SA/24120/2007 1/38 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD SECOND APPEAL No. 241 of 2007 With CIVIL APPLICATION No. 15221 of 2007 In SECOND APPEAL No. 241 of 2007 For Approval and Signature: HONOURABLE MR.JUSTICE K.A.PUJ ========================================================= 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the constitution of India, 1950 or any order made thereunder ? 5 Whether it is to be circulated to the civil judge ? ========================================================= POPATJI BABAJI THAKOR & 5 - Appellant(s) Versus MANUBHAI CHIMANLAL SHAH & 5 - Defendant(s) ========================================================= Appearance : MR SHITAL R PATEL for Appellant(s) : 1 - 6. MR PRAKASH K JANI for Defendant(s) : 1, None for Defendant(s) : 2 - 3, 3.2.1,3.2.2 - 6. ========================================================= CORAM : HONOURABLE MR.JUSTICE K.A.PUJ Date : 24/12/2008 ORAL JUDGMENT 1. The appellants – ori. defendants Nos.5 to 10 SA/24120/2007 2/38 JUDGMENT have filed this Second Appeal under Section 100 of the Civil Procedure Code challenging the judgment and decree passed by the learned Additional District Judge, Mehsana on 15.3.2007 in Regular Civil Appeal No.87 of 2005 whereby the learned Additional District Judge, Mehsana has allowed the Appeal filed by the ori. plaintiff and passed a decree for specific performance in favour of the plaintiffs. 2. It is the case of the original defendants Nos.5 to 10 that the plaintiffs Nos.1 and 2 had filed a Suit for specific performance in respect of an agreement to sell allegedly executed by the defendants Nos.5 to 10 in favour of the ori. defendants Nos.1 to 4 and also asked for a specific performance in respect of an agreement to sell executed by original defendants Nos.1 to 4 in favour of the plaintiffs. Both the agreements were entered into in respect of the new tenure SA/24120/2007 3/38 JUDGMENT land and hence the specific performance of agreement to sell could not be granted in the eye of law. 3. It is also the case of the defendants Nos.5 to 10 that after hearing the parties, the trial Court has dismissed the suit of the plaintiffs and refused to pass decree for specific performance and exercised the discretion on the equitable principles in favour of the defendants Nos.5 to 10. It is also their case that there was no privity of contract between the plaintiffs and the defendants Nos.5 to 10 and, therefore, the ori. plaintiffs have no right to seek specific performance of agreement to sell from the defendants Nos.5 to 10. The trial Court has dismissed the suit of the plaintiffs by judgment and decree dated 25.10.1999 in Special Civil Suit No.68 of 1995. SA/24120/2007 4/38 JUDGMENT 4. Being aggrieved by the said judgment and decree of the trial Court the ori. plaintiffs have filed First Appeal No.7581 of 1999 before this Court. Thereafter, on coming into force the Gujarat Civil Courts Act, 2005, the proceedings of the First Appeal were transferred to the District Court and it was numbered as Regular Civil Appeal No.87 of 2005. The said Appeal was allowed by the learned Additional District Judge. It is this order of the learned Additional District judge which is under challenge in the Second Appeal. 5. Mr.Shital Patel, learned advocate appearing for the appellants/ defendants Nos.5 to 10 has submitted that the learned Appellate Court has committed serious error in appreciating the fact that the first agreement to sell executed by the defendants Nos.5 to 10 in favour of ori. defendants Nos.1 to 4 and an agreement to sell executed SA/24120/2007 5/38 JUDGMENT by ori. defendants Nos.1 to 4 in favour of the ori. plaintiffs are admittedly in breach of Section 43 of the Bombay Tenancy and Agricultural Act and, therefore, the decree for specific performance cannot be granted in respect of an illegal agreement to sell as per Section 43 of the Tenancy Act. It is further submitted that the Appellate Court has committed serious error in not appreciating the fact that the decree of specific performance is based upon the discretion and on the basis of doctrine of equity. When the trial Court exercised the discretion in favour of the defendants Nos.5 to 10 there was no reason for the Appellate Court to reverse the decree of the learned trial Judge without any substantial reason and thus the Appellate Court has committed serious error in granting the decree in favour of the ori. plaintiffs. He has further submitted that the Appellate Court has committed serious error in not SA/24120/2007 6/38 JUDGMENT appreciating the fact that the decree for