: 1: nms.2618.2010 vss IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION NOTICE OF MOTION NO.2618 OF 2010 IN SUIT NO.2538 OF 2010 Heks Infrastructure & Developers ..Plaintiffs Versus Shirinbai Hasanali Kagalwala & Ors. ..Defendants Mr.P.K. Samdhani, Sr.Advocate with Ms.Kavita Shah i/b A.G. Shah for Plaintiffs Mr.Shabbir T. Kapadia with Sayed Mohd. Hyder for Defendants CORAM : DR. D.Y. CHANDRACHUD,J. MARCH 15, 2011 P.C : 1. This Motion for interim relief has been taken out in a Suit for specific performance of an agreement to sell certain immovable property. The property in question admeasures 631.64 sq.yards and bears C.S. No.1441. A building has been constructed on the property which is stated to be tenanted. The property is situated at Nagpada. The case of the Plaintiff is that in February, 2010, negotiations took place with the Defendants who are the lessees in respect of the property. In the course of negotiations, an amount of Rs.6 lakhs was paid to the Defendants in cash. Towards the end of March 2010, the negotiations fructified into an agreement under : 2: nms.2618.2010 which the Defendants agreed to sell the suit property to the plaintiffs at and for a total consideration of Rs.1,83,52,000/-, subject to all the tenants in the building. A payment of Rs.50 lakhs was effected towards earnest money inclusive of the amount of Rs.6 lakhs which was paid earlier. A total amount of Rs.26 lakhs was paid in cash whereas an amount of Rs.24 lakhs was paid by three cheques all dated 15.4.2010. The Defendants executed a receipt dated 6.4.2010 recording having received Rs.26 lakhs in cash and Rs.24 lakhs by cheque against a total consideration of Rs.1,83,52,000/-. The receipt records that the balance payment of Rs.1,33,52,000/- would be effected by the plaintiffs before 30.6.2010 for the sale of the property. The Defendants agreed to execute a deed of assignment in favour of the plaintiffs. 2. Following the agreement, a power of attorney was signed and executed by the Defendants on 15.4.2010. On 9.6.2010, the Plaintiffs issued a notice in the newspapers inviting objections if any to the proposed transaction. Their case is that after the period of 14 days stipulated in the notice expired, they contacted the Defendants for completion of the sale and offered to pay the balance. A draft deed of assignment was prepared and was handed over to the defendants. The draft of deed of assignment refers to the balance : 3: nms.2618.2010 consideration as being Rs.1 crore since according to the plaintiffs the defendants desired that of the remaining balance, an amount of Rs. 33.52 lakhs be paid outside the deed of assignment. The Plaintiffs claimed to have contacted the defendants on 12.7.2010 for completing the transaction and to pay the balance of the consideration due. On 30.7.2010, an advocate's notice was addressed to the defendants to complete the sale. The notice recorded that on 28.6.2010 and 12.7.2010 the defendants had been approached initially with the draft of deed of assignment for execution and also with a request to complete the transaction against the payment of the balance. The defendants replied to the notice by their advocate's letter dated 6.8.2010 and denied that the plaintiffs had approached them. The defendants set up the case that since the plaintiffs had failed to complete transaction by 30.6.2010 and time being of the essence of the contract, they had no option but to forfeit the earnest money of Rs.50 lakhs. The plaintiffs reiterated their case in a letter dated 12.8.2010. Accordingly, a Suit for specific performance was instituted in this Court on 17.9.2010 in which the Motion for interim relief has been taken out. 3. In the affidavit in reply that has been filed by the defendants the essential nature of the transaction is not in dispute. In this : 4: nms.2618.2010 regard, it would be necessary to set out an extract from paragraphs 6, 7, 8 and 9 of the affidavit in reply to the Motion which reads as follows: “6. That sometime around February, 2010 negotiations for Sale of the Defendants Property situated at Survey No.3692 (part) and City Survey No.1441 at 16/66, 3rd Peerkhan Street, 42/54, 2nd peerkhan Street, Nagpada, Byculla Division, Mumbai-400 003 started between the Plaintiffs and the Defendants. 7. By the end of March, 2010 negotiations between the Plaintiffs and the Defendants came to an end, as the parties mutually decided upon the consideration of Rs.1,83,52,000/- (One Crore Eighty Three Lacs and Fifty Two Thousand) and other terms and conditions of the transaction. 8. The Plaintiffs paid to the Defendants a sum of Rs. 50,00,000/- (Rupees Fifty Lacs only) as earnest money in the manner laid out in clause 4(b) of the Plaint. 9. The Plaintiffs agreed to pay the balance consideration of Rs.1,33,52,000/- (One Crore Thirty Three Lacs and Fifty Two Thousand) on or before 30th June, 2010, on payment of which a Deed of Assignment was to be executed and time was strictly an essence of the understanding.” 4. On behalf of the Plaintiffs, it has been submitted that (i) the existence of the agreement and the material terms and conditions are not matters in dispute; (ii) in pursuance of the agreement the plaintiffs had forwarded a draft deed of the assignment to the defendants, paid an amount of Rs.50 lakhs towards earnest money and according to them offered to pay the balance against the : 5: nms.2618.2010 completion of the transaction on 28.6.2010; (iii) though the receipt that was executed by the defendants stated that payment of the balance of Rs.1.33 crores was to be made by 30.6.2010, time was never intended to be the essence of the contract and was not made the essence of contract. In an agreement relating to the sale of immovable property, time does not become the essence merely because parties have stipulated a period within which certain acts have to be completed; (iv) the conduct of the defendants would show that until the plaintiffs addressed a letter dated 30.7.2010, there was no protest on the part of the defendants; (v) the contention of the defendants in the Rejoinder is that the cancellation took place on 6.8.2010 which was after the receipt of the plaintiffs' letter dated 30.7.2011. At that stage, the defendants purported to return an amount of Rs.24 lakhs as against the earnest money of Rs.50 lakhs which was accepted, but a refund of which the plaintiffs have not accepted. The power of attorney was sought to be cancelled only on 17.9.2010. 