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CASE NO.:

Appeal (civil) 679-680 of 2002

PETITIONER:

P. PURUSHOTTAM REDDY AND ANR.

RESPONDENT:

PRATAP STEELS LTD.

DATE OF JUDGMENT: 21/01/2002

BENCH:

R.C. LAHOTI & BRIJESH KUMAR

JUDGMENT:

JUDGMENT

The Judgment of the Court was delivered by R.C. LAHOTI, J. Leave granted.

An Introductory Statement of bare necessary facts would suffice for the

purpose of this order. On 31.10.1987, a contract for sale of immoveable

property was entered into between the parties whereby the appellant agreed

to sell the suit property consisting of a building and the site on which

the building stands, for a consideration of Rs. 40,25,000. An amount of Rs.

8,00,000 was paid by way of advance or earnest money the balance

consideration of Rs. 32,25,000 was to be paid simultaneously with the

execution and registration of sale deed. This contract was in supersession

of an earlier contract dated 22.9.1986 which had lapsed. The vendor had

agreed to obtain the requisite permission from the Urban Land Ceiling

Authority before 30th June, 1988. The time so appointed could be extended

by mutual consent of the parties. It was expressly agreed upon between the

parties that if the requisite exemption or permission under the Urban Land

(Ceiling and Regulation) Act, 1976 ('ULCRA'. for short) was not forthcoming

by 30th June, 1988 or within such extended period as may be mutually agreed

to then the contract was to become inoperative and unenforceable in which

event the only obligation surviving on the vendor was to refund the earnest

money. The vendor could return the earnest money within three months

thereafter and if for any reason whatsoever the amount could not be so

repaid then the amount was to carry interest at the rate of 12 per cent per

annum. It appears that proceedings for declaration that the suit property

was within the ceiling limits as appointed by the ULCRA were already

pending before the Competent Authority at a point of time when the

agreement was entered into between the parties. However, the decision was

not forthcoming within the period of six months from the date of the

agreement. On 1.12.1998 the appellant wrote a letter to respondent

informing that the agreement to sell stands cancelled as per the terms of

the agreement for failure of the requisite clearance from the competent

authority (Urban Land Ceiling) forthcoming. With the letter the appellant

tendered an amount of Rs. 2,00,000 through two cheques enclosed with the

letter, requesting for the agreement being returned duly cancelled to the

vendor and assuring the payment of the balance amount of the earnest money

before the end of December, 1988. This letter erupted a conflict between

the parties leading to exchange of legal notices and filing by the

respondent of a suit nor specific performance of agreement to sell on

29.6.1989. On 12.3.1992 the Trial Court decreed the suit against which the

appellant filed First Appeal before the High Court. On 19.8.1999 the High

Court has allowed the appeal, set aside the judgment and decree of the

Trial Court and remanded the case for holding additional trial on the three

additional issues framed by the High Court and thereafter to decide the

case afresh.

A perusal of the order of remand made by the High Court shows that on

behalf of the appellant Six contentions were raised: (i) that the suit was

not maintainable as the pleadings did not conform to the requirements of

Forms 47 and 48 of Appendix A of the Code of Civil Procedure: (ii) that

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there was no pleading in the plaint that the plaintiff-respondent had

always been ready and willing to perform his part of the contract and

continued to be so, and on the contrary the conduct of the respondent

showed the absence of such readiness and willingness; (iii) that the

agreement became inoperative and unenforceable on 30th June, 1988 and

therefore was rendered incapable of specific performance (iv) that the

grant of relief of specific performance was discretionary, which the facts

and circumstances of the case did not permit being exercised in favour of

the plaintiff-respondent, (v) that the respondent had not approached the

Court with clean hands and therefore was not entitled to the discretionary

and equitable relief of specific performance; and (vi) that the respondent

was not financially sound and therefore was not in a position to perform

his part of the contract.

Before we may proceed to notice how the High Court proceeded to dispose of

the appeal and the reasons which persuaded the High Court to make a remand,

we may place on record two subsequent events which have occurred. Firstly,

the Competent Authority (Urban Land Ceiling) had passed an order on

22.12.1989 declaring the land held by the appellants, including the

property agreed to be sold, not to be in excess of ceiling limits which

order though passed on 22.12.1989 was, according to the appellants,

communicated to them sometime in May 1992, that is, subsequent to the

decision of the suit. In view of this order the need for obtaining

clearance from the Competent Authority (Urban Land Ceiling) was obviated.

