IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE P.R.RAMAN & THE HONOURABLE MR. JUSTICE V.K.MOHANAN FRIDAY, THE 11TH APRIL 2008 / 22ND CHAITHRA 1930 AS.No. 679 of 2000(E) --------------------- OS.29/1997 of I ADDL.SUB COURT,ERNAKULAM .................... APPELLANTS/PLAINTIFFS: ---------- 1. SAMSON THOMAS, S/O.THOMAS, PALAMTHURUTHIL HOUSE, MANJUMMEL KARA, ELOOR VILLAGE. 2. R.DILEEP, S/O.RAMAN MENON, PARAYATH PUTHENVEEDU, MANIKAMANGALAM VILLAGE. BY ADV. SRI.BABU KARUKAPADATH SMT.M.A.VAHEEDA BABU RESPONDENTS/DEFENDANTS: ---------- 1. P.M.HAFSA SHAMSUDHEEN, S/O.SHAMSUDHEEN, JASMIN BUNGALOW, S.R.M. ROAD, ERNAKULAM. 2. ABDUL RAHIM, S/O.MOHAMMED KUNJU, CHARTERED ACCOUNTANT, ALISSERY WARD, ALAPPUZHA. 3. P.K.AYISHAKUTTY, S/O.MOHAMMEDKUTTY, R.M. HOUSE, MANNARKAD VILLAGE. 4. ABDUL HAKHIM, S/O.KOCHUNNI, KOLLAPPARAMBIL, MANJUMMEL. R1 TO R3 BY ADV. SRI.ALIAS M.CHERIAN SMT.S.JASMINE SRI.C.VALSALAN SRI.K.RAKESH ROSHAN SMT.SOUMINI JAMES R4 BY ADV.SRI C. VATHSALAN THIS APPEAL SUITS HAVING BEEN FINALLY HEARD ON 23/01/2008 THE COURT ON 11/04/2008 DELIVERED THE FOLLOWING: ORDER ON CMP.NO.6200/2000 & I.A.NOS.4429/2004 & 369/2006 IN A.S.NO.679 OF 2000 ------ Dismissed 11/4/2008 Sd/- P.R.RAMAN,JUDGE True Copy P.S. to Judge. P.R. RAMAN & V. K. MOHANAN, JJ. = = = = = = = = = = = = = = = = = = = = A.S. NO. 679 OF 2000 = = = = = = = = = = = = = = DATED THIS, THE 11TH DAY OF APRIL, 2008. J U D G M E N T Raman, J. Plaintiffs are the appellants. The suit was one for specific performance. As per the plaint averments, the plaintiffs agreed to purchase from the defendants and the defendants agreed to sell the plaintiffs or to their nominees 2 Acres 11.459 cents of land in Sy. 78/3 of Ernakulam Village, more particularly described in plaint A schedule for a consideration of Rs. 20,000/- per cent. Ext.A1 dated 19.8.1994 is the agreement in this behalf. Plaintiffs paid an amount of Rs. 3 lakhs as advance sale consideration. The agreement stipulates six months period for performance of the contract. According to the plaintiff, time was not the essence of the contract. The plaintiff was ready and willing to perform his part of the obligation. Subsequently, the consideration was reduced to Rs.19,750/- per cent as agreed upon. Property was measured after the agreement and it was found that the actual extent available is only 196.55 cents of land in the possession of the defendants after excluding the land demarcated and left as road for access to the lands already sold by the A.S. 679/2000 :2: defendants to the plaintiffs. In terms of Ext.A1, the plaintiff purchased 64.408 cents of land within six months and 71.680 cents after six months of the agreement. Thus altogether, the plaintiffs purchased 136.088 cents of land from the defendants after paying consideration at the rate of Rs. 19,750/- per cent. As per Ext.A2 dated 18.2.1995, the defendants received 13 cheques to cover the entire consideration for the extent of 196.655 cents including the amounts already paid as the advance. According to them, all cheques received except four cheques were encashed by the defendants. The cheque dated 24.2.1995 for Rs. 1,97,690/- issued by the plaintiff was encashed by the second defendant on 27.5.1995; but no property for the same was conveyed by the defendants. The amount covered by the said five cheques and the advance amount would cover the entire consideration for the balance extent of land of 60.567 cents, which is described as plaint B, C and D schedule properties. They are lying in different boundaries separating the properties already purchased by the plaintiffs and their nominees making it impossible to them to fulfill their project. Though the plaintiffs were willing to purchase the property as per the agreement, defendants delayed the matter under one pretext or other. Ultimately, the suit was laid for specific performance. Though the road portion was excluded for the benefit A.S. 679/2000 :3: of defendants 1 to 3, plaintiffs agreed to purchase the said portion as well if the court finds so. In reply to the notice dated 19.8.1984, defendants 1 to 3 sent a notice dated 20.11.1996 stating false contentions including that they have sold a portion of the property to the Additional 4th defendant for an amount of Rs. 1,97,690/- which was received as per cheque dated 24.2.1995. According to the plaintiffs, no such document was executed or registered till the date of reply notice. The Additional 4th respondent was not made a party initially. According to the plaintiff, they never authorised or requested the defendants to sell any portion of plaint A schedule property to the Additional 4th respondent and hence if such a document is executed it is clearly