IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 09.11.2011 C O R A M THE HONOURABLE MR.JUSTICE K.MOHAN RAM AND THE HONOURABLE MR.JUSTICE G.M.AKBAR ALI A.S.No.23 of 2009 and M.P.No.1 of 2009 M/s. Ve-En Textiles Pvt. Ltd., Rep. By its Managing Director, V.Nadaraja, Vasudev Garden, No.21, Netaji Road, Tiruvanmiyur, Chennai 600 041 ... Appellant/Defendant -Vs.- B.S.Bethu Raju ... Respondent/Plaintiff Prayer:- Appeal Suit filed under Section 96 of the Code of Civil Procedure against the fair and decreetal order passed in O.S.No.101 of 2007, dated 05.09.2008 on the file of the Principal District Judge, Thiruvallur. For Appellant : Mr. V.Perumal For Respondent : Mr. M.S.Subramanian J U D G M E N T (JUDGMENT OF THE COURT WAS DELIVERED BY JUSTICE K.MOHAN RAM The defendant O.S.No.101 of 2007 on the file of the learned Principal District Judge, Thiruvallur, is the appellant in the above appeal. The said appeal is directed against the judgment and decree, dated 05.09.2008 made in the aforesaid suit decreeing the suit for specific performance of an agreement of sale executed by the appellant in favour of the respondent herein. 2. The case of the respondent, as pleaded in the plaint, is as follows:- The suit schedule property belongs to Ve-En Textiles Private Limited, the defendant in the suit. The respondent is a tenant under the appellant under the lease agreement, dated 15.05.2002. After negotiations, the respondent and the appellant entered into an agreement of sale, dated 11.02.2006, where-under the appellant had agreed to sell the suit properties for a total sale consideration of Rs.30 lakhs. An advance of Rs.4 lakhs was paid and the time for performance of the contract was fixed as three months. The time is not treated as the essence of the contract. The respondent has made https://hcservices.ecourts.gov.in/hcservices/ the following payments subsequent to 11.02.2006, namely, on 24.02.2006 Rs.2 lakhs, on 28.02.2006 Rs.2 lakhs and on 03.03.2006 Rs.1 lakh. Thus a total sum of Rs.9 lakhs has been paid under the agreement of sale. It is admitted by the respondent that xerox copies of the title deeds have been handed over to the respondent and they were subsequently returned to the appellant after verification. The respondent was always ready and willing to perform his part of the contract, but inspite of several repeated demands, the appellant postponed the completion of the contract under some pre-text or other. Subsequently as the respondent was threatened to be evicted by the appellant, the respondent filed a suit in O.S.No.295 of 2006 on the file of the District Munsif Court, Ponneri, for interim injunction and ad-interim injunction was obtained, pending the suit, in I.A.No.1321 of 2006. 3. The respondent issued a notice, dated 07.12.2006, calling upon the appellant to receive the balance of sale consideration and to execute the sale deed, but there was no reply for the notice. Subsequently the appellant issued a notice, dated 28.12.2006 alleging termination of the agreement of sale. It was the appellant who was evasive and did not co-operate with the respondent with an ulterior motive. Because of the indifferent attitude of the appellant only, the sale deed not executed, hence the suit has been filed seeking specific performance of the agreement of sale. 4. The appellant contested the suit by filing a detailed written statement inter-alia contending as follows:- The agreement of sale, dated 11.02.2006, is not the first agreement between the appellant and the respondent. The sum of Rs.4 lakhs was not received by the appellant on 11.02.2006 as stated in the agreement. Prior to the agreement, dated 11.02.2006, the appellant and the respondent entered into an agreement of sale in respect of the very same suit property on 01.07.2005 itself and under the said agreement, a sum of Rs.4 lakhs, as advance, was paid on various dates, as detailed below:- (i)Rs.10,000/- as token advance in June, 2005. (ii)Rs.1,00,000/- by Cheque No.502499, dated 11.06.2005 (Both payments are before the agreement of sale). (iii)Rs.90,000/- by cheque No.260531, dated 04.07.2005. (iv)R.30,000/- by Cheque No.517391, dated 04.07.2005. (v)Rs.90,000/- by Cheque No.049517, dated 08.07.2005. (vi)Rs.40,000/- by Transfer from A/c Mrs. Shobana dated 09.07.2005. (vii)Rs.40,000/- by Cheque No.517393, dated 25.07.2005. The contention that time was not treated as the essence of the contract is not true. The respondent promised to pay the balance sale consideration of Rs.26 lakhs within six months and get the sale deed executed in his favour, but he failed to perform his part of the contract inspite of repeated oral demands made by the appellant. 