THE HON’BLE SRI JUSTICE B.SESHASAYANA REDDY AND THE HON’BLE SRI JUSTICE P.DURGA PRASAD C.C.C.A.No.303 of 2004 & Tr.C.C.C.A.No.254 of 2006 (Date:01-02-2011) Between: P.Vijaya Lakshmi Choudary W/o Maj. P.T.Choudary and others …Appellants A n d B.Balaiah S/o late B.Venkaiah and others …Respondents THE HON’BLE SRI JUSTICE B.SESHASAYANA REDDY AND THE HON’BLE SRI JUSTICE P.DURGA PRASAD C.C.C.A.No.303 of 2004 & Tr.C.C.C.A.No.254 of 2006 COMMON JUDGMENT: (Per Hon’ble Sri Justice B.Seshasayana Reddy) These two appeals arose out of common judgment and decree dated 6.4.2004 passed in O.S.No.598 of 1994 and O.S.No.664 of 1997 on the file of I Additional Senior Civil Judge, Hyderabad, whereby and whereunder, the learned Senior Civil Judge dismissed the suit for specific performance as well as suit for injunction. 2. The specific performance suit being O.S.No.598 of 1994 was filed by Smt. P.Vijaya Lakshmi Choudary and three others and whereas the injunction suit being O.S.No.664 of 1997 was filed by Maj. P.T.Choudary. The plaintiffs in the respective suits are the appellants in these two appeals. The specific performance suit was filed basing on the Agency agreement dated 4.5.1991 and two letters dated 19.4.1993 and 28.4.1994 and whereas the injunction suit was filed three years after filing of the specific performance suit by the holder of agency agreement, dated 4.5.1991. 3. The facts leading to filing of these two appeals are as under:- (a) B.Balaiah and his two sons, namely, B.Ramulu and B.Narayana constituted a Hindu Joint Family. B.Shanti Kumar, B.Sanjay Kumar and K.Rashmi are the children of B.Ramulu. B.Balaiah purchased Ac.2-10 gts. under a registered sale deed dated 3.9.1964 as Kartha of the joint family. Out of Ac.2-10 gts., he sold 2374 square yards to Smt. Prameela Menon under registered sale deed dated 18.9.1968. The joint family retained 8516 square yards. The said extent came to be apportioned among the brothers of the joint family by way of family arrangement. The properties fell to the share of each of the members of the family under family arrangement is as follows:- Name of the party Area in Sq. Yards Plot Area/Internal approach 1. B.Balaiah 1123 + 592 2. B.Ramulu (Difference area) 495 + 600 3. B.Narayana 1123 + 592 4. B.Shanti Kumar 1133 + 197 5. B.Sanjay Kumar 1133 + 197 6. K.Rashmi 1133 + 198 (b) B.Balaiah and his two sons, namely B.Ramulu and B.Narayana and his grand children, namely, B.Shanti Kumar, B.Sanjay Kumar and K.Rashmi entered into an Agency Agreement with Maj. P.T.Choudary, who is the 7th defendant in the specific performance suit and plaintiffs in the injunction suit. Under the agency agreement, Maj. P.T.Choudary assured floor price of Rs.38 lakhs to the land holders-principals. He undertook to secure the purchasers within 180 days. The agency agreement contemplates extension of 90 days on condition of the agent paying 12% interest on the assured sum. The agent is entitled to appropriate whatever amount secured over and above the floor price of Rs.38 lakhs. The agent was permitted to undertake development of the land for the purpose of making the land marketable. Possession was also delivered to the agent for carrying on his activity as an agent and obligations under the agency agreement. Few clauses in the agency agreement need to be noted and they are:- “2. That the party of the second part herein hereby agrees to act as an Agent for all the purposes mentioned in this Agreement.” “3. That the parties of the first part herein hereby agree to sell their individual shares in the land mentioned in the schedule II hereunder either in entirety or in part/s or in terms of undivided share/s to the nominee/s of the party of the second part herein subject to payment of the agreed consideration.” “8. That the party of the second party herein agrees to arrange sale consideration for the schedule land to be paid to the parties of the first part herein at an amount not less than the floor price of Rs.38,00,000/-(Rupees Thirty Eight Lakhs only) for the total schedule land jointly to the parties of the first part”. “9. That the party of the second part herein hereby pays a sum of Rs.2,00,000/- (Rupees Two Lakhs only) to Mr.B.Ramulu, No.1 of the parties of the first part on behalf of himself and all the other parties of the first part towards deposit vide Chq. No.0162310 dated 4.5.91 drawn on the Vysya Bank the receipt of which sum is hereby acknowledged by the parties of the first part herein and a separate receipt has also been duly passed”. “11. That the party of the first part herein hereby deliver possession of the schedule land to the party of the second part herein for carrying on his activity as an agent and the obligations under this Agreement.” “12. That the party of the second part herein