specific performance is discretionary remedy and based upon the equity. This will have to be seen in the context of the fact that the alleged agreements to sell on which the specific performance is granted are of the years 1984/1986 and the judgment and decree passed by the Appellate Court is in the year 2007 which is almost after a lapse of 23 years. In between there is a huge escalation in price of the land in question and, therefore, granting of decree of specific performance of agreement to sell of 1986 in the year 2007 would be highly inequitable and, therefore, the learned Appellate Judge has committed a gross error in granting such a decree in favour of the ori. plaintiffs. 6. He has further submitted that the learned Appellate Judge has committed a serious error by not referring to the judgments cited by the defendants Nos.5 to 10 and has relied on SA/24120/2007 7/38 JUDGMENT the judgment which is overruled by the subsequent judgment of the Hon'ble Supreme Court. He has further submitted that the learned Appellate Judge has committed error in making the observation that issue Nos.1, 2, 3, 5 and 7 were answered in favour of the ori. plaintiffs and the same were not challenged by the defendants Nos.5 to 10 and, therefore, for those issues, the defendants Nos.5 to 10 could not have made any grievance as they were not challenged by way of cross objections. He has further submitted that this observation of the learned Appellate Judge is not tenable because there was no need for the defendants Nos.5 to 10 to challenge the decree when the suit of the ori. plaintiff itself was dismissed and, therefore, the challenge of bare finding is not appealable or not fatal to the case of the defendants Nos.5 to 10. Lastly, he has submitted that the learned Appellate Judge has committed serious error in allowing the SA/24120/2007 8/38 JUDGMENT appeal of the ori. plaintiffs and passing a decree of specific performance of agreement to sell Ex.129 and agreement to sell at Ex.79. However, the operative part of the decree is vague and is not in consonance with true spirit of Section 20 of the Specific Relief Act and not in consonance with the spirit of some of the provisions of the Code of Civil Procedure. 7. On the basis of aforesaid grounds it was urged by Mr.Patel that the Appeal deserves to be admitted and the questions of law, which are framed by the defendants Nos.5 to 10 are required to be formulated by this Court for determination and consideration of this Court. “(a) Whether the decree of specific performance can be granted in respect of an agreement which is prohibited by law in the context of Section 43 of the Tenancy Act and in the context of Section 23 of the Contract Act, 1872 ? SA/24120/2007 9/38 JUDGMENT (b) Whether the Appellate Court was right in law in reversing the decree of specific performance which was refused by the trial Court which was based on judicial principle of equity and whether the Appellate Court could have reversed such decree without having any substantial cause, particularly when there is no privity of contract between plaintiffs and present appellants herein ? (c) Whether an agreement to sell of the year 1986 and granting specific performance in the year 2007 against the spirit of Section 16(c) and 20 of the Specific Relief Act and against the principle of equity and escalation of price during the interregnum period was justified in law ? (d) Whether the Suit of specific performance is not barred by limitation, still the decree of specific performance could be refused on the sound principle of law and equity in the context of the facts of the case ? (e) Whether in the context of the facts of the case and evidence on record, the Appellate Court was right in passing a decree for specific performance after a lapse of nearly 21 years SA/24120/2007 10/38 JUDGMENT from the date of agreement to sell particularly when the discretion exercised under Section 20 was judicially exercised by the trial Court. (f) Whether the Appellate Court could have granted decree for specific performance of agreement to sell which itself is prohibited by law and whether the decree of such agreement to sell can be granted in view of Section 23 of the Contract Act, as it is opposed to the public Policy ? 