5. As the respondent could not perform his part of the contract as per the agreement of sale, dated 01.07.2005, he requested the appellant in February 2006 to enter into the fresh agreement of sale, expressing his difficulties in mobilising funds and further promised to get a bank loan and thereby pay the balance of sale consideration and to perform his part of the contract. Out of pity, the appellant https://hcservices.ecourts.gov.in/hcservices/ entered into a fresh agreement of sale, on 11.02.2006, with a specific condition and understanding that the respondent should perform his part of the contract within three months from 11.02.2006. 6. No amount was paid as advance on 11.02.2006, but the earlier amounts totalling Rs.4 lakhs was shown as earnest money. The respondent paid another sum of Rs.5 lakhs, as stated in paragraph 5 of the plaint. The respondent was never ready and willing to perform his part of the contract within the stipulated period of three months. The respondent did not come forward to pay the balance sale consideration and get the sale deed executed. The respondent has no sufficient funds to pay the balance sale consideration and as such it is he who had committed breach of the contract twice. It is not correct to state that the appellant was postponing the completion of the contract in some pre-text or other. There was no threat by the appellant to vacate the premises as alleged in the plaint, whereas the appellant was taking steps to vacate the respondent through legal process and by concocting a false story, the respondent filed O.S.No.295 of 2006 before the District Munsif Court, Ponneri, and the same is pending. 7. The appellant had issued a detailed reply notice through his counsel, dated 25.03.2007, and apart from the notice, dated 28.12.2006, a separate legal notice was sent on 25.03.2007 terminating the tenancy. The respondent, who has failed to perform his part of the contract not once but twice is not entitled to the relief, as contemplated under the Specific Relief Act. The respondent has not approached the Court with clean hands. On the aforesaid pleadings, the suit is sought to be dismissed. 8. On the aforesaid pleadings, the Trial Court framed the following issues:- "(i) Whether the plaintiff is entitled for specific performance of contract of sale dated 1.1.2006? (ii) It is true the plaintiff is entered into an earlier agreement of sale to purchase the suit property on 01.07.2005? (iii) Whether the time is essence for the contract? (iv) Whether the plaintiff is ready to perform his part of the contract in stipulated time? (v) To what relief?" 9. During the course of trial, on the side of the respondent, he was examined as P.W.1 and Exs.A-1 to A-4 were marked. On the side of the appellant, the appellant was examined as D.W.1 and one M.T.Varghese was examined as D.W.2 and Exs.B-1 to B-3 have been marked. On a consideration of the evidence on record, the Court below decreed the suit and being aggrieved by that, the above appeal has been filed as aforesaid. 10. Heard the learned counsel on either side. 11. Mr. V.Perumal, learned counsel for the appellant made the following submissions:- The first agreement, Ex.B-3, dated 01.07.2005, has been totally suppressed by the respondent in the plaint. Under Ex.B-3 the https://hcservices.ecourts.gov.in/hcservices/ appellant agreed to sell the suit property in favour of the respondent for a total sale consideration of Rs.30 lakhs and a sum of Rs.4 lakhs was received as advance. The time for performance was fixed as six months but as the respondent could not mobilise the funds he sought for extension of time, but instead of extending the time a fresh agreement was entered into under Ex.A-1, dated 11.02.2006. The respondent is admittedly a lessee under the appellant and hence taking pity on him, the second agreement, Ex.A-1 was entered into where-under the same terms as found in Ex.B-3 were incorporated, but the time for performance was fixed as three months. The three months time under Ex.A-1 expired on 11.05.2006. For the first time on 07.12.2006 the respondent issued a notice under Ex.A-2. In Ex.A-2 after referring to the terms of the agreement, the filing of the suit in O.S.No.295 of 2006 was also mentioned and it has been further stated that as if the appellant was evasive and not forth coming to perform its part of the contract as per Ex.A-1 sale agreement. By Ex.A-2 the respondent called upon the appellant to execute the sale deed by receiving the balance of sale consideration within seven days from the date of receipt of the notice. 