Secondly, the respondent which is a duly incorporated company running an

industry, fell sick. Proceedings under Sick Industrial Companies (Special

Provisions) Act, 1985 were initiated and the Board of Industrial and

Financial Reconstruction ('BIFR', for by its order dated 14.10.1996

declared the respondent-company as a sick company directing the promoters

to furnish a proposal for revival of the company. During the course of

hearing in this Court we were informed at the Bar that the order made by

BIFR has been put in issue by the respondent by filing a writ petition in

the High Court of Delhi and it is, pending sub-judice.

On an analysis of several recitals of the agreement dated 31.10.1987 and of

the law the High Court concluded that time was not the essence of the

contract and therefore the factum of not obtaining the clearance under the

ULCRA by the appellant within the time appointed did not render the

agreement inoperative and unenforceable. The High Court also held that the

six months time appointed by the agreement could not be said to have been

extended by acuquiescence and implied consent on the part of the appellant.

The High Court then proceeded to examine the crucial question whether the

respondent was ready and willing to perform his part of the contract and

the pleading in that regard as contained in the plaint. The High Court

noticed that there was no specific issue framed by the Trial Court as to

such a plea. The High Court also noticed that in the written statement

there was no plea taken that the suit for specific performance was not

maintainable for non-compliance with Forms 17 and 48 of Appendix A of the

Code of Civil Procedure. Having stated so the High Court felt the need of

framing three additional issues viz. (i) whether the suit is maintainable,

(ii) whether the plaintiff is ready and willing to perform his part of the

contract, and (iii) whether the plaintiff is entitled for specific relief

of the contract. Having formed that opinion the High Court set aside the

judgment and decree of the Trial Court framed the three issues as

abovesaid, allowed liberty to the parties for adducing in the trial court

such evidence as was necessary on the abovesaid issues without amending the

pleadings and sent the matter back to the Trial Court. The High Court also

left it open to the Trial Court to take into account the subsequent events.

Subsequent to the passing of the decree that judgment-debtor had moved an

application under Section 28 of the Specific Relief Act. 1963 to have the

contract rescinded for failure of the decree-holder to comply with his

obligations under the decree specially the one for payment of the purchase

money. The application was rejected by the Trial Court. Feeling aggrieved

by such order the appellant had filed a civil revision petition which was

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taken up for hearing along with the first Appeal. Having disposed of the

First Appeal in the manner and in the terms as already stated the Trial

Court directed the pleas raised in such application also to be decided

along with the suit.

We have heard the learned counsel for the parties and we are satisfied that

the approach adopted by the High Court is unsustainable in law and

therefore the order of remand cannot also be sustained. We briefly set out

the reasons for forming such opinion in the succeeding paragraphs.

For the purpose of deciding the question whether or not time was the

essence of the contract the appellant before the High Court relied on K.S.

Vidyanandam and Ors. v. Vairavan, [1997] 3 SCC 1 which is a two-Judge Bench

decision and a few other decided cases. On behalf of the plaintiff-

respondent reliance was placed on Chandnee Widya Vati Madden v. Dr. C.L

Katial and Ors., [1964] 2 SCR 495, which is a three-Judge Bench decision.

The High Court noticed that facts of both these decisions and having also

dealt with the law laid down therein felt inclined to decide the case in

the light of the law laid down in Chandnee Widya Vati's case because the

decision in Chandnee Widya Vati's case was, as stated by the High Court,

"the earlier larger Bench judgment". The attention of the High Court was

not invited to a Constitution Bench decision in Chand Rani (Smt.) (Dead) by

Lrs. v. Kamal Rani (Smt.) (Dead) by Lrs., [1993] 1 SCC 519 and therefore

the law laid down by the Constitution Bench has escaped the attention of

the High Court. The issue as to whether time is the essence of the contract

in contracts for sale of immoveable property came up for the consideration

of the Constitution Bench and it was held:

"It is a well-settled principle that in the case of sale of immovable

property, time is never regarded as the essence of the contract. In fact,

there is a presumption against time being the essence of the contract. This

principle is not in any way different from that obtainable in England.

Under the law of equity which governs the rights of the parties in the case

of specific performance of the contract to sell real estate, law looks not

at the letter but at the substance of the agreement. It has to be

ascertained whether under the terms of the contract the parties named a

specific time within which completion was to take place, really and in

substance it was intended that it should be completed within a reasonable

time. An intention to make time the essence of the contract must be

expressed in unequivocal language."

xxx xxx

xxx

"...............in the case of sale of immovable property there is not

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."

Vide para 29, the Constitution Bench, on an analysis of evidence, concluded

that though as a general proposition of law time is not the essence of the

contract in the case of sale of immoveable property yet the parties

intended to make time as the essence under clause (1) of the suit

agreement. This Constitution Bench decision in Chand Rani' s case was

placed before and followed by the two-Judge Bench deciding Vidyanadam's

case. The High Court ought to have noticed the Constitution Bench decision,

while dealing with the facts and circumstances of the present case as

emerging from evidence and then decided the case in the light of the law

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laid down by the Constitution Bench.

