IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 15.06.2010 CORAM THE HONOURABLE MR. JUSTICE P.R.SHIVAKUMAR Appeal Suit No.196 of 2002 S.Sambandam ...Appellant/ Plaintiff Vs. P.Daivasigamani ... Respondent/ Defendant Prayer: Appeal filed under Section 96 of Civil Procedure Code against the judgment and decree dated 28.6.2002 made in O.S.No.212 of 1993 on the file of Learned Subordinate Judge, Poonamallee and grant the relief of specific performance of the agreement for sale dated 05.10.1989 or in the alternative confirm the decree for refund of advance and also grant compensation of Rs.2,50,000/- with interest and costs and the alternative reliefs have claimed without giving up the main relief of specific performance. For Appellant : Mr.Venkatapathy Senior Counsel for Mr.K.V. Sundarajan For Respondent : Mr.Palaniappan Anand Jain JUDGMENT The plaintiff in the Original Suit is the appellant herein. The suit was filed for specific performance of an agreement for sale dated 05.10.1989 or in the alternative for refund of the advance amount with interest and for the recovery of a sum of Rs.2,50,000/- as compensation for breach of contract and also for a permanent injunction restraining the defendant from alienating or transferring the suit property to any other person. After trial, the learned trial Judge decreed the suit in respect of the prayer for refund of advance amount with interest at the rate of 12% per annum and dismissed the suit in respect of other prayers by a judgment and decree dated 28.6.2002. As against the decree of the trial Court dismissing the suit in respect of the prayer for specific performance of the contract and in the alternative for damages and also for permanent injunction, the present appeal has been preferred. https://hcservices.ecourts.gov.in/hcservices/ 2.The case of the appellant/plaintiff in brief can be stated as follows: The respondent/defendant is the owner of the property described in the plaint schedule as suit property, namely, an extent of 1 acre out of 1.80 acre of wet land comprised in S.Nos.287 and 288 situated in No.85, Ayyanambakkam Village within the Sub-Registration District of Ambattur and Registration District of Chennai North. The respondent/defendant agreed to sell and the appellant/plaintiff agreed to purchase the suit land for a sum of Rs.6,50,000/- at the rate of Rs.6,500/- per cent. Consequently, a written agreement was entered into between the appellant/plaintiff and respondent/defendant on 05.10.1989, on which date a sum of Rs.50,000/- was paid to the respondent/defendant as advance and part payment of the sale consideration. Time for completion of the sale transaction was stipulated to be 6 months in the suit sale agreement. But the time fixed in the agreement was not specifically agreed to be the essence of the contract. The respondent/defendant undertook to obtain and produce Income Tax clearance certificate and up-to-date Encumbrance Certificate. He had also agreed to hand over vacant possession of the suit property at the time of execution of the sale deed. In addition to that the respondent/defendant also agreed to execute a deed of irrevocable Power of Attorney in favour of the appellant/plaintiff. Though the appellant/plaintiff periodically contacted the respondent/defendant and informed him about his readiness and willingness to perform his part of the contract and requested the respondent/defendant to execute the sale deed after obtaining Income Tax clearance certificate and Encumbrance Certificate, the respondent/defendant failed to get those documents and failed to execute even an irrevocable Power of Attorney in favour of the appellant/plaintiff. In fact, the appellant/plaintiff had prepared a deed of irrevocable Power of Attorney and handed over the same to the respondent/defendant for execution and registration. But the respondent/defendant did not come forward to execute the deed of Power of Attorney. Therefore, the appellant/plaintiff sent a letter by registered post on 17.3.1990 calling upon the respondent/defendant to execute a deed of Power of Attorney and also to conclude the sale transaction. But the respondent/defendant refused to receive the said registered letter. Thereafter, the appellant/plaintiff sent a lawyer's notice dated 26.3.1990, which was also returned with an endorsement “refused”, pursuant to which, the appellant/plaintiff caused a public notice to be issued by way of publication in the Tamil daily “Dhina Thanthi” on 02.5.1990 and in the English daily “Indian Express” on 06.5.1990 warning the public from entering into any sale transaction in respect of the suit property with the respondent/defendant. Despite the said efforts taken by the appellant/plaintiff, the respondent/defendant failed to fulfill his obligations under the agreement for sale. The appellant/plaintiff had been ever willing and ready to perform his part of the contract https://hcservices.ecourts.gov.in/hcservices/ under the suit agreement and on the other hand, the respondent/defendant was not ready and willing and hence the appellant/plaintiff was constrained to file the suit for the above said reliefs. 