illegal, unauthorised, fraudulent and collusive. The Additional 4th respondent was aware of the agreement dated 19.8.1994 and later, he was impleaded in the suit. 2. Defendants 1 to 3 contended that time is the essence of the contract, that the cheques issued on 18.1.1994 were returned agreeing to issue fresh cheques as and when sale takes place, that the plaintiffs abandoned the contract by taking away the cheques already issued, that the agreement sought to be executed was an extension of the earlier agreement, that the formation of the road and the reduction of consideration and extent are denied, that a sale deed was executed in favour of the 4th A.S. 679/2000 :4: defendant for the consideration received from the first plaintiff as per cheque dated 24.2.1995 as he was one of the partners of the plaintiff and as directed by the plaintiff, that since the plaintiff had no sufficient funds they took away the cheques issued and they did not purchase the property due to lack of funds, that the plaintiffs committed breach of contract and they are not entitled to get back Rs. 3 lakhs as it was the earnest money. On these grounds, they prayed for dismissal of the suit. The Additional 4th defendant also filed a written statement supporting the stand of defendants 1 to 3. 3. The trial court framed various issues for trial. The evidence consists of the oral testimony of PWs 1 to 7, DWs 1 to 3 and documentary evidence EXts.A1 to A12, Exts. X1 to X8, Exts.B1 to B6 and Exts C1 and C1(a). The trial court found that time is the essence of the contract, that after the execution of Ext.A1, circumstances have changed, that several conveyance were made in plaint A schedule and various parties were put in possession, and that the plaintiffs are not entitled to the equitable remedy of specific performance. Accordingly, the suit was dismissed. However, the question as to whether the plaintiffs are entitled for any alternative relief of return of consideration was not specifically considered. The appellants impugns the said judgment and decree passed by the court below in this appeal. A.S. 679/2000 :5: 4. Ext.A1 is the agreement for sale between the parties. It is dated 19.8.1994. As per Ext.A1, the intending transferor traces his title to the property scheduled thereunder to registered documents Nos. 1386, 1387, 1388 and 1389 of the year 1972, which is registered as a registered sale deed in favour of the first party. The first party had instituted a suit as O.S. 575/1992 for an injunction restraining one K.A. Buhari and others from trespassing into the said properties in which a temporary injunction was granted. An extent of 16.711 cents on which there was an alleged trespass was excluded from this document and the balance extent of 2 acres 11 cents 409 links was agreed to be sold for a consideration of Rs. 20,000/- per cent in favour of the second party or to his nominee within a period of six months. It also acknowledges receipt of an amount of Rs. 3 lakhs paid towards earnest money as per two cheques ( Nos. 7792976 & 7792977 ) drawn on Bank of India, Udyogamandal Branch. All the previous title to the property and other records including encumbrance certificate for thirteen years has to be made available by the first party to the second party before sale. The balance amount has to be paid within the stipulated period of six months before registration and in case there is any default on the part of the first party, a right is conferred on the second party to deposit the balance consideration before the court and to get the document executed through A.S. 679/2000 :6: court and in case the sale could not take place on the default of the second party, the entire amount paid by way of earnest money would be adjusted towards damages suffered by the first party. It is also stipulated that time is the essence of the contract and there will not be any extension of time and both sides agreed to such conditions. It is also stipulated that the suits O.S. 572/1992 and O.S. 793/1993 are to be prosecuted further by the second party and all necessary help will be rendered by the first party since those suits are pertaining to the subject matter of the proposed transaction. The total extent covered as per the description contained in the schedule is 2 acres 11 cents and 459 square links. 