IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE P.BHAVADASAN THURSDAY, THE 22ND DECEMBER 2011 / 1ST POUSHA 1933 RFA.No. 278 of 2003() --------------------- OS.277/1993 of SUB COURT, PATHANAMTHITTA .................... APPELLANTS/DEFENDANTS ---------------------------------- 1. RAMAKRISHNA PILLAI PRABHAKARAN NAIR, VILANGANTHONDIL HOUSE, KARUMPALA MURI, AND VILLAGE. 2. KALYAIAMMA RAJAMMA, OF DO DO. BY ADVS. SRI.T.KRISHNAN UNNI, SENIOR ADVOCATE SRI.SAJU.S.A SRI.K.C.KIRAN RESPONDENT/PLAINTIFF: ------------------------------ SALINA, D/O.JUBILATHUBEEVI, JALILA MNZIL, KOTTARAKARA MURI AND VILLAGE. R1 BY ADVS. SRI.R.RAJASEKHARAN PILLAI SRI.GEORGE T. THACHETT SMT.SABINA JAYAN THIS REGULAR FIRST APPEAL HAVING BEEN FINALLY HEARD ON 3.12.2011, ALONG WITH RFA NO. 279 OF 2003 , THE COURT ON 22/12/2011 PASSED THE FOLLOWING: vk P. BHAVADASAN, J. - - - - - - - - - - - - - - - - - - - - - - - - - - - R.F.A. Nos. 278 & 279 of 2003 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Dated this the 22nd day of December, 2011. JUDGMENT Two suits for specific performance, namely O.S.277 of 1993 and O.S.278 of 1993 before the Sub Court, Pathanamthitta, were disposed of by separate judgments. Both the suits were decreed. The defendants in both the suits have come up in appeal. R.F.A.278 of 2003 is directed against the judgment and decree in O.S.277 of 1993 while R.F.A.279 of 2003 is directed against the judgment and decree in O.S. 278 of 1993. 2. Since the issues that arise for consideration are identical and since the facts are almost similar though evidence was adduced separately, these appeals are being disposed of by a common judgment. 3. A couple had to raise the funds for the marriage of their daughter. They, therefore, decided to sell R.F.A.278 & 279/2003. 2 a portion of 1.50 acres of land they had. They divided the property into northern half and southern half after leaving a pathway through the middle of the property. They wanted to sell 90 cents out of the property they had and the entire property abuts the road on the western side. 4. The plaintiff's case in O.S. 277 of 1993 is that by Ext.A1 dated 10.11.1992 the defendants agreed to sell 25 cents of land for Rs.90,000/- and received Rs.10,000/- as advance. The plaintiff in O.S.278 of 1993 alleged that as per Ext.A1 dated 10.11.1992 the defendants agreed to sell 15 cents of property for a sum of Rs.67,500/- and received Rs.5000/- as advance. In both the agreements, the period for completion of transaction was fixed as nine months. In both the cases, the respective plaintiffs averred that they were always ready and willing to perform their part of the contract. The defendants in both the suits had to get the properties measured, put up the boundaries and free the properties from any encumbrance. According to the R.F.A.278 & 279/2003. 3 plaintiffs in both the suits they demanded execution of the sale deeds, but that was put it off under one pretext or another by the defendants. Finally, on 11.8.1993 the plaintiffs issued notice to the defendants calling upon them to perform their part of the agreement. The allegation is that after accepting the notice on 13.8.1993, the defendants caused to issue a notice to the respective plaintiffs by anti-dating the notice as on 12.8.1993 and that too in the name of wrong persons. subsequently, the defendants caused to issue a reply notice dated 20.8.1993 to the notice issued by the respective plaintiffs raising false claims. The defendants are guilty of breach of contract and the plaintiffs are entitled to get specific performance of the agreement executed by them. 5. Both the suits were resisted by the defendants adopting similar contentions. The defendants in both the suits are the same. In both the cases, respective agreements namely, Ext.A1, were admitted. According to R.F.A.278 & 279/2003. 4 them, there were two earlier agreements between the parties and Ext.A1 produced in each of the suits is the third agreement in relation to the sale of the property. First of them was dated 11.5.1992 and the period fixed was three months. Since the plaintiff could not raise funds, they sought for extension of time which resulted in a subsequent agreement dated 11.8.1992. Again time was fixed as three months for execution of sale deed. Even thereafter, the plaintiffs did not have sufficient funds and at the request of the plaintiffs, a third agreement dated 10.11.1992 was executed. The defendants would say that they were not inclined and were very reluctant to extend the time by executing the third agreement, but finally they conceded to the request made by the plaintiffs in the respective cases. It could be seen from Ext.A1 agreement in both the cases that the stipulation of time for performance was initially left blank. It was filled up by the defendants and fixed a period of nine months for completion of the contract. It is pointed R.F.A.278 & 279/2003. 