3.The suit was contested by the respondent/defendant by filing a written statement, the contents of which, in brief, are as follows:- The suit as framed by the plaintiff is not maintainable. The pleading made by the appellant/plaintiff in the plaint regarding the execution of the agreement and the fixation of the consideration are true. But the advance amount of Rs.50,000/- was not paid on the date of agreement as contended by the appellant/plaintiff. The appellant/plaintiff gave a cheque for the said amount and as per the request of the respondent/defendant, 2 months after the date of agreement, the appellant/plaintiff paid Rs.50,000/- in cash and got back the cheque from the respondent/defendant. The readiness and willingness on the part of the appellant/plaintiff and the absence of the same on the part of the respondent/defendant as pleaded by the appellant/plaintiff in the plaint is denied as false. The allegations regarding the registered letter dated 17.3.1990 are not true. The appellant/plaintiff himself, after sending the said letter, had somehow managed to get it returned with the endorsement “refused”. The respondent/defendant did not have any knowledge of the lawyer's notice allegedly sent by the appellant/plaintiff through his lawyer on 26.3.1990. Respondent/defendant is also not aware of the alleged publications made in the newspapers. The respondent/defendant was always ready and willing to perform his part of the contract under the agreement for sale. On the other hand, appellant/plaintiff was not ready and willing and it was he who committed default. As such, the contract stands rescinded and no such contract was in subsistence as on the date of filing of the suit. The appellant/plaintiff having committed default shall not be entitled to the relief of specific performance or damages. On the other hand, because of the default committed by the appellant/plaintiff, the advance amount of Rs.50,000/- paid by him stands forfeited and the appellant/plaintiff shall be liable to pay damages to the tune of Rs.5,00,000/- to the respondent/defendant for the mental torture caused by the failure of the appellant/plaintiff to fulfil his obligations. However, the respondent/defendant reserves his right to file a separate suit for claiming damages against the appellant/plaintiff. The suit is time barred. For all the above said reasons, the suit filed by the appellant/plaintiff should be dismissed with cost. One Sundaram, Manager of “Indegar Paints and Warnish Co.” in whose presence the agreement was finalized is a necessary party to the suit for proper adjudication and the plaintiff would not be entitled to any relief without making him a party to the suit. https://hcservices.ecourts.gov.in/hcservices/ 4.Based on the above said pleadings, the learned trial Judge framed 7 issues which are as follows:- 1) Whether the plaintiff has paid the advance of Rs.50,000/-? 2) Whether the plaintiff has not demanded the enforcement of contract? 3) Whether the plaintiff has been ready and willing to perform the obligations under the contract? 4) Whether the advance amount has been forfeited? 5) Whether the suit is in time? 6) Whether the plaintiff is entitled for specific performance? 7) Whether alternatively the plaintiff is entitled for return of advance and damages in case of refusal of decree for specific performance Which relief is claimed without giving up the claim of specific performance? 5.On the side of the appellant/plaintiff, he figured as the sole witness, namely PW1 and Exs.A1 to A7 were marked. Similarly, on the side of the respondent/defendant, he was examined as the sole witness (DW1) and no document was marked on his side. 6.The trial Court considered the pleadings and evidence in the light of the arguments advanced on either side and, upon such consideration, came to the conclusion that the time stipulated in the agreement was the essence of the contract; that the appellant/plaintiff was not able to prove his readiness and willingness from the date of agreement till the filing of the suit to perform his part of the contract under the suit agreement and that hence, the appellant/plaintiff was not entitled to either the relief of specific performance or for recovery of damages as claimed by him. The trial Court also held that the relief of injunction sought for by the appellant/plaintiff could not be granted in favour of the appellant/plaintiff. However, the learned trial Judge held that the appellant/plaintiff was entitled to the refund of the advance amount with an interest on the same at the rate of 12% p.a from the date of agreement till realization. Accordingly, the trial Court passed a decree directing refund of the advance amount of Rs.50,000/- to the appellant/plaintiff together with an interest at the rate of 12% p.a from the date of suit sale agreement till the date of realization and dismissing the suit in respect of other reliefs with a direction that the parties should bear their respective costs. 