5. The six months period thus expired on 19th February, 1995. According to the plaintiff, though there is a recital that time is the essence of the contract, actually, it is not the essence of the contract and the parties never intended that the time is to be the essence of the contract. The plaintiff was always ready and willing to purchase the property within the period of six months and out of the total extent, 1 acre 36 cents and 088 cents were already purchased from the defendants within the aforesaid period of six months. It is also their case that though the consideration as agreed in Ext.A1 was Rs. 20,000/- per cent, it was subsequently, reduced to Rs. 19,750/- per cent on mutual consent. The plaintiffs placed reliance on A.S. 679/2000 :7: the fact that they purchased 64.408 cents of land within the six months period and 71.680 cents after six months of the agreement dated 19.8.1994. According to them, defendants defered the sale on the ground that the second defendant was laid up and the third defendant had gone for Hajj Pilgrimage. The plaint schedule property was measured and both sides agreed that the extent available was 1 acre and 96.655 cents of land after excluding the land already demarcated and left as road for access to the lands already sold by the defendants to the plaintiffs and their nominees. According to the plaintiffs, they issued 13 post dated cheques in favour of the defendants and paid Rs. 1,50,000/- to the defendants before expiry of the six months period from the date of Ext.A1, towards consideration for the balance extent, of which nine cheques were encashed and eight sale deeds were executed selling portions of plaint A schedule property in favour of the plaintiffs and their nominees. Out of the 13 cheques, Cheque No. 384122 dated 24.2.1995 for Rs. 1,97,690/- drawn on Nedungadi Bank was issued in favour of the second defendant for selling 10.010 cents of land in plaint A schedule property to the first plaintiff. The said cheque was encashed by the second defendant on 27.5.1995 but he did not execute the sale deed in respect of 10.010 cents of property. The remaining four cheques were not presented by the defendants. According to A.S. 679/2000 :8: them, since the entire consideration was paid for sale of plaint B, C and D schedule properties there is no justification for the defendants in refusing to execute the sale deed in respect of these items. 6. Defendants 1 to 3 contended that 2 acres 30 cents in Survey No. 78/3 of Ernakulam Village was originally belonged to Payyappallil Dr. Karunakara Kaimal and on his death it devolved on his legal heirs who became absolute owners. 60 cents and 420 sq. links of property was purchased by the first defendant for valuable consideration as per document No. 1368/72 dated 16.6.1972 of Ernakulam Sub Registry and an extent of 79 cents 500 sq. links and 30 cents 250 sq. links together 1 acre 9.50 cents was purchased by the second defendant for valuable consideration as per document No. 1387/1972 on the same date and another 40 cents was purchased by the third defendant for valuable consideration as per document No. 1387 of 1972 of Ernakulam Sub Registry. The defendants together have purchased 9 cents as per document No. 1389/72 on the same day. Thus, though each of the defendants purchased different portions and collectively purchased a portion, the entire property lying in one block was enjoyed in common and jointly by all of them as per the agreement. They admitted that on 21.1.1989 they entered into an agreement for sale of the property with one K.A. Buhari and K.A.Shajahan. But according to them, A.S. 679/2000 :9: the sale could not be materialized as they did not fulfill their part of the contract. Believing that Buhari and Shajahan would fulfill their part of the contract before expiry of the period, consent was given to put up a building on 9.675 cents of land. But they also reduced into their possession another extent of 7.03 cents of land unlawfully to the adjoining 9.675 cents. It was when they made attempt to trespass into the whole property, that O.S. 575/1992 was filed before the Sub Court, Ernakulam. Subsequently, Shajahan and Buhari instituted O.S. 105/1994 for specific performance. The defendants thought of selling away the property apprehending further mischief from Buhari and Shajahan. It was then that the plaintiffs who were well aware of the facts and circumstances, approached the defendants along with Sajan, Sunil and Hukeem and expressed their intention to purchase the property. One Raju Malayil also joined them as partner. They admit Ext.A1 agreement. It is further contended that the intending buyers approached the defendants and pleaded that some more time may be given. The defendants were forced to give two months time and an agreement was written in the hand-writing of the first plaintiff himself incorporating the above portion. That was done by a separate agreement which is also produced in the case. It is also admitted that some post dated cheques were issued to the plaintiffs but according to them, they were taken