5 out that the parties were agreed that time would be the essence of the contract. Even after executing Ext.A1 agreement, the plaintiffs were unable to raise the necessary funds. The defendants were always ready and willing to perform their part of the contract. They would claim that on 10.8.1993 the plaintiff in O.S.278 of 1993 along with his henchmen came to the house of the defendants and demanded further extension. The defendants were not amenable to such a course. So they issued a notice dated 12.8.1993. It is contended on behalf of the defendants that on 11.51992 when the first agreement in each case was entered into between the parties, there were no litigations pending in respect of the property. Subsequently, false and frivolous suits were instituted by the neighbours of the defendants. The plaintiffs wanted the defendants to settle the cases and assign the property. Since the defendants were in need of money for the marriage of their daughter, they were always ready and willing to perform their part of R.F.A.278 & 279/2003. 6 the contract. As a result of the default committed by the plaintiff, it is claimed that the marriage of the daughter of the defendants had to be postponed. Accusing the plaintiffs in the respective cases, guilty of breach of contract and inability to perform their part of the contract, the defendants prayed for a dismissal of the suit. 6. On the basis of the above pleadings, issues were raised in each case. The evidence in O.S. 277 of 1993 consists of the testimony of P.W. 1 and documents marked as Exts.A1 to A6 from the side of the plaintiffs. The defendants in the said case had D.Ws.1 to 6 examined and Exts.B1 to B16 marked. In O.S.278 of 1993 the evidence consists of the testimony of P.W.1 and documents marked as Exts.A1 to A5 from the side of the plaintiffs. The defendants in the said case had D.Ws.1 to 5 examined and Exts.B1 to B19 series marked. On an appreciation of the evidence in the case, the trial court came to the following conclusions: i) Time was not the essence of the contract. R.F.A.278 & 279/2003. 7 ii) The defendants had committed breach of contract. iii) Plaintiffs were ready and willing to perform their part of the contract. Based on the above findings, the suits were decreed allowing specific performance of the contract as sought for by the plaintiffs. The said judgments and decrees are assailed in these appeals. 7. Learned counsel appearing for the appellants in these appeals raised mainly two points for consideration. They are i) time was the essence of the contract and ii) the discretion available under Section 20 of the Specific Relief Act has not been properly exercised. 8. Ext.A1 in each case, which is the agreement for sale in the respective cases is an admitted document. The contention of the defendants is that Ext.A1 is the third agreement in respect of the property with the respective plaintiffs. The first among was entered into on 11.5.1992 R.F.A.278 & 279/2003. 8 fixing a period of three months for completion of the sale. The defendants would say that the plaintiffs could not raise funds within the stipulated time and therefore they sought an extension of time and then came the second agreement dated 11.8.1992 wherein three months again was fixed for completion of sale. As the plaintiffs were still unable to raise funds, they sought for a further extension and very reluctantly and hesitantly the defendants executed Ext.A1 agreement dated 10.11.1992. The receipt of advance of Rs.10,000/- and Rs.5000/- in each of the case is admitted. 9. One of the contentions is that when the third agreement was executed, i.e.. agreement dated 10.11.1992, space for period of completion of the sale was left blank and it was filled up by the defendants, who specified that execution of the sale deed had to be completed within nine months. This act on the part of the defendants is put forward as a ground to contend for the position that time is the essence of the contract. The defendants would say that R.F.A.278 & 279/2003. 9 it was the plaintiffs who had committed breach of the contract. 