8. In support of his submissions that exercise of discretion for specific performance of agreement would substantially affect the rights of parties which gives rise to a question of law, Mr.Patel has relied upon the following decisions of Hon'ble Supreme Court. (i) In the case of Rajeshwari Vs. Puran Indoria, reported in 2005 (7) SCC 60 it is held that, normally a suit for specific performance of an agreement for sale of immovable property involves the following SA/24120/2007 11/38 JUDGMENT questions : (1) Whether the plaintiff was ready and willing to perform his part of the contract in terms of Section 16 of the Specific Relief Act, 1963, (2) Whether it was a case for exercise of discretion by the Court to decree specific performance in terms of Section 20 of the Specific Relief Act, and (3) whether there were latches on the part of the plaintiff in approaching the Court to enforce specific performance of the contract. In some cases, a question of limitation may also arise in the context of Article 54 of the Limitation Act, 1963 on the terms of the agreement for sale. Other questions like the genuineness of the agreement, abandoning of the right to specific performance, a novation and so on, may also arise in some cases. No doubt, a finding on the three primary aspects indicated above would depend upon the appreciation of the pleadings and the evidence in the case in the light of the surrounding circumstances. These questions, SA/24120/2007 12/38 JUDGMENT by and large, may not be questions of law of general importance. But they cannot also be considered to be pure questions of fact based on an appreciation of the evidence in the case. They are questions which have to be adjudicated upon, in the context of the relevant provisions of the Specific Relief Act and the Limitation Act ( if the question of limitation is involved). Though an order in exercise of discretion may not involve a substantial question of law, the question whether a court could, in law, exercise a discretion at all for decreeing specific performance, could be a question of law that substantially affects the rights of parties in that suit. Therefore, in the case on hand, the High Court was not justified in dismissing the second appeal in the manner in which it has done. (ii) In the case of Malapali Munaswany Naidu Vs. P. Sumathi, reported in 2004 (13) SCC 364 SA/24120/2007 13/38 JUDGMENT it is held that it is very clear from the judgment of the High Court that the High Court did not go into any other issue and having reversed the finding of the trial Court on the question as to the admissibility of agreement in evidence directed the suit to be decreed. In particular, the High Court did not examine whether by reference to Section 20 of the Specific Relief Act, 1963 it was a fit case for exercising discretion to decree specific performance or not. For this reason, the appeal was allowed by the Supreme Court and the matter was remanded for hearing afresh by the High Court after keeping all the issues for consideration afresh by the High Court. (iii) In the case of Manoharlal alias Manohar Singh Vs. Maya, reported in 2003 (9) SCC 478, it is held that when the correctness of the factual aspect of the finding arrived at by the High Court has not been disputed, the SA/24120/2007 14/38 JUDGMENT Court cannot find fault with the view taken by the High Court that a just, legal and proper exercise of judicial discretion would be not to direct specific performance but to direct the refund of such consideration as was paid. (iv) In the case of Kanshiram Vs. Om Prakash Jawal and others, reported in 1996 (4) SCC 593 it is held that though the rise in prices of the property during the pendency of the suit may not be the sole consideration for refusing to decree the suit for specific performance, granting decree for specific performance of a contract of immovable property is not automatic. It is one of discretion to be exercised on sound principles. When the court gets into equity jurisdiction, it would be guided by justice, equity, good conscience and fairness to both the parties. Considered from this perspective, in view of the fact that the SA/24120/2007 15/38 JUDGMENT respondent himself had claimed alternative relief for damages, the courts would have been well justified in granting alternative decree for damages, instead of ordering specific performance which would be unrealistic and unfair. Under these circumstances, the decree for specific performance is inequitable and unjust to the appellant. (v) In the case of A.C.Arulappan Vs. Ahalya Naik (Smt.), reported in 2001 (6) SCC 600 it is held that The jurisdiction to pass decree specific relief is discretionary and the Court can consider various circumstances to decide whether such relief is to be granted. Merely because it is lawful to grant specific relief, the Court need not grant the order for specific relief; but this discretion