugned judgment, the respondent was ordered to deposit  Rs.75,000/- payable under the second installment within eight  weeks from 17.6.2000.  If the aforestated amount has been so  deposited, the appellants herein would be entitled to withdraw  the same with interest, if any.

       For the aforesaid reasons, we do not find any merit in this  civil appeal, which is, accordingly, dismissed, with no order as  to costs.