10. The plaintiffs would say otherwise. They would point out that as per Ext.A1 agreement, the defendants had an obligation to measure the property, put up boundaries and to ensure that the properties are free from encumbrances. They did none of those things. Even though the plaintiffs demanded execution of the sale deed, it is alleged by them, the execution of the sale deed was put off under one pretext or another by the defendants and therefore they were guilty of breach of contract. 11. Learned counsel appearing for the appellants pointed out that the evidence of D.Ws.2 to 5 would clearly show that there were two prior agreements and that the stipulation of time in Ext.A1 agreement by the defendants would clearly show that the time was the essence of the contract. Learned counsel pointed out that the plaintiffs have no case that they had sought execution of the sale R.F.A.278 & 279/2003. 10 deed before the expiry of the period. The evidence, according to the learned counsel, would clearly show that the defendants were in dire need of money and therefore, under no circumstances they would have postponed the execution of the sale deed. According to learned counsel, an impartial analysis of the evidence in the case would clearly show that it was the plaintiffs in the respective cases who had committed breach of the contract. In support of the claim that time is the essence of the contract, learned counsel relied on the decisions reported in Joseph George v. Chacko Thomas (1992 (1) K.L.T.6) and Govind Prasad Chaturvedi v. Hari Dutt Shastri ((1977) 2 SCC 539). 12. Learned counsel appearing for the respondents on the other hand contended that there is absolutely no evidence in this case at all to the effect that Ext.A1 agreement was preceded by two other agreements as contended by the defendants. Learned counsel would contend that it is well settled that in cases of agreement for R.F.A.278 & 279/2003. 11 sale of immovable property, time is usually not treated as the essence of the contract. There are no indications in Ext.A1 to show that the parties had consciously made time as the essence of the contract. If as a matter of fact, it was so, the defendants ought to have issued notice before the expiry of the period calling upon the plaintiffs to pay the balance sale consideration and to get the sale deed executed after showing that they had done what they had to do under the contract. The act of sending a predated notice shows the malafides on the part of the defendants. The evidence would clearly show that the plaintiffs were always ready and willing to perform their part of the contract and it was the defendants who are in breach of the contract. The court below was therefore perfectly justified in coming to the conclusion that time is not the essence of the contract. 13. In each of the cases, the respective plaintiffs were examined as P.W.1. They speak in terms of the plaint. R.F.A.278 & 279/2003. 12 In each of the cases, the first defendant was examined as D.W.1. He would admit that Ext.A1 agreement in both the cases were executed by the defendants. He sticks to his contentions in the written statement. He would assert that on the date of execution of Ext.A1, the defendants were infact not inclined to enter into such an agreement, but under pressure from the plaintiffs, very reluctantly, the defendants signed the document. He would also claim that the period of nine months shown in Ext.A1 was written by him making it very clear that the transaction has to be completed within the expiry of nine months. He speaks about the incident on 10.8.1993 and the issuance of notice to the plaintiffs. He would claim that, that notice contained inadvertent mistakes and were wrongly addressed. He however admitted that at the relevant time cases were pending in respect of the suit property. But he would at once say that that was not a hurdle for execution of the sale deed at all. He would also assert that at the time of R.F.A.278 & 279/2003. 13 execution of Ext.A1 agreement, the plaintiffs were aware of the pendency of the suits. According to him, D.W.3, the scribe, is the real villain. He stated that at no point of time the defendants had declined to execute the sale deed. 14. D.W.2 is the father of one of the assignees from the defendants in each of the cases. He was examined to prove the purchase of the property in pursuance to an agreement dated 11.5.1992. Though he speaks about the sale in the name of his son, he denied having any knowledge of the agreements with the plaintiffs on the same day. The evidence of D.W.3 is open to serious doubt and a reading of his evidence would show that he is not speaking the truth. 