IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 07-07-2010 CORAM THE HONOURABLE MR.JUSTICE M.JAICHANDREN S.A.No.1283 of 2008 and M.P.No.1 of 2008 1.A.Natarajan 2.N.K.Sengaliappan 3.Sangameswaran .. Appellants/Defendants 1 to 3 Versus 1.M/s.Chitra Mills Rep. By S.Kumar No.11, Rajarao Street, Thiruppur. 2.Messrs. Pentool Products by its Manager, Ranga Konar Street, Kattoor, Coimbatore-9. 3.Mrs.Deivathal .. Respondents/Plaintiff and Defendants 4 & 5. PRAYER: Appeal against the judgment and decree, dated 21.8.2007, made in A.S.No.115 of 2004, on the file of the learned Principal District Judge, Coimbatore, confirming the judgment and decree, made in O.S.No.568 of 1992, dated 9.12.2003, on the file of the Principal Subordinate Judge Court, Coimbatore. For Appellants : Mr.C.R.Prasanan For RespondentNo.2 : Mr.P.M.Duraiswamy J U D G M E N T This second appeal has been filed against the judgment and decree, dated 21.8.2007, made in A.S.No.115 of 2004, on the file of the Principal District Court, Coimbatore, confirming the judgment and decree, dated 9.12.2003, made in O.S.No.568 of 1992, on the file of the Principal Subordinate Court, Coimbatore. https://hcservices.ecourts.gov.in/hcservices/ 2. Defendants 1 to 3 in the suit, in O.S.No.568 of 1992, are the appellants in the present second appeal. The plaintiff in the suit is the first respondent herein. The plaintiff had filed the suit praying for a decree of specific performance of the agreement for sale, dated 4.11.1987, marked as Ex.A-1. 3. In the registered agreement, dated 4.11.1987, it had been agreed that the sale of the suit property is to take place within a period of one year from the date of the agreement. An advance amount of Rs.2,00,000/- had been paid, as part of the sale consideration, on the date of the agreement. Thereafter, by way of Ex.A-2, dated 22.10.1988, the period specified in the agreement, dated 4.11.1987, had been extended by three months and an amount of Rs.25,000/- had been taken from the plaintiff on the said date and an endorsement had been made on the back side of the agreement, acknowledging the said fact. As such, the agreement ought to have expired on 21.4.1989. 4. It had also been stated that a power of attorney had been obtained from the second defendant in favour of S.Kumar, a partner in the plaintiff mill. The said document, dated 24.2.1989, had been marked as Ex.A-4. Thereafter, by way of an endorsement made on 15.4.1989, which had been marked as Ex.A-3, the period for execution of the sale deed had been extended by another period of three years stating that the tenant was in occupation of the property in question and therefore, the sale of the property in question can be effected only after the property is vacated by the tenant. 5. It has been further stated by the plaintiff that, even after repeated reminders, asking the concerned defendants to execute the sale deed, they had not come forward to do so. Therefore, the plaintiff had issued a legal notice, dated 3.4.1992, marked as Ex.A- 5. Since, there was no proper response from the defendants, the plaintiff had filed the suit, praying for the relief of specific performance of the sale agreement, dated 4.11.1987, on 10.4.1992. 6. In the written statement filed on behalf of the defendants, it had been stated that the defendants had never executed an agreement in favour of the plaintiff agreeing to convey the properties mentioned in the suit schedule for a sum of Rs.2,50,000/-, as alleged by the plaintiff. The agreement referred to in the plaint had been executed by the defendants only in view of certain circumstances which had been narrated in the written statement. 7. It had been stated that a partner of the plaintiff mill, namely, S.Kumar is the son of one Subramaniam, who is closely related to the defendants. In the year 1987, the defendants 1 to 3 had approached the said Subramaniam for a loan of Rs.2,00,000/- for which the said defendants were prepared to give their immovable properties, as security for the loan. Subramaniam, after consulting his son S.Kumar, had agreed to advance a loan of Rs.2,00,000/-. S.Kumar had https://hcservices.ecourts.gov.in/hcservices/ suggested the execution of the agreement in favour of the plaintiff Mill instead of executing a document offering the immovable properties, as security for the loan. It had also been represented by Subramaniam and his son that the amount given as loan should be returned in a period of five years, with interest at 18% per annum. Based on the request of Subramaniam and his son S.Kumar, the defendants had executed the registered agreement in favour of the plaintiff mill. 8. It had also been stated that an additional amount of Rs.25,000/- had been paid by the plaintiff, as an additional loan to the defendants. There was no agreement between the plaintiff and the defendants to hand over vacant possession of the property in question. The plaintiff is aware of the fact that the fourth defendant was in possession of the property, as a tenant, and it was not possible for the defendants to get the tenant vacated. It had also been claimed that the defendants had never extended the period, as claimed by the plaintiff. No endorsement had been made in the agreement, dated 4.11.1987, as alleged in the plaint. 9. It had also been stated that the defendants did not execute any document, dated 20.4.1989, extending the period for executing the sale deed. The allegation of the plaintiff that the period had been extended only in view of the fact that the fourth defendant was in possession of the property concerned, as a tenant, is incorrect. A reading of the agreement would clearly show that it was intended to be only a mortgage and not an agreement to convey the property in favour of the plaintiff. 