A.S. 679/2000 :10: back by the plaintiffs with the assurance that they will issue fresh cheques. They deny that the price was subsequently reduced to 19,750/- per cent. Both agreements specifically provide that time is the essence of the contract. The allegation that the sale of the property was delayed by the defendants is denied. It is also admitted that five sale deed were executed by the second defendant after various cheques issued by the plaintiffs. The allegation that the second defendant did not execute document for the amount of Rs. 1,97,690/- encashed as per Cheque No. 384122 dated 24.2.1995 is stated to be not correct. It is also admitted that there is some dispute between the parties regarding the encashment of the cheque. The document relating to the said cheque was executed in favour of one Hakkim which was done as per instruction. Since all the other documents were executed in favour of other partners excepting Hakkim, document No. 5325/96 was executed in his favour. This is reflected in the letter sent by the first plaintiff to Hakkim dated 26.2.1996. It is their case that in view of the provisions contained in the agreement earnest money need not be repaid. The Additional 4th defendant has set up a case that the defendants executed the sale deed for sale at the request of all the partners and Rs. 3 lakhs was paid by the plaintiffs and other partners along with the additional 4th respondent. Contribution made by the Additional 4th respondent is stated to be Rs. A.S. 679/2000 :11: 2,50,000/-. Since the plaintiff and other partners did not give directions to the defendants to execute the sale deed in favour of the Additional 4th defendant, he came to understand that the other partners are trying to exclude him from the partnership arrangement. there was some difference of opinion which was settled and the plaintiffs and other partners gave instruction to defendants 1 to 3 to execute the sale deed in favour of the 4th defendant and therefore, the defendants 1 to 3 executed a sale deed in favour of the 4th defendant on 27.10.1996 with number as 5325/96 of the Ernakulam Sub registry Office. Thus, the additional 4th defendant became the absolute owner of the property covered by the said document. 7. From the pleadings of the parties, it is not in dispute that there was an agreement Ext.A1 and an amount of Rs. 3 lakhs was paid at the time of Ext.A1 to the defendants. It is admitted by the defendants that time was subsequently extended and even according to them 16 documents were executed by them in favour of the plaintiffs or their nominees as the case may be. One document, which is stated to be executed in respect of ten cents of property, in favour of the Additional 4th defendant is, however, in dispute and according to the plaintiffs, they have not given any instruction to the defendants to execute the sale deed in favour of the Additional 4th defendant. Admittedly, consideration for that sale was received by the A.S. 679/2000 :12: defendants as per cheque issued by the plaintiffs. Therefore, specific performance is sought for only for the balance extent mentioned as B, C and D schedule measuring about 60.567 cents. Even though it is provided under Ext.A1 that time is the essence of the contract, this being a sale of immovable property, normally, time cannot be considered as the essence of the contract. Further, the agreement itself provides for sale of the properties either to the plaintiffs or their nominee and the documents were also executed in piecemeal, executing sale deeds of smaller extent. As a matter of fact, it was post-dated cheques which were issued by the plaintiffs vide Ext.A2 stretching the period even after six months specified in Ext.A1. The sale deed for 71.680 cents of land was executed after six months period. If as a matter of fact, there was any failure on the part of the plaintiffs to discharge their obligation, one would have expected the defendants to issue a notice especially when there is a forfeiture clause to adjust Rs. 3 lakhs towards damages. But no such notice was issued by the defendants. This conduct on the part of the parties would clearly show that even the parties did not treat time as the essence of the contract. The court below has strained very much to hold that time is the essence of the contract without adverting to the conduct of the parties in issuing post dated cheques and acceptance of the same by the defendants. The execution of the documents A.S. 679/2000 :13: in piecemeal either to the plaintiffs or their nominees, the admission of the defendants that time was extended by two months on expiry of the six months period, the execution of the sale deed in favour of