The next question to be examined is the legality and propriety of the order

of remand made by the High Court. Prior to the insertion of Rule 23A in

Order 41 of the Code of Civil Procedure by CPC Amendment Act 1976, there

were only two provisions contemplating remand by a court of appeal in Order

41 of CPC. Rule 23 applies when the trial court disposes of the entire suit

by recording its findings on a preliminary issue without deciding other

issues and the finding on preliminary issue is reversed in appeal. Rule 25

applies when the appellate court notices an omission on the part of the

trial court to frame or try any issue or to determine any question of fact

which in the opinion of the appellate court was essential to the right

decision of the suit upon the merits. However, the remand contemplated by

Rule 25 is a limited remand in as much as the subordinate court can try

only such issues as are referred to it for trial and having done so, the

evidence recorded, together with findings and reasons therefore of the

trial court, are required to be returned to the appellate court. However,

still it was a settled position of law before 1976 Amendment that the

court, in a appropriate case could exercise its inherent jurisdiction under

Section 151 of the CPC to order a remand if such a remand was considered

pre-eminently necessary ex debito justitiate, though not covered by any

specific provision of Order 41 of the CPC. In cases where additional

evidence is required to be taken in the event of any one of the clauses of

sub-rule (1) of Rule 27 being attracted, such additional evidence oral or

documentary, is allowed to be produced either before the appellate court

itself or by directing any court subordinate to the appellate court to

receive such evidence and send it to the appellate court. In 1976, Rule 23

A has been inserted in Order 41 which provides for a remand by an appellate

court hearing an appeal against a decree if (i) the trial court disposed of

the case otherwise than on a preliminary point, and (ii) the decree is

reversed in appeal and a retrial is considered necessary. On twin

conditions being satisfied, the appellate court can exercise the same power

of remand under Rule 23A as it is under Rule 23. After the amendment, all

the cases of wholesale remand are covered by Rule 23 and 23 A. In view of

the express provision of these rules, the High Court cannot have recourse

to its inherent powers to make a remand because, as held in Mahendra v.

Sushila, AIR (1965) SC 365, at p. 399), it is well settled that inherent

powers can be availed of ex debito justiatiate only in the absence of

express provisions in the Code. It is only in exceptional cases where the

court may now exercise the power of remand de hors the Rules 23 and 23A. To

wit, the superior court, if it finds that the judgment under appeal has not

disposed of the case satisfactorily in the manner required by Order 20 Rule

3 or Order 41 Rule 31 of the CPC and hence it is no judgment in the eye of

law, it may set aside the same and send the matter back for re-writing the

judgment so as to protect valuable rights of the parties,. An appellate

court should be circumspect in ordering a remand when the case is not

covered either by Rule 23 or Rule 23A or Rule 25 of the CPC. An unwarranted

order of remand gives the litigation an undeserved lease of life and,

therefore, must be avoided.

In the case at hand, the trial court did not dispose of the sit upon a

preliminary point. The suit was decided by recording findings on all the

issues. By its appellate judgment under appeal therein, the High court has

recorded its finding on some of the issues, not preliminary, and then

framed three additional issues leaving them to be tried and decided by the

trial court. It is not a case where a retrial is considered necessary.

Neither rule 23 nor rule 23A of Order 41 applies. None of the conditions

contemplated by Rule 27 exists so as to justify production of additional

evidence by either party under that Rule. The validity of remand has to be

tested by reference to Rule 25. So far as the objection as to

maintainability of the suit for failure of the plaint to satisfy the

requirement of Form,s 47 and 48 of Appendix A of CPC is concerned, the High

court has itself found that there was no specific plea taken in the written

statement. The question of framing an issue did not, therefore, arise.

However, the plea was raised on behalf of the defendants purely as a

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question of law which, in their submission, strikes at the very root of the

right of the plaintiff to maintain the suit in the form in which it was

filed and so the plea was permitted to be urged. So far as the pleas as to

readiness and willingness by reference to clause (c) of Section 16 of the

Specific Relief Act, 1963 is concerned, the pleadings are there as they

were and the question of improving upon the pleadings does not arise in as

much as neither any of the parties made a prayer for amendment in the

pleadings nor has the High Court allowed such a liberty. It is true that a

specific issue was not framed by the trial court. Nevertheless, the parties

and the trial court were very much alive to the issue whether Section 16(c)

of the Specific Relief Act was complied with or not and the contentions

advanced by the parties in this regard were also adjudicated upon. The High

Court was to examine whether such finding of the trial court was

sustainable or not-in law and on facts. Even otherwise the question could

have been gone into by the High Court and a finding could have been

recorded on the available material in as much as the High Court being the

court of first appeal, all the questions of fact and law arising in the

case were open before it for consideration and decision.