12. Learned counsel for the appellant further submitted that having issued such a notice, the respondent had not called upon the appellant to be present before the Sub Registrar's Office on a particular date and neither he had sent the demand draft; the non- mentioning of Ex.B-3 agreement will amount to suppression of material fact and this will show that the respondent had not approached the Court with clean hands; the time is the essence of the contract as the property agreed to be sold consists of not only land and building, but also machineries; though on 27.11.2006 when the respondent filed the suit for permanent injunction and the remedy for specific performance was available to him, yet he did not file the suit for specific performance, which itself will show that the respondent was not having sufficient funds and therefore he was not ready and willing to perform his part of the contract. He further submitted that the finding of the trial court that the respondent was ready and willing to perform his part of the contract is not based on any acceptable evidence either oral or documentary; though consistently the respondent had been claiming to be ready and willing to perform his part of the contract and such an averment has also been made in his notice as well as in the plaint, to substantiate the same, no acceptable evidence has been produced; there is absolutely no evidence to show that he had the necessary capacity or funds to perform his part of the contract of sale; the fact that the second agreement had to be executed will itself show that only because of his inability to raise necessary funds he could not get the first agreement performed, therefore, the learned counsel submitted that the judgment and decree rendered by the trial court is liable to be set-aside. 13. Rebutting the aforesaid submissions, Mr. M.S.Subramanian, learned counsel for the respondent, made the following submissions:- The respondent is admittedly a tenant under the appellant from 2002 on a monthly rent of Rs.20,000/- and he had paid an advance of Rs.1.5 lakhs and the rents are being up-to-date and there is no arrears of rent. The suit property belongs to a Private Limited Company. In Ex.A-1 itself it has been stated that the business https://hcservices.ecourts.gov.in/hcservices/ constitution being a Private Limited Company and having movable and immovable assets, the transfer of shares / properties will be decided by both the parties in consultation with the Auditor of the company, therefore, according to the learned counsel, the appellant ought to have consulted the company's Auditor and may finalise as to how the sale deed could be executed, but the appellant / D.W.1, in his cross- examination, has admitted that he had not even shown the agreement to his Auditor. 14. Learned counsel for the respondent further submitted that in the first agreement-Ex.B-3 the first two payments mentioned therein had been made even prior to the execution of Ex.B-3 and the other payments are by way of cheques, which are dated subsequent to the date of Ex.B-3, which will show that Post Dated Cheques could have been handed over towards the advance amount; the fact that the appellant had accepted post-dated-cheques itself show that there was cordial relationship between the appellant and the respondent and both of them had reposed faith on each other; though the time fixed under Ex.B-3 expired on 31.12.2005 and if the time was treated as the essence of the contract, the appellant could very well have cancelled the first agreement, but no such cancellation was made; in Ex.A-1, dated 11.02.2006, time is not mentioned as the essence of the contract; there is no default clause in Ex.A-1 and there is no forfeiture clause, therefore, it is clear that the parties did not entertain time to be the essence of the agreement of sale. 15. Learned counsel for the respondent further submitted that the fact that the respondent had paid Rs.2 lakhs on 24.02.2006, another Rs.2 lakhs on 28.02.2006 and a further sum of Rs.1 lakh on 03.03.2006 totalling Rs.5 lakhs within a period of fifteen days itself will show the capacity of the respondent to raise necessary funds to pay the balance sale consideration; the fact that the respondent was able to raise Rs.5 lakhs within a short period and the further fact that he is running the business will show his capacity to pay the balance sale consideration; since the appellant had not treated the time as the essence of the contract he had not chosen to terminate the agreement of sale; the appellant had chosen to examine one Varghese, as D.W.2, and he had deposed as if D.W.1-Prakash and D.W.2 went in-person to the respondent and demanded him to pay the balance sale consideration and get the sale deed executed, but there is absolutely no mention about the same in the written statement; admittedly D.W.2 was not present at the time of execution of Ex.A-1 and Ex.B-3 and the aforesaid version of D.W.2 has also not been deposed by D.W.1. He further submitted that both in his notice as well as in the