the Additional 4th defendant after the period of six months - all would go to show that time was not treated to be the essence of the contract by the parties. Therefore, the court below was wrong in finding that time is the essence of the contract in the present case. 8. PWs 1 and 2 have stated that they had the capacity to raise funds. Ext.A2 is co-related to the land purchased and is dated 18.2.1995. It is a list of 12 post-dated cheques of which eight were evidenced as having been encashed. Exts.X1 to X8 are the copies of encashed cheques proved by PWs 1 to 4. Ext. A12 is the certificate issued to PW.7 by the Bank of India showing the term deposit accounts with the said Bank. Therefore, the contention that all the cheques were taken back is disproved by the encashment of the various cheques and execution of the document accepting consideration thereof. Ext.A3 is the copy of the lawyer notice dated 20.11.1996 issued by the plaintiff to defendants 1 to 3. True that Ext.A3 do not speak about the reduction in the rate of price to Rs.19,750 from Rs. 20,000/- per cent or about the subsequent understanding reached between the parties. Ext.A6 is the reply to the said notice, dated A.S. 679/2000 :14: 23.12.1996. According to the plaintiffs, Hakkim was only a broker and had nothing to do with the plaintiffs in the matter of purchase of property. The very fact that post dated cheques were accepted by the defendants would clearly show that it is only on an understanding that the amount is to be made ready on or before the date of the cheque, that the defendants were executing the documents after presenting the cheques and encashment. But it is the obligation of the plaintiffs to show, for seeking specific performance of the agreement, that the entire balance consideration was readily available in the Bank so as to convince the court that if the cheques were presented on due dates, though post dated, would have been honoured by the Bank. But there is no evidence adduced by the plaintiff in this regard. Therefore, the finding of the court below that the plaintiffs did not establish on evidence that they were ready and willing to perform their obligation, cannot be faulted. Therefore, the plaintiffs are not entitled for specific performance of the agreement as regards the plaint agreement is concerned. But the fact remains that in respect of an extent of 10 cents of land for which consideration was actually received by the defendants, sale deed was executed in favour of the Additional 4th defendant, stated to be on instruction by the plaintiff. Certainly,there cannot be any cause for the plaintiffs for claiming specific performance in respect of that ten cents if A.S. 679/2000 :15: the defendant is able to establish that the Additional 4th defendant was a nominee of the plaintiff. But there is absolutely no evidence on record to show that the plaintiffs, at any point of time, requested the defendants to execute the sale deed in respect of ten cents in favour of the Additional 4th defendant. Admittedly, the sale deed in favour of the Additional 4th respondent was registered on the next day of receipt of lawyer notice by the defendants. Therefore, knowing fully that the plaintiffs are disputing the facts, that the defendants executed the document. Instead of waiting to clear that dispute by any written document or letter from the plaintiff, they could not have proceeded to register the sale deed ignoring the notice. Normally, one would have expected to take care that when admittedly, the agreement is with the plaintiffs, the defendants would have ensured that the document executed in respect of ten cents for which consideration was received by them should have been either to the plaintiffs or to their nominees. In the absence of any evidence, especially when a dispute was raised and the execution of the document was after receipt of the notice would clearly show that the case put up by the defendants that the execution of the document in respect of an extent of ten cents of land in favour of the Additional 4th respondent was as instructed by the plaintiffs, cannot be believed to be true. The burden is on the defendants to show A.S. 679/2000 :16: that document was executed in favour of the Additional 4th defendant as instructed by the plaintiff. But they failed to discharge their burden to prove so by adducing any cogent evidence. 9. Though admittedly, an amount of Rs. 3 lakhs is received by the defendants and even though the plaintiffs may not be entitled for specific performance of the agreement, the conduct of the defendants in executing a sale deed in respect of 10 cents of land in favour of the Additional 4th defendant itself shows that