hereby undertakes to ensure the completion of the sale transactions within a period of 180 days from this date and arrange for the payments of the said consideration within the said period either in instalments or in lumpsum to each of the parties of the first part or to Mr.B.Ramulu, No.1 of them and all or any payment/s made to the said Mr.B.Ramulu shall be deemed to have been paid to each of the parties of the first part and the party of the second part to the extent of such payment shall stand discharged of this obligation under this Agreement”. “13. That in the event of any delay on the part of the second part herein in making the payment due to any unforeseen or unavoidable circumstances the said period of 180 days shall be extended by a further period of 90 days subject to the condition that the party of the second party herein shall be bound to pay interest at 12% per annum on the unpaid agreed floor price for the period of delay till the date of payment of such unpaid balance amount.” “14. That the parties of the first part herein specifically agree that any excess realised on the sale of the land mentioned in the schedules over and above the floor price shall be to the credit of the party of the second party herein and similarly any deficiency thereof shall be to the debit of the party of the second part herein, and it is further clarified that the excess over floor price if any derived out of the sale transfer of the schedule land shall be entirely to the party of the second part and shall be deemed to include the element of commission due to the party of the second part”. “17. That the appointment of the party of the second part herein as an Agent is an exclusive appointment and the parties of the first part herein hereby undertake not to terminate this Agreement and also not to enter into similar agreement/s with any other person/s and similarly, the parties of the first herein hereby undertake not to sell or transfer their interest in the land mentioned in the schedules hereunder to any other person other than the nominee/s of the party of the second part and not to create any charge or encumbrance of any nature, by any method on the schedule land during the period or extended period of this Agreement”. “19. That the parties of the first part shall execute such power of Attorney/s in favour of the Agent, i.e., the parties of the second part, as may be necessary for the purposes of this Agreement and for due execution of the intents of this Agreement by the parties.” 4. Smt. P.Vijaya Lakshmi Choudary, P.Virendernath Choudary, P.Lalitchandra Choudary and Kasula Constructions Pvt. Ltd. filed O.S.No.598 of 1994 for specific performance of the agreement of sale in respect of the suit schedule properties. The suit schedule comprises two items. The 1st item admeasures 2856 square yards and the 2nd item admeasures 4536 square yards. Plaintiffs 1 to 3 in the specific performance suit claim to have purchased Item No.1 whereas the 4th plaintiff claims to have purchased Item No.2 for Rs.12, 00,000/- and Rs.22,00,000/- respectively and paid an advance of Rs.4,00,000/- and Rs.6,00,000/- respectively to Maj. P.T.Choudary, who is the 7th defendant in the specific performance suit and Plaintiff in the injunction suit. According to them, Maj. P.T.Choudary as an agent of the land owners, pursuant to the agency agreement, agreed to sell the suit schedule property under letter dated 19.4.1993, which has been exhibited as Ex.A.3 and thereupon, Maj P.T.Choudary under letter dated 28.4.994, which has been exhibited as Ex.A-2, demanded the land owners namely B.Balaiah, B.Ramulu and B.Narayana, B.Shanti Kumar, B.Sanjay Kumar and K.Rashmi to execute registered sale deed in favour of the agreement holders. Since the land owners did not respond to Ex.A-2 letter dated 28.4.1994, they filed suit against land owners/defendants 1 to 6 and also their agent/defendant No.7 for specific performance. 5. In the specific performance suit, Defendant No.2-B.Ramulu filed written statement on 26.2.1996. Defendant No.3-B.Narayana and D-6- K.Rashmi filed memo adopting the written statement of D-2- B.Ramulu. Defendants 2 and 6 filed additional written statement on 17.2.2004. Defendant No.4-B.Shanti Kumar filed separate written statement. Defendant No.5 filed memo adopting the written statement of defendant No.4 on 25.7.1996. The 7th defendant, i.e., Maj. P.T.Choudary filed separate written statement supporting the claim of the plaintiffs. 