15. The court below has found that there is no evidence at all to show that Ext.A1 was preceded by two other agreements as claimed by the defendants. One aspect needs to be noticed. If as a mater of fact, Ext.A1 was preceded by two other agreements, nothing prevented the defendants from insisting about mentioning the two R.F.A.278 & 279/2003. 14 agreements in Ext.A1 agreement. At any rate, the defendants could have insisted that Ext.A1 agreement was being executed on the request made by the plaintiffs for extension of time. That is also not there in Ext.A1. A reading of Ext.A1 would show that the agreement had been entered into for the first time and there is nothing to show that there were two prior agreements. It is more so, because, if, as a matter of fact there were two earlier agreements prior to Ext.A1, then obviously the advance amount would have been received much earlier than the date of execution of Ext.A1. But Ext.A1 would show that advance amount was received on the date of execution of Ext.A1. 16. Further, as per Ext.A1 agreement, the defendants had to perform certain acts. They had to get the properties measured, lay boundaries and also to ensure that the properties are free from encumbrances. Though the defendants would say that the plaintiffs in the respective suits were aware of the pendency of the litigation in respect R.F.A.278 & 279/2003. 15 of the suit property, at the time of execution of Ext.A1 agreement, there is no evidence regarding the same. There is also no evidence to show that the defendants had either measured the property or put up boundaries. Under these circumstances, the plaintiffs were fully justified in insisting that the property be freed from litigation and the same be conveyed to them. 17. The question is whether time can be treated as the essence of the contract. 18. In the decision reported in Joseph George v. Chacko Thomas (1992(1) K.L.T. 6) it was held as follows: “Under S.55 of the Contract Act, time is not the essence of contract to sell immovable property and a stipulation in the contract that the document has to be executed within a period fixed in the contract need not make the stipulation as to time essence of contract. Default clause by itself also need not evidence the intention to make time the essence of the contract, time can be the essence of the contract if it is intended to be so R.F.A.278 & 279/2003. 16 and such intention can be evidenced either by express stipulations or by strong circumstance to displace the presumption that in a contract for sale of land time is not the essence of the contract.” 19. In the decision reported in Govind Prasad Chaturvedi v. Hari Dutt Shastri ((1977) 2 SCC 539) it was held as follows: “The fixation of the period within which the contract has to be performed does not make the stipulation as to time the essence of the contract. When a contract relates to sale of immovable property it will normally be presumed that the time is not the essence of the the contract. Also the language used in the agreement is not such as to indicate in unmistakable terms that the time is of the essence of the contract. The intention to treat time as the essence of the contract may be evidenced by the circumstances which are sufficiently strong to displace the normal presumption that in a contract of sale of land stipulation as to time is not the essence of the contract.” R.F.A.278 & 279/2003. 17 20. Apart from the two decisions cited by the learned counsel for the appellants, a few other decisions may also be noticed. In the decision reported in Narinder Kumar Malik v. Surinder Kumar Malik ((2009) 8 SCC 743), it was held as follows: “To ascertain if the time was of the essence of the contract, we have to go through Condition (iii) of the MoU which categorically mentions that the second party viz. the respondent herein shall make the payment of the balance amount of Rs.3.25 crores within a maximum period of one hundred fifty days from the date of execution of the MoU i.e. up to or before 9.7.2005. However, this period of one hundred fifty days was extendable by another ten to twenty days, if need be with the consent of both the parties but not more. The High Court certainly fell into error in construing the said provision in right perspective and erred in coming to the conclusion that since time was extendable, the time could not have been made the essence of the contract. A bare R.F.A.278 & 279/2003. 18 perusal of the aforesaid provision makes it clear that ultimately the time was only up to 9.7.2005. However, with an intention to give further leverage to the respondent herein, the time was made extendable by ten to twenty days and not more and that too only with the consent of the parties. Even if it is said that 9.7.2005 could not have been the last date, atleast after twenty days the said last date expired.” 