7.Aggrieved by and challenging the judgment and decree of the trial Court dated 28.6.2002, the appellant/plaintiff has come forward with the present appeal on various grounds set out in the memorandum of appeal. https://hcservices.ecourts.gov.in/hcservices/ 8.The arguments advanced by Mr.Venkatapathy, learned senior counsel representing the counsel on record for the appellant and Mr. Mr.Palaniappan Anand Jain, learned counsel appearing on behalf of the respondent were heard and the materials available on record, including judgment of the trial Court and evidence recorded by the trial Court, both oral and documentary, were also perused. 9.The points that arise for consideration in the appeal are:- 1.Whether the time stipulated in the suit agreement is the essence of the contract? 2.Whether the finding of the trial Court regarding Issue No.5 framed in the suit that the suit was not filed in time is erroneous? 3.Whether the finding of the trial Court that the plaintiff failed to prove his readiness and willingness to perform his part of the contract is erroneous? 4.Whether the appellant/plaintiff is entitled to the relief of specific performance? 5.To what other relief/reliefs the appellant/plaintiff is entitled? Point No.1 10.The plaintiff in the original suit, who proved to be unsuccessful in getting a decree for specific performance of contract based on the suit agreement for sale or in the alternative for recovery of a sum of Rs.2,50,000/- as damages and also for a perpetual injunction, but proved to be partly successful in getting a decree for the refund of the advance amount with interest at the rate of 12%p.a., has come forward with this appeal. 11.It is not in dispute that the appellant/plaintiff and the respondent/defendant entered into an agreement for sale of the suit property to the appellant/plaintiff; that a sum of Rs.6,50,000/- was fixed as total consideration and that a sum of Rs.50,000/- was paid as advance. The suit agreement for sale dated 05.10.1989 has been produced and marked on the side of the appellant/plaintiff as Ex.A1. Though the contention of the appellant/plaintiff regarding the date of payment of the advance has been disputed by the respondent/defendant in his written statement, the same makes no difference. However, a consideration of the contention of the respondent/defendant in this regard shall be helpful to decide the conduct of the parties and also the veracity of the respondent/defendant who deposed as DW1. In paragraph 7 of the written statement, the respondent/defendant has stated that the appellant/plaintiff had given a cheque for Rs.50,000/- towards payment of advance amount and that since the respondent/defendant insisted upon payment in cash, the appellant/plaintiff paid a sum of Rs.50,000/- in cash in December 1989 and got back the cheque. The suit agreement is dated 05.10.1989. Therefore, it is quite obvious that the pleading made by the respondent/plaintiff in the https://hcservices.ecourts.gov.in/hcservices/ written statement is to the effect that a cheque was issued on the date of agreement and two months after the date of agreement, namely, in December 1989, the appellant/plaintiff paid a sum of Rs.50,000/- in cash and got back the cheque issued on the date of agreement. But curiously, the evidence of DW1 in this regard is contradictory to the above pleading. DW1 in his evidence would state that a cheque for a sum of Rs.50,000/- was given to him in the month of September 1989 i.e., anterior to the date of execution of the suit sale agreement (Ex.A1) and that since he declined to accept the cheque, the advance amount was paid in cash on the date of agreement. The said contradiction between the pleading and evidence will tell upon the conduct of the respondent/defendant in dealing with the appellant/plaintiff pursuant to Ex.A1 agreement. On the other hand, appellant/plaintiff who figured as PW1 seems to have stated the correct facts which transpired. He has stated that on 11.9.1989, he met the respondent/defendant with the draft agreement and a cheque for the advance amount and the respondent/defendant refused to accept payment by cheque and hence, he paid the advance in cash on 05.10.1989 were upon the respondent/defendant signed the agreement. Whatever may be the impact of the said pleading and evidence on the conduct of the parties, as pointed out supra, it becomes immaterial so far as the payment of sum of Rs.50,000/- as advance on the date of agreement has been admitted by the defendant while deposing as DW1. 