HIGH COURT OF UTTARAKHAND AT NAINITAL Second Appeal No. 38 of 2004 Ilam Chand & others …. Defendants/Appellants .. Versus Smt. Kunta … Plaintiff/Respondent Sri Lok Pal Singh, Advocate for the defendants/appellants. Sri A.K. Sharma, Advocate for the plaintiff/respondent. 23rd October, 2009 Hon’ble Sudhanshu Dhulia, J. Heard Sri Lok Pal Singh, Advocate for the defendants/appellants as well as Sri A.K. Sharma, Advocate for the plaintiff/respondent. The plaintiff/respondent had filed a suit for specific performance against the defendants/appellants being Suit No. 136 of 1996. The facts giving rise to the filing of the aforesaid suit are as follows : An agreement was executed between the plaintiff and the defendants on 29.10.1992 which was registered as per the agreement the defendants had to sell its land to the plaintiff for a consideration of Rs. 3,87,765/- for which as per the agreement an amount of Rs. 1,00,000/- was given as earnest money. The remaining amount was to be given by the plaintiff to the defendants within a year and the sale deed was to be executed on 31.8.1993. According to the plaintiff since the defendants refused to execute the sale deed, she constrained to file a suit for specific performance against the defendants. The trial court formulated the following issues : 2 (A) Whether the plaintiff, as per the agreement dated 29.10.1992 was always ready and willing to execute the sale deed ? (B) Whether there has been a breach of contract on the part of the plaintiff and consequently the amount given by the plaintiff to the defendants i.e. Rs. 1,00,000/- is not liable to be returned to the plaintiff? (C) Whether the suit is barred by Section 20 of the Specific Relief Act? (D) Whether the suit is barred by limitation? (E) Whether the time was an essence of contract? If yes, then its effect? (F) To what relief the plaintiff is entitled for? (G) Whether as per the terms of the agreement the defendants had dug and installed tube- well and planted trees? If yes, then its effect? (H) Whether the suit is barred by Section 154 of Zamindari Abolition Act? The trial court after examining the entire evidence on record and after considering the arguments advanced by both the parties came to the conclusion as far as “readiness and willingness” is concerned, neither the plaintiff nor the defendants showed any readiness or willingness to execute the contract and as such following decree was passed : The amount of Rs. 1,00,000/- along with 11 per cent interest was given to the plaintiff. The interest was to be calculated from the date of the agreement i.e. 29.10.1992. Against the said decree the defendants filed a first appeal being Civil Appeal No. 6/2000 Ilam Chand & others v. Smt. Kunta. The lower appellate court had dismissed the appeal of 3 the defendants and confirmed the decree passed in favour of the plaintiff. Aggrieved, the defendants have filed the present second appeal. This second appeal has been admitted on the following substantial questions of law : (A) Whether the Courts can pass a decree in favour of plaintiff beyond the terms of contract along with 11 % interest, where there is no condition in the contract for refund of money along with interest? (B) Whether unless the Courts found that the main relief sought by the plaintiff/respondent cannot be granted without recording the findings in this regard, whether the Court can grant alternative relief and without refusing the main relief for specific performance, the learned Courts below committed illegality in granting the alternative relief ? Both the substantial questions of law on which the second appeal is admitted are being decided accordingly. First and foremost, the relief of specific performance is a discretionary relief. Undoubtedly this discretion can never be arbitrary and has to be passed on sound and reasonable established principles. Nevertheless, the trial court as well as the lower appellate court has come to a considered view that under the present facts and circumstances and based on the findings adduced by both the parties the readiness and willingness both on the part of the plaintiff and the defendants could not be clearly established. Consequently instead of granting a decree of specific performance, the trial court has rightly decreed that an amount of Rs. 1,00,000/- given by the plaintiff to the defendants will be returned along with 11 per cent interest. This Court finds no anomaly as far as the trial 4 court’s conclusion and the amount of Rs. 1,00,000/- is concerned. The only question would be of the interest awarded by the court. Section 34 of the C.P.C. reads as follows : “34. Interest. – (1) Where and in so far as a decree is for the payment of money, the Court may, in the decree, order interest at such rate as the Court deems reasonable to be paid on the principal sum adjudged, from the date of the suit to the date of the decree, in addition to any interest adjudged on such principal sum for any period prior to the institution of the suit, [with further interest at such rate not exceeding six per cent per annum as the Court deems reasonable on such principal sum], from the date of the decree to the date of payment, or to such earlier date as the Court thinks fit” [provided that where the liability in relation to the sum so adjudged had arisen out of a commercial transaction, the rate of such further interest may exceed six per cent per annum, but shall not exceed the contractual rate of interest or where there is no contractual rate, the rate at which moneys are lent or advanced by nationalised banks in relation to commercial transactions. Explanation I. – In this sub-section, “nationalised bank” means a corresponding new bank as defined in the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 (5 of 1970). Explanation II. – For the purposes of this section, a transaction is a commercial transaction, if it is connected with the industry, trade or business of the party incurring the liability.] 