Assuming that there was any deficiency in the pleadings and also an

omission on the part of the trial court to frame a specific issue, the

present one is a case where the applicability of the law laid down by this

court in Nagubai Ammal and Ors. v. B. Shama Rao and Ors., AIR (1956) SC 593

was squarely attracted. In Nagubai case this court was called upon to

examine if the plea of its pendens was not open to the plaintiff on the

ground that it had not been raised in the pleadings. Neither the plaint nor

the reply statement of the plaintiff contained any averment that the sale

was affected by the rule of Us pendens. There was no specific issue

directed to that question. However, evidence was adduced by the plaintiff

on the plea of lis pendens and not objected to by the defendants. The

question was argued and tested by taking into consideration the evidence

that the proceedings were collusive in character with a view to avoid

operation of Section 52 of the T.P. Act. This court felt satisfied that the

defendants went to trial with full knowledge that the question of Us

pendens was in issue, had ample opportunity to adduce their evidence

thereon and fully availed themselves of the opportunity. This court formed

the opinion that in the circumstances of the case, absence of a specific

pleading on the question was a mere irregularity which resulted in no

prejudice to the defendants. After having noticed the rule of pleadings as

applicable to civil law that "no amount of evidence can be looked into upon

a plea which was never put toward", this court held, "The true scope of

this rule is that evidence let in on issues on which the parties actually

went to trial should not be made the foundation for decision of another and

different issue, which was not present in the minds of the parties and on

which they had no opportunity of adducing evidence. But that rule has no

application to a case where parties go to trial with knowledge that a

particular question is in issue, though no specific issue has been framed

thereon, and adduce evidence relating thereto."

In the case before us it was not the grievance raised by any of the parties

before the High Court that there was any failure on the part of the trial

court in discharging its obligation of framing issues. Nobody complained of

prejudice at the trial for want of any issue or a specific issue. It was

nobody's case that any evidence, oral or documentary, was excluded or not

allowed to be taken on record by the trial court. The very fact that the

defendant-appellants have come up to this court laying challenge to the

order of remand shows that the appellants are not interested in remand and

do not want any additional issue to be framed or to adduce any further

evidence. Once of the pleas taken by the appellants in the memo of special

leave petition is that the High Court had erred in remanding the matter

back for fresh trial and the High Court had failed to appreciate that there

was sufficient material on record to show absence of readiness and

willingness on the part of the plaintiff to perform its part of the

contract. On the other hand, after the passing of the impugned order of

remand the plaintiff-respondent has also through his counsel, filed a memo

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before the trial court on 18.2.2000 submitting that on the additional

issues framed pursuant to the direction of the High Court, the evidence on

behalf of the plaintiff was already on record and the plaintiff would lead

rebuttal evidence only if any evidence was adduced by the defendants. Thus

the plaintiff is also not desirous of adducing any additional evidence on

the issues.

The subsequent events which are material and ought to be noticed by the

appellate court are only two i.e. (i) communication of the order of the

competent authority (Urban Land Ceiling) holding the land of the appellants

to be within ceiling limits, and (ii) order of BIFR holding the plaintiff-

respondent to be a sick company. These two events are subject matter of

documentary evidence and almost admitted between the parties. The High

Court can be requested to take note of such subsequent events by bringing

the relevant documents on record which being public documents would not

require any formal proof. The High Court may take note of such subsequent

events and test the validity of judgment under appeal by reference to those

events also or mould the relief suitably and as may be considered

necessary.

For the foregoing reasons the appeals are allowed. The impugned order of

remand made by the High Court is set aside. The first appeal and the civil

revision petition shall stand restored on the file of the High Court and

shall be decided afresh after affording the parties an opportunity of being

heard and consistently with the observation made hereinabove. No order as

to the costs.

Before parting, we would like to make it clear that we have not expressed

any opinion on the merits of any of the issues arising for decision in the

suit or appeal and whatever we have stated herein is only for the purpose

of demonstrating that no remand was required. So also although the order of

remand has been set aside and the parties too are not desirous of adducing

any evidence excepting for placing on record the relevant requisite

documents as to the two admitted subsequent events, yet we should not be

understood as depriving the High Court of its power to require any document

to be produced or any witness to be examined to enable it to pronounce

judgment, or for any other substantial cause, within meaning of clause (b)

of sub-Rule (1) of Rule 27 Order 41. That power inheres in the court and

that court alone which is hearing the appeal. It is the requirement of

court (and not of any of the parties) and the conscience of the court

feeling inhibited in satisfactory disposal of lis which rule the exercise

of this power.