12.The next question that arises for consideration is whether the time stipulated in the agreement was agreed to be the essence of the contract. If the time was agreed to be the essence of the contract, then the party approaching the Court should have either performed his obligations in its entirety or would have come forward to perform his obligations under the agreement within the time stipulated in the agreement and in the event of time being the essence of contract, the aggrieved party should have approached the Court without latches. In this case, the learned trial Judge has given a finding that the time stipulated in Ex.A1 agreement was agreed to be the essence of the contract. There is a specific pleading by the appellant/plaintiff in his plaint that though a time of 6 months had been stipulated in Ex.A1 agreement for the completion of the transaction, the same was not agreed to be the essence of the contract. On the other hand, the defendant has not come forward with a clear and unambiguous plea in the written statement that the time stipulated in the agreement was agreed to be the essence of the contract. He has simply stated that the transaction should have been completed within six months and he waited for six months without doing any act in furtherance of the completion of the transaction in the hope that the appellant/plaintiff would make payment of the balance consideration and get the sale deed executed and that since the appellant/defendant had not chosen to do so, the agreement stands rescinded and the advance amount stands forfeited. As against the https://hcservices.ecourts.gov.in/hcservices/ specific plea made in the plaint that time was not agreed to be the essence of contract,there is no such clear or unambiguous plea in the written statement to the effect that time was agreed to be the essence of contract. Even in the evidence, DW1 has not stated that the time stipulated in the agreement was agreed to be an essential condition of the contract. He would simply state that the appellant/plaintiff did not make payment of the balance consideration within six months; that despite his demand for payment of balance consideration within six months, appellant/plaintiff did not make such payment and that on the other hand, the appellant/plaintiff informed him that he could not arrange funds as his friends failed to help him in arranging the funds. However, he has also admitted during cross examination that on the date of Ex.A1 agreement itself, the appellant/plaintiff entered into another agreement with his sister Pushparani, the respondent in the connected appeal and a letter dated 17.3.1990 i.e., within six months from the date of agreement, sent by the appellant/plaintiff to the sister of the defendant and received by her was perused by him (DW1). He would also admit that no reply was sent for the letter thus received by his sister. Ex. A2 letter was sent to the defendant on the same day on which a similar letter was sent to his sister. The letter sent to his sister was admittedly received by her. On the other hand, the registered letter sent to the defendant under Ex.A3, a copy of which has been marked as Ex.A2, was returned with the postal endorsement “refused”. It shall be clear from the same that after knowing that a letter similar to the one sent to his sister was sent by the plaintiff under Ex.A3, the respondent/defendant has refused to receive the same. 13.The appellant/plaintiff seems to have sent a lawyer's notice under the returned postal cover Ex.A5 on 26.3.2003. A copy of the notice has been marked as Ex.A4. The said notice was also returned with the postal endorsement 'refused'. From these documents coupled with the clear testimony of PW1, it becomes obvious that the plaintiff besides making a clear and unambiguous plea that the time stipulated in the agreement was not agreed to be the essence of contract, he had also taken steps within the period of six months stipulated in Ex.A1 agreement towards the completion of the transaction. On the other hand, the respondent/defendant did nothing towards the completion of the transaction but has chosen to refuse to receive the registered letter and lawyer's notice sent even within that period of six months only after perusing a similar letter sent to his sister and was receive by her. Further more, there is absence of clear indication in the agreement that the time stipulated therein was agreed to be the essence of the contract. In fact Clause 2 of the agreement simply recites as follows:- “2.The sale shall be completed within a period of six (6) months from this day” https://hcservices.ecourts.gov.in/hcservices/ It does not proceed with a further stipulation that the said time was agreed to be the essence of the contract. There is not even a clause incorporated in the agreement that in case of failure to complete the transaction within 6 months, penal consequences like forfeiture of advance would arise. On the other hand, the very next clause namely, Clause No.3 states that advance amount shall be adjusted towards the sale consideration. Clauses 4 and 5 are to the effect that the vendor should obtain and produce Income Tax clearance certificate well in advance and also obtain and produce up-to-date Encumbrance certificate to the purchaser. Clause 7 says, “Both the parties shall have the right to specific performance of this contract”. 