plaint it has been clearly stated that the respondent is ready and willing to perform his part of the contract; the suit was decreed on 05.09.2008 and the balance sale consideration of Rs.21 lakhs was deposited into the Court on 04.11.2008 itself; the fact that the entire balance sale consideration has been deposited into the Court will also show the capacity of the respondent to raise necessary funds. In support of the aforesaid contentions, the learned counsel based reliance on the following decisions:- (i)1999 (III) CTC 394 (Rathinam Chettiar v. Embar Naidu) (ii)(1993) 1 Supreme Court Cases 519 (CB) (CHAND RANI v. KAMAL RANI) https://hcservices.ecourts.gov.in/hcservices/ (iii)(2008) 4 Supreme Court Cases 464 (BALASAHEB DAYANDEO NAIK v. APPASAHEEB DATTATRAYA PAWAR) 16. We have considered the aforesaid submissions made by the learned counsel on either side and perused the materials available on record. 17. The points that arise for consideration in the above appeal are, (i) when admittedly the suit property belongs to the defendant / appellant-Private Limited Company, whether its Managing Director, B.Nataraja, is entitled to enter into a sale agreement in respect of the Company's property in favour of the plaintiff / respondent without there being a resolution passed by the Board of Directors of the Private Limited Company authorising the sale of the property and whether the agreement of sale, Ex.A-1, dated 11.02.2006, is legally enforceable against M/s.Ve-En Textiles Private Limited; (ii) Whether the plaintiff / respondent was always ready and willing to perform his part of the contract? and (iii) To what relief the plaintiff / respondent is entitled to? 18. A perusal of Ex.A-1, agreement of sale, dated 11.02.2006, shows that the properties both movable and immovable assets of the Private Limited Company has been agreed to be sold under the agreement by B.Nataraja, in favour of the respondent herein as if he is representing the appellant company. Ex.A-1 does not reveal that the Board of Directors of the Private Limited Company either had passed any resolution authorising the sale of the property or authorising the said B.Nataraja to enter into an agreement of sale in respect of the assets of the Private Limited Company, namely, the suit property, in favour of the respondent herein. In the evidence adduced before the Court below also, no documentary evidence has been produced to show that the Board of Directors of the Private Limited Company passed any such Resolution or granted any authorisation in favour of the said B.Nataraja. In fact such an issue was not raised by the appellant / defendant and no pleadings whatsoever has also been made in the written statement. 19. The said issue, being a legal issue, affecting the very validity of the agreement of sale itself, has to be gone into before deciding the other issues and therefore we raised an issue and asked the learned counsel for the respondent as to whether any such Board Resolution was passed or any authorisation was given to B.Nataraja to enter into the agreement of sale. 20. Learned counsel for the respondent fairly submitted that there is absolutely no evidence to show that any such resolution of the Board was passed or any authorisation was given in favour of Mr.B.Nataraja. In the absence of valid Board Resolution passed by the appellant / company deciding to sell the movable and immovable assets of the company and in the absence of any valid authorisation authorising B.Nataraja to enter into an agreement of sale in respect of the company's assets, it has to be held that Ex.A-1 agreement of sale or for that matter Ex.B-3 agreement of sale could not be legally enforced. On this legal ground alone, the suit has to be dismissed, but unfortunately as none of the parties raised the said issue, the trial court has also not gone into this issue. https://hcservices.ecourts.gov.in/hcservices/ 21. As far as the readiness and willingness on the part of the respondent is concerned, though in the notice issued on his behalf and in the plaint, it has been specifically mentioned that he was always ready and willing to perform his part of the contract and the same satisfies the legal requirement as contemplated under Section 16 (c) of the Specific Relief Act, that itself is not sufficient to hold that the respondent was always ready and willing to perform his part of the contract. Such an averment made in the plaint and in the notice should be proved by adducing acceptable evidence. Except the ipsi dixit of the respondent in his oral evidence that he was always ready and willing to perform his part of the contract which has been disputed and questioned by the appellant, there is no other evidence either oral or documentary to prove such readiness and willingness. 