shall not be exercised in an arbitrary or unreasonable manner. Certain circumstances have been mentioned in Section 20(2) of the SA/24120/2007 16/38 JUDGMENT Specific Relief Act, 1963 as to under what circumstances the Court shall exercise such discretion. If under the terms of the contract the plaintiff gets an unfair advantage over the defendant, the Court may not exercise its discretion in favour of the plaintiff. So also, specific relief may not be granted if the defendant would be put to undue hardship which he did not foresee at the time of agreement. If it is inequitable to grant specific relief, then also the Court would desist from granting a decree to the plaintiff. (vi) In the case of Bhagwan Bala Mahanavar Vs. Sandipan Laxman Shinde and others, reported in 2002 (9) SCC 532 it is held that the High Court was not justified in dismissing the Second Appeal summarily and directed the High Court to decide the following substantial questions of law; (i) Whether, on a fair and reasonable SA/24120/2007 17/38 JUDGMENT interpretation of the relevant clause of the agreement appointing the time of performance, the suit can be said to be barred by limitation under Article 54 of the Limitation Act, 1963 ? (ii) Whether, on the facts and in the circumstances of the case, the plaintiff can be said to have been ready and willing to perform his part of the contract continuously till the date of filing of the suit ? (iii) Whether, on the facts and in the circumstances of the case, the discretion in granting the relief of specific performance deserves to be exercised in favour of the plaintiff, also keeping in view the delay in filing the suit. (vii) In the case of Manjunath Anandappa URF Shivappa Hanasi Vs. Tammanasa and others, reported in 2003 (10) SCC 390, the plaintiff filed suit almost after six years from the date of entering into agreement to sell. He SA/24120/2007 18/38 JUDGMENT did not bring any material on record to show that he had ever asked defendant 1, the owner of the property, to execute a deed of sale. He filed the suit only after he came to know that the suit land had already been sold by him in favour of the appellant herein. Furthermore, it was obligatory on the part of the plaintiff for obtaining a discretionary relief having regard to Section 20 of the Act to approach the Court within a reasonable time. Having regard to his conduct, the plaintiff was not entitled to the discretionary relief. (viii) In the case of Dulara Devi and others Vs. Mahdei , reported in 2005 (11) SCC 432 it is held that the disposal of the appeal at the hands of the High Court has not been satisfactory. There are several relevant factors calling for consideration for exercise of discretion by the Court in favour of or against decreeing a suit for specific SA/24120/2007 19/38 JUDGMENT performance which ought to have received consideration by the High Court. The Court, therefore, allowed the Appeal and it was restored on the file of the High Court with a direction to identify the substantial questions of law arising for decision in the appeal. (ix) In the case of K.S.Vidyanandam and others Vs. Vairavan, reported in AIR 1997 SC 1751 it is held that the rigor of the rule evolved by courts that time is not of the essence of the contract in the case of immovable properties - evolved in times when prices and values were stable and inflation was unknown - requires to be relaxed, if not modified, particularly in the case of urban immovable properties. It is high time for the Court to do so. In the instant case may be the parties knew of the circumstance regarding rising prices but they have also specified six months as the period within SA/24120/2007 20/38 JUDGMENT which the transaction should be completed. The said time-limit may not amount to making time the essence of the contract but it must yet have some meaning. Not for nothing could such time-limit would have been prescribed. Can it be stated as a rule of law or rule of prudence that where time is not made the essence of the contract, all stipulations of time provided in the contract have no significance or meaning or that they are as good as non-existent ? All this only means that while exercising its discretion, the Court should also bear in mind that when the parties prescribe certain time-limit(s) for taking steps by one or the other party, it must have some significance and that the said time-limit(s) cannot be ignored altogether on the ground that time has not been made the essence of the contract (relating to immovable properties). (x) In the case of Ramlal & Anr. Vs. Phagua SA/24120/2007 21/38 JUDGMENT & Ors. Reported in AIR 2006 SC 623 it is held that the High Court had liberty to reappreciate the evidence and record its own conclusion for reversing the order passed by the Lower Court. 