5 (2) Where such a decree is silent with respect to the payment of further interest [ on such principal sum] from the date of the decree to the date of payment or other earlier date, the Court shall be deemed to have refused such interest, and a separate suit therefor shall not lie.” Therefore, the first substantial question of law on which this second appeal has been admitted is answered as follows : The proviso to Section 34 of C.P.C. clearly states that interest can be awarded in the decree but it shall not exceed the contractual rate of interest but in case there is no contractual rate of interest (as in the present case), then in such cases the rate of interest shall be the interest on which moneys are lent or advanced by nationalised banks in relation to commercial transactions. The matter pertains to the year 1992 – 93 where the advance made by the nationalised bank on such rate of interest was common place. Therefore, not only the fact that the trial court has awarded interest on the earnest money is correct, rate of interest so calculated is also free from any fault. In short, there is no fault in such a decree. Regarding the second substantial question of law on which the second appeal has been admitted, it has already been stated that decree for specific relief is a discretionary remedy as provided in Section 20 of the Specific Relief Act, 1963. Section 20 of the Specific Relief Act reads as follows : “20. Discretion as to decreeing specific performance. – (1) The jurisdiction to decree specific performance is discretionary, and the court is not bound to grant such relief merely because it is lawful to do so; but the discretion of the court is not arbitrary but sound and reasonable, guided by judicial principles and capable of correction by a court of appeal. 6 (2) The following are cases in which the court may properly exercise discretion not to decree specific performance :- (a) where the terms of the contract or the conduct of the parties at the time of entering into the contract or the other circumstances under which the contract was entered into are such that the contract, though not voidable, gives the plaintiff an unfair advantage over the defendant; or (b) where the performance of the contract would involve some hardship on the defendant which he did not foresee, whereas its non-performance would involve no such hardship on the plaintiff; or (c) where the defendant entered into the contract under circumstances which though not rendering the contract voidable, makes it inequitable to enforce specific performance. Explanation 1. – Mere inadequacy of consideration, or the mere fact that the contract is onerous to the defendant or improvident in its nature, shall not be deemed to constitute an unfair advantage within the meaning of clause (a) or hardship within the meaning of clause (b). Explanation 2. – The question whether the performance of a contract would involve hardship on the defendant within the meaning of clause (b) shall, except in cases where the hardship has resulted from any act of the plaintiff subsequent to the contract, be determined with reference to the circumstances existing at the time of the contract. (3) The court may properly exercise discretion to decree specific performance in any case where the plaintiff has done substantial acts or suffered losses 7 in consequence of a contract capable of specific performance. (4) The court shall not refuse to any party specific performance of a contract merely on the ground that the contract is not enforceable at the instance of the party.” The fact that such a discretion has been rightly adopted has already been stated in the preceding paragraph of the present order. Hence, there is no fault in that part of the impugned order and judgment as well. The second substantial question of law is also answered accordingly. However, on well- established principles, the interest shall be calculated not from the date of the agreement i.e. 29.10.1992 but it shall be calculated from the date of filing of the suit i.e. 22.8.1996. The decree of the trial court shall be suitably modified to the extent given in this judgment. Hence both the substantial questions of law, on which this second appeal was admitted, are decided against the Appellants/defendants and the second appeal is accordingly dismissed. The decree of the courts below is upheld, subject to the aforesaid modification that the interest of 11 % shall be calculated from the institution of suit and not from the date of the agreement. No order as to costs. (Sudhanshu Dhulia, J.) 23.10.2009 Avneet