IN THE HIGH COURT OF JUDICATURE AT MADRAS Dated: 7-3-2006 Coram: The Honourable Mr. Justice T.V. MASILAMANI A.S. Nos.2 and 544 of 1992 A.S.No.2/1992: 1. P.Samiappa Gounder 2. P.S.Velusami 3. P.S.Prakash .. Appellants/defendants 1 to 3 vs. 1. P.K.Rajan 2. Marayammal 3. Angayammal 4. S.Sengoda Gounder .. Respondents/Plaintiff & defendants 4 to 6 A.S.No.544/1992: S. Sengoda Gounder .. Appellant/ defendants 6 vs. 1. P.K.Rajan 2. P.Samiappa Gounder 3. P.S.Velusamy 4. P.S.Prakash .. Respondents/Plaintiffs & defendants 1 to 3 Appeal Suits against the judgment and decree dated 23.9.1991 made in O.S. No.425 of 1987 on the file of the II Additional Subordinate Judge, Erode. For Appellants in A.S.2/92 : Mr.A.K.Kumarasamy For Appellant in A.S.544/92 : Mr.C.Raghunatha Reddy For 1st Respondent : Mr.N.S.Manoharan in both appeals ... https://hcservices.ecourts.gov.in/hcservices/ JUDGMENT The defendants 1 to 3 have preferred the appeal in A.S.No.2 of 1992 and the 6th defendant has preferred the appeal in A.S.No.544 of 1992 challenging the decree and judgment passed by the II Additional Subordinate Judge, Erode in O.S.No.425 of 1987 dated 23.9.1991. 2. The first respondent/plaintiff entered into an agreement of sale with the appellants in A.S.No.2 of 1992 (hereinafter referred as defendants 1 to 3) on 30.5.1986 with reference to the suit property measuring 4727-1/2 sq.ft. out of 1.18 acres at the rate of Rs.43/- per sq.ft. and also paid Rs.25,000/- as advance of the sale price on the date of the agreement and agreed to pay another sum of Rs.25,000/- on or before 30.6.1986 and to pay the entire balance within 5 months from the date of the agreement and complete the contract. Though the plaintiff paid the said sum of Rs.25,000/- on 28.7.1986 after a delay of about one month, the defendants 1 to 3 accepted the same and since the plaintiff failed to pay the entire balance amount within 5 months from the date of the agreement, the defendants 1 to 3 rescinded the contract and sold the property to the 6th defendant, who is the appellant in A.S.No.544 of 1992. 3. Therefore the plaintiff was constrained to file the suit for specific performance against the defendants 1 to 3 and 6. As the other two defendants 4 and 5 claimed rights over the suit property in the suit filed by them for partition and separate possession of their shares, they are made parties to the suit. 4. On the basis of the pleadings and the evidence adduced on either side, learned Subordinate Judge decreed the suit directing the appellants to execute the sale deed as prayed for by the first respondent. Hence the appellants have preferred these appeals challenging the decree and judgment passed by the Court below. 5. The averments in the plaint filed by the first respondent/plaintiff are briefly as follows:- (a) The first defendant and his two sons, who are defendants 2 and 3, entered into an agreement of sale dated 30.5.1986 to sell the suit property to the plaintiff. As per the terms of the agreement, the plaintiff has to pay Rs.43/- per sq.ft. in respect of the suit property measuring 4727-1/2 sq.ft. out of 1.18 acres fully described in the schedule. Further the plaintiff has also paid a sum of Rs.25,000/- as advance on the date of the agreement and agreed to pay another sum of Rs.25,000/- within one month and to pay the entire balance of sale consideration within 5 months from the date of the agreement and to complete the transaction. By mutual consent between the parties, the plaintiff paid the said sum of Rs.25,000/- on https://hcservices.ecourts.gov.in/hcservices/ 28.7.1986 and the same was acknowledged by the defendants 1 to 3 in the agreement itself. (b) Though the plaintiff was always ready and willing to perform his part of the contract, the defendants 1 to 3 were delaying the performance of the agreement for one reason or another. Since the agreement is one for sale of immovable property, time was not essence of the contract and therefore the plaintiff accommodated the defendants 1 to 3 to get the agreement performed in its entirety. Since the defendants 1 to 3 failed to comply with the terms of the agreement, the plaintiff issued a notice through his counsel on 2.12.1986 demanding specific performance of the agreement. Though the defendants 1 to 3 received the same, they issued a notice rescinding the agreement and contending that the advance of Rs.50,000/- is appropriated towards damages. The false allegations contained in the notice issued by them had been repudiated by a reply given by the plaintiff's counsel and he expressed the readiness and willingness to perform his part of the contract. Though the said notice was despatched by the plaintiff on 6.12.1986, the defendants received the same on 