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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.