6. The sum and substance of the written statement of the 2nd defendant is that the agency agreement stood cancelled by the efflux of time. The two letters dated 19.4.1993 and 28.4.1994 were concocted by the plaintiffs and defendant No.7 and that he did not receive the letter dated 28.4.1994. The plaintiffs 1 to 3 are no other than the wife and sons of defendant No.7 and all of them conspired together and pressed into service the letters dated 19.4.1993 and 28.4.1994. The two sale deeds executed in favour of third parties for a total consideration of Rs.2,81,250/- are independent of the agency agreement dated 4.5.1991. The 7th defendant ceased to be in possession of the land when agency agreement stood terminated as he failed to comply with the terms and conditions mentioned therein. The defendants are in exclusive physical possession of the suit land and the 7th defendant ceased to have any possession over the land even as an agent on the expiry of the period mentioned in the agency agreement. The possession of the agent cannot be and will not be independent of that of the principals. At no point of time, the plaintiffs demanded the defendants 1 to 6 for execution of the sale deeds. The role of defendant No.7 under the agency agreement was to bring proper and suitable purchasers for negotiations with defendants 1 to 6. The allegation that defendant No.7 undertook at his cost development of the land namely removing of boulder’s, levelling of land, sinking of bore wells etc., is false, baseless and concocted for the purpose of the suit. 7. The written statement of the 4th defendant, in brief, is:- The plaintiffs are family members of 7th defendant and they in collusion with other defendants have created documents to knock away the property at a throw away price. The defendants 4 and 5 have not received any amount from the plaintiffs much less an amount of Rs.2,00,000/- by way of cheque to be adjusted over final phase of transaction. The defendants 4 and 5 never executed any sale deeds much less three separate sale deeds dated 28.10.192 in favour of third parties. 8. Basing on the above pleadings, the trial Court framed the following issues:- 1) Whether the plaintiff is liable for specific performance of agreement as prayed for? 2) Whether time is essence of contract? 3) Whether there is privity of contract between the plaintiffs and defendant? 4) Whether the suit claim is barred by limitation? 5) Whether the suit is properly valued and DCF paid is just and sufficient? 6) To what relief? The following additional issues were also framed:- (1) Whether the developmental (Agency) agreement dt.4.5.1991 between the defendants 1 to 6 and 7th defendant is true, valid and binding on the plaintiffs? (2) Whether the defendant No.7 is in possession and enjoyment of the schedule property, if so, plaintiffs are entitled for recovery of schedule property from defendant No.7? 9. Pending disposal of the suit, defendant No.1 Balaiah died in 1994. The plaintiffs filed I.A seeking for temporary injunction. The said application ended in dismissal on 4.2.1997. They unsuccessfully carried the matter in appeal being C.M.A.No.427 of 1997. Thereafter, defendant No.7 filed O.S.No.664 of 1997 against B.Ramulu, B.Narayana, B.Sanjay Kumar, B.Shanti Kumar and K.Rashmi seeking for perpetual injunction restraining them from interfering with the peaceful possession over the suit schedule property admeasuring 7391 square yards comprised in Sy.No.129/56 situate at Road No.14, Banjara Hills, Hyderabad. It is stated in the plaint that defendants tried to dispossess him from the suit land on 29.9.1997 with the help of anti social elements. B.Ramlu and K.Rashmi, who have been figured as defendants 1 and 5 in the said suit, filed written statement. B.Shanti Kumar and B.Sanjay Kumar filed memo adopting the written statement of B.Ramulu and K.Rashmi. In the written statement, they denied of receiving notice dated 29.3.1997 allegedly issued by the plaintiffs. They denied of plaintiffs spending any amount for the development of the land. They also pleaded that the Agency Agreement dt.4.5.1991 is void and unenforceable in law and it stood automatically terminated by efflux of time. Time is the essence of the agency agreement. Basing on the above pleadings, the trial Court framed the following issues:- 1) Whether the plaintiff is entitled for the relief of perpetual injunction as prayed for? 2) Whether the defendants are compelled and forced to execute the agreement dt.4.5.1991 in the circumstances as stated in written statement? 3) Whether the time is essence of contract and plaintiff violated and committed the breach of contract? 4) Whether the Agreement dt.4.5.1991 is void and unenforceable? 5) Whether the suit claim is barred by Limitation? 6) Whether the Court Fee paid is insufficient? 7) To what relief? 10. The trial Court clubbed O.S.No.664 of 1997 and O.S.No.598 of 1994 and recorded evidence in O.S.No.598 of 1994 (Specific performance suit). On behalf of the plaintiffs, the 2nd plaintiff was examined as Pw.1 and ten documents were marked as Exs.A-1 to A- 10. On behalf of the 7th defendant, he got himself examined as Dw.1 and marked four documents Exs.B-1 to B-4. On behalf of the contesting defendants, the 2nd defendant-B.Ramulu was examined as Dw-2. 