15.12.1986. (c) Further, the defendants 1 to 3 issued a notice dated 6.12.1986 informing the plaintiff that they would be waiting at the Sub Registrar's office on 11.12.1986 to execute the sale deed after receiving the balance of the sale price. Though the plaintiff went to the Sub Registrar's office on 11.12.1986 and waited there till 5.00 p.m. with necessary amount to complete the transaction, the defendants never turned up. Hence the plaintiff issued a telegram dated 12.12.1986 informing the defendants about such facts. On the other hand, the defendants issued the next notice dated 12.12.1986 falsely alleging that they were waiting at the Sub Registrar's office on 11.12.1986 and that the plaintiff did not turn up with necessary amount to get the sale deed executed as per the agreement. (d) However, in view of the defendants' next notice dated 12.12.1986 that again they would be waiting at the Sub Registrar's office on 17.12.1986, the plaintiff went there with necessary amount to take the sale deed from the defendants 1 to 3. But, again, the defendants 1 to 3 did not turn up as per their notice referred supra. In the above circumstances, the plaintiff did not go to the Sub Registrar's office on 5.1.1987, even though the defendants 1 to 3 informed him that they would be waiting there on that date. (e) In this state of affairs, the defendants 1 to 3 gave another notice dated 20.4.1987 enclosing therewith two banker's cheques each for a sum of Rs.25,000/- in favour of the plaintiff on the ground that the plaintiff breached the contract and therefore the same had been rescinded by the defendants 1 to 3. However, the plaintiff issued a reply dated 27.4.1987 repudiating the averments in the https://hcservices.ecourts.gov.in/hcservices/ notice given by the defendants and also returned the cheques issued by them in favour of the plaintiff. Further, in order to show the bona fide, the plaintiff also enclosed with the said notice dated 27.4.1987 two demand drafts, one for Rs.1,00,000/- and another for Rs.53,282.50 towards the balance of the sale price and thereby demanded the defendants 1 to 3 to execute the sale deed and put the plaintiff in the possession of the suit property. (f) But, on the contrary, the defendants 1 to 3 without complying the demand made by the plaintiff addressed another notice dated 14.5.1987 to the plaintiff claiming damages to the tune of Rs.56,440/- and offering to perform their part of the contract if the plaintiff paid the said sum in addition to the amount already paid by him as noted above. On 20.5.1987, the plaintiff issued a reply refuting the allegations made in the defendants' notice and also reaffirmed the readiness and willingness to perform his part of the obligations under the agreement. Finally, the defendants issued a notice dated 2.9.1987 returning the banker's cheques sent by the plaintiff and also claiming to forfeit the earnest money of Rs.50,000/- paid by the plaintiff in pursuance of the contract. Further it was alleged that the sisters of the first defendant also claimed rights over the suit property in the pending suit filed by them for partition. On enquiry, the plaintiff learnt that the defendants 4 and 5 herein, who the sisters of the first defendant filed the suit in O.S.No.176 of 1984 on the file of the Subordinate Court, Erode against their brothers including the first defendant herein for partition of their share and also included the subject matter of the instant suit as an item to be divided by way of an amendment made as late as 20.4.1987. The plaintiff is given to understand that the defendants 1 to 3 herein instigated the defendants 4 and 5 to include this property also as an item in that suit so as to defeat the claim of the plaintiff for specific performance of the agreement. (g) As the plaintiff has always been ready and willing to perform his part of the contract and as the defendants 1 to 3 repudiated the agreement and purported to forfeit the amount of Rs.50,000/- given as advance of the sale price, the suit is laid to enforce the agreement or in the alternative, if for any reason, the court finds that the plaintiff is not entitled to specific performance, for recovery of the amount of Rs.50,000/- paid by the plaintiff and for damages for breach of the agreement. Pending the suit agreement, the defendants 1 to 3 conveyed the suit property under two sale deeds dated 12.6.1987 and 15.6.1987 for Rs.43,665/- and Rs.42,850/- respectively to the 6th defendant, who already knew about the suit agreement in favour of the plaintiff. Since the defendants 1 to 3 colluded with the 6th defendant and created the sale deeds for inadequate consideration in order to defeat the rights of the plaintiff, the sale deeds executed by the defendants 1 to 3 in https://hcservices.ecourts.gov.in/hcservices/ favour of the 6th defendants are not valid in law. Hence, it has become necessary to file the suit for specific performance of the agreement dated 30.5.1986 against the defendants and for possession of the suit property or in the alternative, for recovery of Rs.50,000/- being the advance amount paid by the plaintiff in pursuance of the agreement and for Rs.1,50,000/- as compensation for breach of the agreement by the defendants 1 to 3. 