14.A reading of above clauses found in the agreement will make it clear that though a time for completion of the transaction has been fixed in the agreement, there is nothing to show that the said time was agreed to be the essence of the contract. The learned trial Judge, without considering the repeated views expressed by the High Court and the Supreme Court in this regard, has been carried away by the word 'shall' employed in clause 2 of the agreement and arrived at a conclusion that the time was agreed to be the essence of the contract. In this regard, taking note of two judgments of the Hon'ble Supreme Court shall be appropriate. A three Judge Bench of Hon'ble Supreme Court in Govind Prasad Chatturvedi Vs.Hari Dutt Shastri reported in (1977) 2 SCC 539 has made the following observations:- “when a contract relates to sale of immovable property, it will normally be presumed that the time is not the essence of the contract. It may also be mentioned that 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 contract may be evidenced by the circumstances which are sufficiently strong to displace the normal presumption that in a contract for sale of land stipulation as to time is not the essence of contract.” The Hon'ble Supreme Court also pointed out that the defendant in that case had not set up a clear plea that the time was the essence of contract and that when such a plea was not taken, the Court should not impute a plea that the time was the essence of contract. The said observation made by the Hon'ble Supreme Court squarely applies to the facts of the case. The written statement of the respondent/defendant does not contain an unambiguous plea that time was agreed to be the essence of contract, whereas a clear and specific plea has been made by the appellant/plaintiff to the effect that the time was not the essence of the contract. The agreement also does not contain any such unambiguous clause to dispel the presumption that the time was not the essence of contract in respect of an agreement for sale of immovable property. 15.In Swarnam Ramachandran (Smt) & Anr. V. Aravacode Chakungal Jayapalan reported in (2004) 8 SCC 689, the Hon'ble Supreme Court https://hcservices.ecourts.gov.in/hcservices/ observed, “time is presumed not to be essence of contract relating to immovable property, but it is of essence in contracts of reconveyance or renewal of lease. The onus to plead and prove that time was the essence of 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. 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 due duty of the Court to examine the real intention of the parties giving such notice by looking at the facts and circumstances of each case”. 16.In Chand Rani(Dead by Lrs) Vs. Kamal Rani (dead by Lrs) reported in (1993) 1 SCC 519, a Constitution Bench of the Hon'ble Supreme Court made the following observations:- “It is a well-accepted principle that in the case of sale of immovable property, time is never regarded as the essence of the contract. In fact, there is a presumption against time being the essence of the contract. This principle is not in any way different from that obtainable in England. Under the law of equity which governs the rights of the parties in the case of specific performance of contract to sell real estate, law looks not at the letter but at the substance of the agreement. It has to be ascertained whether under the terms of the contract the parties named a specific time within which completion was to take place, really and in substance it was intended that it should be completed within a reasonable time. An intention to make time the essence of the contract must be expressed in unequivocal language.” 17.Referring to all the earlier decisions in this regard, the Hon'ble Supreme Court in Balasaheb Dayandeo Naik (Dead) through LRs and Ors Vs.Appasaheb Dattatraya Pawar reported in 2008 (1) CTC 530 has held that even in cases wherein a default clause providing for forfeiture of the advance amount has been incorporated along with a specific recital that time was the essence of contract, stipulating extension of time in certain contingencies or payment of fine or penalty etc., would be construed to render ineffective the express provision stipulating the