11. The trial Court, on considering the evidence brought on record and on hearing the counsel appearing for the parties, came to the conclusion that Ex.B-1 agency agreement is not coupled with interest and that time is the essence of the agreement and as the 7th defendant failed to arrange sales within the stipulated time as well as the extended time, the Agency Agreement stood cancelled by efflux of time. The trial Court also observed that the conduct of the plaintiff in O.S.No.664 of 1997 dis-entitled him to seek the assistance of the Court by way of perpetual injunction. With these observations, the trial Court dismissed the specific performance suit, i.e., O.S.No.598 of 1994 and the injunction suit, i.e., O.S.No.664 of 1997, by the common judgment dated 6.4.2006. 12. Assailing the judgment and decree passed in O.S.No.598 of 1994, the plaintiffs filed C.C.C.A.No.303 of 2004 whereas assailing the judgment and decree passed in O.S.No.664 of 1997, the plaintiff filed A.S.No.611 of 2005 on the file of the II Additional Chief Judge, City Civil Court, Hyderabad and the said appeal came to be withdrawn and transferred to the file of this court as per orders in Tr.C.M.P.No.120 of 2006 dated 19.6.2006 and re-numbered as Tr.C.C.C.A.No.254 of 2006. 13. Since both the appeals are directed against the common judgment, they were heard together and are being disposed of by this common judgment. 14. Heard Sri Vedula Venkata Ramana, learned Senior Counsel appearing for the appellants in C.C.C.A.No.303 of 2004 and Tr.C.C.C.A.No.254 of 2006 and Sri S.Ramachandra Rao, learned Senior Counsel appearing for the respondents 2 to 6 in C.C.C.A.No.303 of 2004 and respondents 1 to 5 in Tr.C.C.C.A.No.254 of 2006. 15. Sri Vedula Venkata Ramana, learned senior counsel contended that Ex.B-1 agency agreement is not in way inferior to the contract of sale and the recitals therein contained negative covenant that the owners shall not have an option to sell the land to any party except through the agent and that the owners shall not refuse the nominees of the agent and the said clauses would clearly show that Ex.B.1, in effect and in substance is similar to an agreement of sale with a power to the agreement holder to enter into further sale transactions with third parties like the appellants. The Court below has failed to appreciate the evidence brought on record and the clauses in Ex.B.1 agency agreement in right perspective and thereby erred in recording a finding that time is the essence of the contract. Mere recital that mutual obligation shall be performed within the stipulated time does not by itself make it pre-emptory that time shall be essence of the contract. Learned senior counsel further contended that Ex.B-4 letter dated 3.5.1997 written by one of the owners is sufficient to infer that at no point of time the principals terminated Ex.B.1 agency agreement and instead, it supported the plea of the appellants that time was not the essence of the contract and the subsequent sale deeds, certified copies of which have been exhibited as Exs.A.3 to A.7 and original sale deeds, which have been exhibited as Exs.A.9 and A.10, were pursuant to Ex.B.1-agency agreement. He would also contend that there is specific clause of delivery of possession in Ex.B.1 agency agreement which shows that agent was put in exclusive possession of the suit land in which case, suit filed by the agent i.e., O.S.No.664 of 1997 deserves to be decreed granting injunction against the principals-owners. The contention of the learned senior counsel is that the owners never terminated Ex.B-1 agency agreement either by issuing notice or by their subsequent conduct in executing registered sale deeds. The learned senior counsel laid much emphasis on Ex.A.2 notice dated 28.4.1994 sent to the owners and Ex.A.3 dated 19.4.1993 sent to the plaintiffs in specific performance suit. According to the learned senior counsel, Ex.B.1 agency agreement is coupled with interest and therefore, under Section 202 of the Indian Contract Act, the agency cannot, in the absence of an express contract, be terminated to the prejudice of such interest of the agent. In support of his submissions, reliance has been placed on the decisions of the Supreme Court in Union Territory, Chandigarh v. Managing Society, Goswami, GDSDC[1], T.M.Balakrishna Mudaliar v. M.Satyanarayana Rao[2], Gomathinayagam Pillai v. Palaniswami Nadar[3], Govind Prasad Chaturvedi v.Hari Dutt Shastri [4] and the decision of Madras High Court in Sinnakaruppa Gounder v. M.Karuppuswami Gounder[5] and a decision of this Court in Budda Adeyyamma v. Kandregula Simhachalam[6]. 