6. The contentions in the written statement filed by the first defendant and adopted by defendants 2 and 3 are briefly as follows:- (a) The contract of sale dated 30.5.1986 is not enforceable as the plaintiff committed breach of the same. The defendants suffered a loss of Rs.56,440/- on account of the plaintiff's conduct in not completing the sale within the stipulated time and therefore the defendants have adjusted the said sum of Rs.50,000/- and the plaintiff has to pay the balance of Rs.6,440/-. After such adjustment, the defendants undertook to pay court-fee on such sum as determined by the court. (b) Though the first defendant claims the suit property as his absolute property, it becomes a subject matter of litigation in O.S.No.176 of 1984 on the file of the Subordinate Court, Erode. (c) Though the plaintiff adumbrated the terms of the agreement in the plaint, he has suppressed to mention that time is the essence of the contract and therefore the amount paid by him is liable to be forfeited if he fails to complete the transaction within the stipulated period. It is incorrect to state that the defendants 1 to 3 received the payment of Rs.25,000/- on 28.7.1986 after condoning the delay, but, on the other hand, since the plaintiff pleaded his inability in securing the amount, the defendants out of magnanimity accepted the same, even though the amount was not paid within the time stipulated in the agreement. (d) Similarly, the allegation that the plaintiff was always ready and willing to perform his obligations is false. The defendants 1 to 3 were losing interest which they would have earned by discharging their liabilities within time if the plaintiff performed his part of the obligations within the stipulated time. As a matter of fact, the defendants were repeatedly requesting the plaintiff to pay the balance of sale price and to perform his part of the agreement, but the plaintiff was delaying the same. Hence the defendants 1 to 3 were forced to issue a notice on 3.12.1986 and in order to create a defence, the plaintiff caused a notice to be issued on 2.12.1986. Even before receiving the said notice dated 2.12.1986, the defendants issued a notice on 3.12.1986 putting an end to the sale agreement and forfeiting the advance. https://hcservices.ecourts.gov.in/hcservices/ (e) It was not the intention of the defendants 1 to 3 to keep alive the agreement beyond the stipulated period. Even when they offered to receive the loss sustained by him amounting Rs.56,440/-, besides the sale consideration stipulated in the agreement, the plaintiff was not ready and willing to pay the same and complete the transaction. (f) The plaintiff failed to comply with the requests made by the defendants to complete the transaction on 12.12.1986 and also on 17.12.1986. Similarly, in spite of a fresh offer, the plaintiff did not come to the Sub Registrar's office on 5.1.1987 to perform his part of the obligation as he had no money at that time. (g) The defendants 1 to 3 informed the plaintiff by a notice dated 20.4.1987 refunding the said sum of Rs.50,000/- that they are no longer under any obligation to the plaintiff. On coming to know that the defendants 1 to 3 are likely to sell the suit property, the plaintiff issued a reply on 27.4.1987 enclosing the demand drafts for the balance sale price. (h) On 14.5.1987, the defendants 1 to 3 returned the demand drafts issued by the plaintiff and informed him that they have forfeited the sum of Rs.50,000/- as they have incurred loss of Rs.56,440/- and also informed that the defendants 4 and 5 are laying claim over the suit property in O.S.No.176 of 1984. Therefore the allegation that the defendants 1 to 3 induced their sisters to lay a false claim is denied as false. Hence, the suit is liable to be dismissed with costs and a decree against the plaintiff has to be passed directing him to pay Rs.6,440/- being the balance towards the loss sustained by the defendants 1 to 3 and to pay necessary court- fees on the amount so ascertained by the Court. 