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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.