16. Sri S.Ramachandra Rao, learned senior counsel for the owners submits that there is no proof of agent spending any amount in the development of the property and in which case, it cannot be said that the agent spent considerable money in levelling the land covered under the agency agreement. As per the terms of the agency agreement, time is the essence of the contract and the parties to the agency agreement were well aware that the agent was to arrange buyers within 180 days and a grace period of 90 days with penal interest at 12% p.a and after expiry of the specified period, power given to the agent stood terminated and that itself indicates that time was the essence of the agreement. Learned senior counsel further contended that Exs.A.2 and A.3 are concocted for the purpose of the suit and that the trial court has considered the evidence brought on record in right perspective and came to the conclusion that Exs.A.2 and A.3 are concocted for the purpose of the suit and the said finding is based on sound reasons and it does not warrant interference in these appeals. In elaborating his argument, learned counsel took us to the plaint in specific performance suit, wherein the verification of the plaint is stated to have been made on 9.4.1994, whereas the plaint averments refer to the letter dated 28.4.1994. When the plaint is verified on 9.4.1994, making reference of letter dated 28.4.1994 itself indicates that the said letter is concocted so as to save the claim from being barred by the law of limitation. Learned senior counsel submits that if the agent had received advance money from the plaintiffs in specific performance suit pursuant to Ex.B.1 agreement, he would have tendered advance money to the principals, i.e., the owners. Admittedly, the agent retained the money with him and he did not even disclose in the letter allegedly sent on 28.4.1994 as to his receiving advance sum of Rs.10 lakhs. Learned senior counsel drew our attention to the address of the agent and also purchasers in the letter dt.19.4.1993, which has been exhibited as Ex.A.3 to buttress his submission that Ex.A.3 is concocted for the purpose of the suit. What he means to say is that both the agent as well as the purchasers are residing in the same house. But the agent, while being examined as Dw.1 could not say as to how copy of Ex.A.3 letter was sent to the purchasers who are no other than his wife and sons. Learned counsel took us to certain portions of the cross examination of the agent, who has been examined as Dw.1. The relevant portions of the cross examination on which much reliance has been placed by the learned counsel are as follows:- “…..It is true that in pursuance of clause 12, I have to complete the sale transaction within a period of 180 days from the date of agreement. The letter under Ex.A3 addressed by me to the plaintiffs dated 19-4-1993 indicates that it was written after expiry of 180 days. Ex.A.3 was handed over to the plaintiffs through somebody and it was delivered by somebody by hand. The address of the plaintiffs 1 to 3 shown in Ex.A.3 and the address of my residence is one and the same. Ex.A.3 does not specify that I have taken approval or consent of defendants 1 to 6 while accepting the offer of the plaintiffs. Ex.A.3 letter itself is an acknowledgment of receipt of Rs.10,00,000/-from the plaintiffs. I have not filed any document to show that I paid Rs.10 lakhs to defendants 1 to 6 during the period from 19-4-93to 28-4-94. (The witness adds that I issued two cheques to D2. Those two cheques were issued by me on 30-4-93 valued at Rs.1,71,250/- and Rs.2,00,000/-). It is not mentioned in Ex.A.2 dated 28.4.1994 that I issued two cheques to the defendants on the dates indicated above. It is true that as per Ex.B.1 I have to incur all the expenses for levelling and developing the land and defendants 1 to 6 need not pay anything for levelling and developing the land. I have levelled the land formed a pathway, dug a borewell, broken boulders and rocks. But I have not filed any documentary proof to show the quantum of expenditure incurred by me. ……………… ……I have not obtained sub division permission from MCH for dividing the said land into plots as it is not required. It is true that possession of the suit schedule property was given to me by D.1 to D.6 as per clause 11 of Ex.B.1 for carrying on my activity as an agent and the obligations under Ex.B.1 agreement…………… It is true that under Ex.A.4 to A.6 the reference of Ex.B.1 is not made. It is true that my name has not been mentioned in Exs.A.4 to A.6 as a consenting party. It is true that under Ex.A.4 to A.6 possession was delivered by the vendor B.Balaiah to the purchasers. ………” In nutshell, the contention