7. The averments in the written statement filed by the appellant in A.S.No.544 of 1992, who is the 6th defendant in the suit, are briefly as follows:- (a) It is true that the suit property belonged to the defendants 1 to 3. This defendant is not aware of the agreement dated 30.5.1986 between the defendants 1 to 3 and the plaintiff and therefore the allegations made in the plaint against this defendant are not true. This defendant is possessed of fertile lands and also had sufficient funds to set up power loom factory near Erode town. Therefore when he learnt that the defendants 1 to 3 are ready to sell their lands, he entered into the sale agreement dated 10.4.1987 with them agreeing to purchase the suit property at the rate of Rs.40/- per sq.ft. and also paid a sum of Rs.55,000/- as advance towards the sale price on the same date to defendants 1 to 3. The period of six months was stipulated for completing the sale. https://hcservices.ecourts.gov.in/hcservices/ (b) There were several items of liabilities owed by the defendants 1 to 3 to third parties and this defendant discharged the same and obtained receipts from the creditors. Thereafter he obtained the sale deeds from the defendants 1 to 3 on 12.6.1987 and 15.6.1987 reciting as consideration the balance amount payable after discharge of the debts as aforesaid and also deducting Rs.55,000/- paid as advance. This defendant is therefore a bona fide purchaser for value and without notice of any prior agreement in favour of the plaintiff. (c) The allegations in the plaint that this defendant already knew about the suit agreement in favour of the plaintiff and that he has colluded with the defendants 1 to 3 and created the sale deeds are denied as false. The plaintiff is not entitled to any relief against this defendant. There is no cause of action against him and the one alleged is not true. Hence the suit may be dismissed with costs. 8. On the above pleadings, the trial court framed the issues and recast the same as follows:- (1) Whether the plaintiff was ready and willing to perform his part of the contract as per the agreement of sale dated 30.5.1986? (2) Whether time was the essence of the contract between the parties? (3) Whether the plaintiff committed breach of contract as alleged? (4) Whether the defendants 1 to 3 are entitled to forfeit Rs.50,000/-, being the advance amount paid by the plaintiff at the time of the agreement? (5) Whether the 6th defendant is a bona fide purchaser of the suit property for value and without notice of the prior agreement between the plaintiff and the defendants 1 to 3? If so, whether his rights are entitled to be protected under law? (6) Whether the plaintiff is entitled to the relief of specific performance as prayed for? (7) Whether the plaintiff is entitled to the alternative relief of recovery of the advance amount of Rs.50,000/- and damages to the tune of Rs.1,50,000/- from the defendants 1 to 3? (8) To what relief the plaintiff is entitled? 9. In order to prove the case of the first respondent/plaintiff, he has examined himself as P.W.1 and two other witnesses as P.Ws.2 and 3 and marked the documents under Exs.A-1 to A-33. Similarly, the appellants in both the appeals/defendants 1 to 3 and 6 examined 9 https://hcservices.ecourts.gov.in/hcservices/ witnesses and marked the documents under Exs.B-1 to B-22. Besides the above said documents, Ex.C-1 was marked by the court. 10. Having considered the evidence both oral and documentary adduced on either side and upon hearing the arguments advanced by the learned counsel appearing for both the parties, learned Subordinate Judge held on issue Nos.1 and 2 that the plaintiff was ready and willing to perform his part of the suit agreement dated 30.5.1986 and that time was not the essence of the contract between the parties. Similarly, he rendered a finding on issue Nos.3 and 4 that the plaintiff did not commit any breach of the contract and that therefore the defendants 1 to 3 are not entitled to forfeit the advance amount of Rs.50,000/- paid by the plaintiff. However he held on issue No.5 that the 6th defendant is not a bona fide purchaser of the suit property for valuable consideration and that he had knowledge of the prior agreement between the plaintiff and the defendants 1 to 3 in respect of the suit property. Therefore he held that the 6th defendant is not entitled to any relief and that the plaintiff is entitled to the relief of specific performance as prayed for. In view of his finding on issue Nos.5 and 6, the alternative relief prayed for by the first respondent/plaintiff was not granted by the trial judge. Hence the appellants have come forwarded with these appeals challenging the decree and judgment rendered by the trial court against them. 11. Heard both sides. The parties in both appeals may be referred to hereunder as they were arrayed before the trial court. 