9. In support of his submissions for invoking Order 41 Rule 33 Mr.Patel relied on the following decisions; (i) In the case of Koksingh Vs. Smt. Deokabai, reported in AIR 1976 SC 634 it is held that if an appellate Court is of the view that any decree which ought in law to have been passed was in fact not passed by the Court below, it may pass or make such further or other decree or order as the justice of the case may require. Thus under Order 41. Rule 33 the High Court is competent to pass a decree for the enforcement of a charge in favour of the respondent notwithstanding the fact that the SA/24120/2007 22/38 JUDGMENT respondent did not file any appeal from the decree. (ii) In the case of Shyam Nath and others Vs. Durga Prasad, reported in AIR 1982 Allahbad 474 it is held that in Rule 22 of Order 41 an Explanation was added to sub-rule (1), whereby, the respondent was given a right to file a cross-objection in respect of the findings as well. The amendment in the main sub-rule (1) about challenging the finding, made it obligatory on the respondent to have filed a cross-objection, if he wanted to challenge the finding of the lower appellate Court. The proviso to sub-rule (1) of Rule 22 applies to the decrees and not to mere findings. It has however been permitted that a cross-objection could be filed against a finding as well. As the decree itself could not be challenged, the filing of any cross- objection was not obligatory. Had the respondent challenged any portion of the SA/24120/2007 23/38 JUDGMENT decree, certainly he could not do so unless he had filed a cross-objection as contemplated by sub-rule (1). (iii) In the case of Mahant Dhangir and another Vs. Shri Madan Mohan and others, reported in AIR 1988 SC 54 it is held that Rule 22 and R.33 are not mutually exclusive. They are closely related with each other. If objection cannot be urged under R.22 against co-respondent R.33 could take over and come to the rescue of the objector. The sweep of the power under R.33 is wide enough to determine any question not only between the appellant and respondent, but also between respondent and co-respondents. The Appellate Court could pass any decree or order which ought to have been passed in the circumstances of the case. The appellate Court could also pass such other decree or order as the case may require, the words "as the case may require" used in R.33 of 0.41 SA/24120/2007 24/38 JUDGMENT have been put in wide terms to enable the Appellate Court to pass any order or decree to meet the ends of justice. The only constraint on the power are these : That the parties before the lower Court should be there before the appellate Court. The question raised must properly arise out of the judgment of the lower Court. If these two requirements are there, the appellate court could consider any objection against any part of the judgment or decree of the lower Court. It may be urged by any party to the appeal. (iv) In the case of Johri and others Vs. Mahila Darupati alias dropadi and others, reported in AIR 1991 Madhya Pradesh 340, it is held that Order 41, R. 33, CPC, gives power to appellate Court to grant relief in favour of a respondent, if an appellate Court is of the view that any decree which in law ought to have been passed was not in fact passed by the Court below, it may pass or SA/24120/2007 25/38 JUDGMENT take such further or other decree or order as the justice of the case may require. 10. Mr. P. K. Jani, learned advocate appearing for the ori. plaintiffs on caveat on the other hand has submitted that the Trial Court, after going through the pleadings in all, had framed eight issues which are as under :- (1) Whether the plaintiffs prove that defendant Nos.1 to 4 have executed sale agreement dtd 26.10.86 to sell the disputed property in the consideration amount of Rs.1,60,000/- ? (2) Whether the plaintiffs prove that they have paid Rs.25,000/- to the defendant Nos.1 to 4 ? (3) Whether the plaintiffs prove that the defendant Nos.5 to 10 had executed sale agreement dated 3.12.86 in favour of the defendant Nos.1 to 4 for the consideration amount of Rs.1,20,000/- ? (4) Whether the plaintiffs prove that they have obtained (taken) possession of the SA/24120/2007 26/38 JUDGMENT disputed property (land) as per the sale agreement dated 26.10.86 ? (5) Whether the plaintiffs prove that they were and are ready and willing to