5. On the other hand, it has been urged on behalf of the defendants that (i) a power of attorney was executed by the defendants in favour of the plaintiffs on 15.4.2010 without even waiting for the encashment of the cheques towards the payment of : 6: nms.2618.2010 earnest money; the plaintiffs took no steps for the performance of their obligations under the contract and it was only on 9.6.2010 that an advocate's notice for investigation of title was issued. The letter of the plaintiffs dated 30.7.2010 was not accompanied by any offer of payment. Hence, between April and June, there was no action forthcoming on the part of the plaintiffs and hence, the defendants were entitled to rescind the contract and forfeit the earnest money. Time, it was submitted should be regarded as being the essence of the contract. 6. The facts that have emerged from the record would prima facie indicate that the plaintiffs and the defendants agreed to the sale of the immovable property at and for a total consideration of Rs. 1,83,52,000/-. The plaintiffs paid an amount of Rs.50 lakhs to the defendants as earnest money. While executing the receipt on 6.4.2010, the defendants recorded that the balance of Rs.1.33 crores should be paid by the purchaser before 30.6.2010. 7. The defendants agreed to execute a deed of assignment in favour of the plaintiffs as purchasers. In pursuance of the agreement the defendants executed a power of attorney on 15.4.2010. On 9.6.2010, an advocate's notice was published on behalf of the : 7: nms.2618.2010 plaintiffs for the purpose of investigation of title. The fact that a draft deed of assignment was forwarded by the plaintiffs to the defendants is not a matter in dispute. The averment in that regard which is contained in paragraph 7 of the plaint is not specifically denied in paragraph 23 of the reply that has been filed by the defendants. 8. The law on the point is well settled. Normally in the case of the contract for the sale of immovable property, time is not construed to be of the essence of the agreement. This however, does not preclude parties to the transaction from specifically making time of the essence. Section 55 of the Contract Act stipulates that when a party to a contract promises to do a thing at or before a specified time and fails to do so, the contract or so much of it as has not been performed becomes voidable at the option of the promisee “if the intention of the parties was that time should be of the essence of the contract”. This provision was interpreted by the Supreme Court in Gomathinayagram Pillai & Ors. vs. Palaniswami Nadar, AIR 1967 SC 868. The Supreme Court held that it is not merely because of a specification of time on or before which a thing to be done under the Contract is promised to be done and in default in compliance therewith, that the other party may avoid the contract. Such an option arises only if it is intended by the parties that time is of the : 8: nms.2618.2010 essence of the contract. An intention to make time of the essence if expressed in writing must be in language which is unmistakable. Such an intention may also be inferred from the nature of the property agreed to be sold, the conduct of the parties and surrounding circumstances on or before the Contract. If a contract relates to immovable property it would normally be presumed that time is not of the essence of the contract. A similar reiteration of principle was made in the judgment of the Supreme Court in Arosan Enterprises Ltd. Vs. Union of India & Anr., AIR 1999 SC 3804. 9. In the present case, the mere provision that the balance payment should be effected by 30.6.2010 cannot lead to the inference that time was intended to be or that it was made the essence of the contract. As a matter of fact, even after 30.6.2010, it was only when the plaintiffs addressed a letter on 30.7.2010 that the defendants by their reply dated 6.8.2010 purported to state that they were forfeiting the earnest money deposit. Moreover, in the affidavit in rejoinder that has been filed in these proceedings a letter of the defendants dated 21.9.2010 has been annexed, which states that the Memorandum of Understanding, deed of assignment and power of attorney were cancelled on 6.8.2010. This conduct is prima facie not consistent with the conduct of a party which proceeds on the footing : 9: nms.2618.2010 that time is of the essence of the contract. In these circumstances, there is no reason or justification why the normal presumption of law which militates against time being of the essence of a contract for the sale of immovable property should not apply in the facts. The defendants have failed to demonstrate that time was indeed intended to be or was made the essence of the contract. The readiness and willingness of the plaintiffs to perform their part of the agreement is prima facie evidenced by the payment of earnest money to the extent of Rs.50 lakhs; the transmission of the draft deed of assignment; the issuance of an advocate's notice for investigation of title and letters of the advocate requiring the defendants to perform their objections under the Contract. 10. For the aforesaid reasons, interim relief would have to be granted in the Motion in terms of prayer clause (b) restraining the defendants from disposing of, alienating, selling, transferring, encumbering or creating any third party rights or parting with the possession of the suit property more particularly described in exhibit A to the plaint. There shall be an order of injunction, pending the disposal of the suit, in these terms. : 10: nms.2618.2010 11. The Motion is accordingly disposed of. (Dr.D.Y. Chandrachud, J.)