12. Mr.A.K.Kumarasamy, learned counsel for the appellants/defendants 1 to 3 made the following submissions:- (a) The trial court failed to exercise the principle of justice, equity and good conscience and also erred in holding that the first respondent/plaintiff is entitled to the relief of specific performance which is a discretionary relief. Similarly, it was wrongly held by the court below that the time was not made the essence of contract under Ex.A-1 without looking into the recitals in the document and the intention of the parties at the time of the execution of the agreement of sale. The subsequent exchange of notices between the parties would reveal that the time was made the essence of the contract. (b) Further the plaintiff was not always ready and willing to perform his part of the contract, though time was extended by the defendants 1 to 3. In spite of the notice Ex.A-11 given by the defendants 1 to 3 to the plaintiff, he did not turn up before the Sub Registrar on 5.1.1987 with the balance sale price to perform his obligations nor sent any reply for the same. Though the defendants 1 to 3 offered to execute the sale deed as early as in January, 1987, https://hcservices.ecourts.gov.in/hcservices/ the first respondent sent the demand drafts towards the balance of sale consideration only in the last weak of April, 1987 and therefore he was not always ready and willing to perform his part of the contract. (c) Lastly, the finding that the appellant in A.S.No.544 of 1992/6th defendant is not a bona fide purchaser for value and without notice of the earlier agreement of sale is against the evidence and therefore the trial court ought to have rejected the evidence of P.W.1, the plaintiff as unreliable on this aspect of the matter. 13. Mr.C.Raghunatha Reddy, learned counsel for the appellant in A.S.No.544 of 1992/6th defendant submitted the following in his argument:- (a) The trial court ought to have held that time was intended to be the essence of the contract and that since the stipulation as to such period of contract was breached, the agreement ceased to be operative with effect from 5.1.1987. The plaintiff had no capacity to raise funds to perform his part of the contract. The trial court failed to decide the issues on the basis of the evidence that the plaintiff abandoned the contract for more than four months from 23.12.1986, the date of notice Ex.A-11 until 27.4.1987. Hence the trial court failed to consider that the 6th defendant had every right to enter into the subsequent agreement of sale dated 10.4.1987 in respect of the suit property with the defendants 1 to 3. (b) The trial court's finding that the defendants 1 to 3 and 6 are closely related to each other is erroneous. The 6th defendant had in fact discharged the loans on behalf of the defendants 1 to 3 while entering into the agreement of sale dated 30.5.1986 and therefore he is a bona fide purchaser for value and without notice of any earlier agreement. The finding of the trial court that this defendant had prior knowledge of the earlier agreement is not supported by any evidence. Similarly, the sale deeds in favour of him are valid documents executed for valuable consideration. The claim of the plaintiff as against this defendant was barred by limitation as the time prescribed by law for enforcement of the agreement of sale expired when this defendant was sought to be impleaded as party to the suit. 14. In the above circumstances, the following points arise for consideration:- (1) Whether the time was stipulated as essence of the contract as per the terms of the agreement dated 30.5.1986 entered into between the first respondent/plaintiff and the appellants in A.S.No.2 of 1992/defendants 1 to 3? https://hcservices.ecourts.gov.in/hcservices/ (2) Whether the first respondent/plaintiff was ready and willing to perform his part of the contract? (3) Whether the first respondent/plaintiff had committed breach of the contract as alleged by the appellants? (4) Whether the appellant in A.S.No.544 of 1992/6the defendant is a bona fide purchaser of the suit property from the appellants in A.S.No.2 of 1992/defendants 1 to 3 for value and without notice of the earlier agreement of sale dated 30.5.1986? (5) To what relief the appellants are entitled? 15. Points (1) to (5): Since these appeals relate to the common questions formulated above and inasmuch as the parties to both the proceedings are same, it may be useful to refer them as they were arrayed before the trial court while discussing the above points for consideration. Similarly, while considering the above points, it may be necessary to refer to the same set of evidence and therefore this Court finds it convenient to consider all the points at the same time. 16. The first and foremost question for consideration