21. In the decision reported in Swarnam Ramachandran v. Aravacode Chakungal Jayapalan ((2004) 8 SCC 689), it was held as follows: “According to Pollock & Mulla: Indian Contract & Specific Relief Acts, the intention can be ascertained from: “(i) the express words used in the contract; (ii) the nature of the property which forms the subject-matter of the contract; (iii) the nature of the contract itself; and (iv) the surrounding circumstances.” That time is presumed not to be of essence of the contract relating to immovable property, but it is of essence in contracts of reconveyance R.F.A.278 & 279/2003. 19 or renewal of lease. The onus to plead and prove that time was the essence of the contract is on the person alleging it, thus giving an opportunity to the other side to adduce rebuttal evidence that time was not of essence. That when the plaintiff pleads that time was not of essence and the defendant does not deny it by evidence, the court is bound to accept the plea of the plaintiff. In cases where notice is given making time of the essence, it is duty of the court to examine the real intention of the party giving such notice by looking at the facts and circumstances of each case. That a vendor has no right to make time of the essence, unless he is ready and willing to proceed to completion and secondly, when the vendor purports to make time of the essence, the purchaser must be guilty of such gross default as to entitle the vendor to rescind the contract.” 22. In the decision reported in A.K.Lakshmipathy v. Rai Saheb Pannalal H. Lahoti Charitable Trust ((2010) 1 SCC 287) it was held as follows: “In our view, the decision of this court in Swarnam Ramachandran case would not be R.F.A.278 & 279/2003. 20 applicable in the facts and circumstances of the present case. It is true that it was conclusively held in the aforesaid decision of this Court on facts that time was not to be of the essence of the contract except in a reconveyance or renewal of lease, the facts and circumstances of that case were totally different from the one at hand. In the said case, there was a specific proviso to one of the clauses in the contract for sale which clearly stipulates that if payment was not made in time, the appellants who were the vendors could extend such date. Hence, in that decision, this court in the facts of that case held that time was not to be of the essence of the contract which was determined by this Court in the said decision on the intention of the parties as well as the written terms of the agreement. Clauses 3 and 10 of the contract for sale in this case clearly indicate that time was always meant to be of prime importance in the contract. In fact P.w.1, V.A.Gupta who was examined as a witness for the appellants admitted in his deposition that time was always of the essence of the contract and the appellants were aware of this R.F.A.278 & 279/2003. 21 even before entering into the contract. From the contract for sale also, we can very well see that time was repeatedly mentioned to be of prime importance and it was stated quite clearly that under all circumstances, the appellants would have to definitely deposit the balance amount of Rs.5 lakhs by the date stipulated in the contract for sale. Hence, this submission advanced by Mr.Venugopal, that time was not the essence of the contract cannot at all be accepted and, therefore, we reject the same.” 23. In the decision reported in Citadel Fine Pharmaceuticals v. Ramaniyam Real Estates Private Limited ((2011) 9 SCC 147) it was held as follows: “In case of a contract relating to sale of immovable property, time is not normally of the essence. However, this is not an absolute proposition and has several exceptions. From the terms of agreement in the instant case time was of the essence and this was clearly stipulated and understood by parties, especially when consequences of non-completion of terms of the purchaser within the stipulated time were clearly R.F.A.278 & 279/2003. 22 spelt out in Clause 9. Furthermore,in a contract relating to commercial enterprise the court is strongly inclined to hold time to be essential, whether the contract is for the purchase of land or for such purposes or more “directly for the prosecution of trade”. here the purchaser was admittedly in the business of building construction and was entering into the agreement for purchasing the plot on commercial basis. The court can also take judicial notice