22. In this context, it will be useful to refer to a decision of the Apex Court reported in (1996) 4 Supreme Court Cases 526 (HIS HOLINESS ACHARYA SWAMI GANESH DASSJI v. SITA RAM THAPAR). In the said decision, in paragraph 2, the Apex Court has laid down as follows:- "2. There is a distinction between readiness to perform the contract and willingness to perform the contract. By readiness may be meant the capacity of the plaintiff to perform the contract which includes his financial position to pay the purchase price. For determining his willingness to perform his part of the contract, the conduct has to be properly scrutinised. There is no documentary proof that the plaintiff had ever funds to pay the balance of consideration. Assuming that he had the funds, he has to prove his willingness to perform his part of the contract. According to the terms of the agreement, the plaintiff was to supply the draft sale deed to the defendant within 7 days of the execution of the agreement, i.e., by 27-2-1975. The draft sale deed was not returned after being duly approved by the petitioner. The factum of readiness and willingness to perform plaintiff's part of the contract is to be adjudged with reference to the conduct of the party and the attending circumstances. The Court may infer from the facts and circumstances whether the plaintiff was ready and was always ready and willing to perform his part of the contract." If, in the light of the aforesaid law laid down by the Apex Court, the facts of the case and the evidence available on record are concerned, we are of the considered view that the respondent / plaintiff has miserably failed to establish whether he had necessary funds in his hand or cash or in bank or his capacity to raise the balance sale consideration to perform his part of the agreement of sale. 23. In the decision reported in 1971 (2) S.C.J. 51 (Nathulal v. Poolchand) the Apex Court has held that to prove himself ready and willing, the purchaser need not necessarily produce the money or vouch a concluded scheme for financing the transaction and that if he has an outstanding arrangement with his banker to enable him to draw the amount needed by him for payment to the vendor, that would be sufficient to prove his readiness and willingness. https://hcservices.ecourts.gov.in/hcservices/ 24. In our judgment, dated 21.10.2011 rendered in A.S.No.811 of 2008, after referring to a catena of decisions of the Apex Court and other High Courts, we have held that it is not necessary for the vendor to prove that he was having necessary cash in hand or in Bank or he had concluded arrangement to raise the funds, but what is necessary to prove by the vendor is that he has the necessary means or capacity to raise the required funds to perform his part of the contract when the time for performance of the contract comes. 25. In the decision of the Apex Court reported in (1996) 4 Supreme Court Cases 526 (referred to supra) also, the Apex Court has held that by readiness may be meant the capacity of the plaintiff to perform the contract which includes his financial position to pay the purchase price. In that case, the Apex Court has come to the conclusion on the basis of the evidence available on record and the surrounding circumstances that there was no documentary proof that the plaintiff had ever funds to pay the balance sale consideration. It has been further laid down therein that the Court may infer from the facts and circumstances whether the plaintiff was ready and was always ready and willing to perform his part of the contract. 26. In this case, as pointed out above, except pleading that he was always ready and willing to perform his part of the contract and repeating the same in his oral evidence, P.W.1 has not spoken to about the nature of assets held by him or his family members, he has not even stated that he is an income tax assessee, he has not deposed as to what is his monthly income from the business carried on by him and whether he owns any immovable properties from which he is getting any income and he has also not produced any documentary proof to prove his capacity to raise the funds to pay the balance of sale consideration. It is pertinent to point out that he has deposed in his evidence that even when he entered into Ex.A-1-agreement of sale to complete the sale, he was having the necessary funds to complete the sale transaction. When that being so, if he had possessed of such funds, nothing prevented him from immediately getting the sale deed executed instead of entering into a sale agreement. It is also pertinent to point out that if he had necessary funds and he was always ready and willing to perform his part of the contract, he could have easily got the sale deed executed as