10. It had also been stated that, on 25.1.1991, a sum of rupees two lakhs had been paid to S.Kumar and his father Subramaniam, towards the interest, along with a portion of the principal amount. While receiving the said amount, S.Kumar and his father had agreed to cancel the agreement, after receiving the balance amount due from the defendants. While so, the plaintiff had filed the suit for specific performance of the agreement, by making false and frivolous allegations against the defendants. 11. In view of the averments made on behalf of the plaintiff, as well as the defendants 1 to 3, the trial Court had framed the following issues for consideration. 1) Whether the plaintiff is entitled to possession, as prayed for in the suit? 2) Whether the suit is barred by limitation? 3) What relief the plaintiff is entitled to? https://hcservices.ecourts.gov.in/hcservices/ 12. The following additional issue had been framed by the trial Court, on 16.12.2003. Whether the plaintiff is entitled to the relief of specific performance? 13. Two witnesses had been examined on behalf of the plaintiff and documents Exs.A-1 to A-15, had been marked in favour of the plaintiffs. Three witnesses had been examined on behalf of the defendants and documents Exs.B-1 to B-11 had been marked as exhibits. One witness had been examined as Court witness. 14. Accepting the contentions raised on behalf of the plaintiff the trial Court had come to the conclusion that the agreement, dated 4.11.1987, entered into between the plaintiff and the defendants 1 to 3, marked as Ex.A-1, is an agreement for sale of the suit property and not a mortgage, as claimed by the said defendants. The trial Court had also found that the period fixed for the execution of the sale deed had been extended for a further period of six months, by way of Ex.A-2, dated 22.10.1988, on payment of Rs.25,000/-, by the plaintiff to the defendants. Thereafter, a power of attorney had been obtained from the second defendant in favour of S.Kumar, a partner in the plaintiff mill, dated 24.2.1989, marked as Ex.A-4. Based on the power of attorney an endorsement had been made on behalf of the second defendant by S.Kumar and the defendants 1 and 3 had also made an endorsement, along with S.Kumar, for the extension of the period for executing the sale deed, extending the period by another three years, as found from Ex.A-3, dated 15.4.1989. 15. The trial Court had also found that in spite of the plaintiff being ready and willing, the respondents 1 to 3 had not executed the sale deed, as per the agreement, dated 4.11.1987, and therefore, the plaintiff had issued a legal notice, dated 3.4.1992, marked as Ex.A-5, asking the defendants 1 to 3 to execute the sale deed, as agreed by them. Since, there was no response from the said defendants the plaintiff had filed the suit in O.S.No.568 of 1992, on the file of the Subordinate Judge, Coimbatore. 16. The trial Court had also found that the suit was not barred by limitation, as alleged by the defendants, as it had been filed within the time limit prescribed for the filing of the said suit, based on the endorsement granting the extension for the execution of the sale deed. The trial Court had not accepted the claim that the agreement was in fact a mortgage. As such, the trial Court had decreed the suit in favour of the plaintiff, by its judgment and decree, dated 9.12.2003. 17. Aggrieved by the judgment and decree of the trial Court, dated 9.12.2003, the defendants 1 to 3 had filed an appeal, on the file of the Principal District Court, Coimbatore, in A.S.No.115 of https://hcservices.ecourts.gov.in/hcservices/ 2004. 18. The First Appellate Court, while confirming the judgment and decree of the trial Court, dated 9.12.2003, had held that the agreement for sale, dated 4.11.1987, was not a mortgage, as claimed by the appellants in the first appeal. Further, the suit was not barred by limitation, as alleged by the appellants, as it had been filed within three years from the extended period of three years, in view of the endorsement made on behalf of the appellants in the agreement, dated 4.11.1987, marked as Ex.A-1. The First Appellate Court had not accepted the claim of the appellants that there was no reference of tenancy in the agreement and that the agreement had been prepared only for the purpose of obtaining a loan. Further, it had not accepted the claim of the appellants that the first respondent was not ready and willing to perform his part of the contract. As such, the First Appellate Court had found that there was no error in the findings of the trial Court. 19. Aggrieved by the judgment and decree of the First Appellate Court, dated 21.8.2007, made in A.S.No.115 of 2004, the appellants in the first appeal had filed the present second appeal before this Court raising the following questions, as substantial questions of law: “1) Whether the Courts below erred in overlooking that the first respondent had not proved his readiness and willingness upto the date of hearing thus disentitling him from getting discretionary relief of Specific Performance as laid down in the dictum reported in the 1998 I.C.T.C. Page No.186, 1998 I Law Weekly page.No.301 2001 I CTC Page No.200 and 2006 II SCC Page nO.496, 2007(6) MLJ 1505. 2) Whether in law the Courts below are right in overlooking that Ex.A.1 suit agreement was executed only for the loan received by the appellant and the documents marked as Ex.B-12 to Ex.B-16? 3) Whether in law the Courts below erred in holding that there is a valid extension of time under Ex.A.3 in the absence of any clause authorizing the plaintiff to extend the time on behalf of the second defendant in Ex.A.4 who has not signed the same overlooking that it is one of the circumstances to disentitle the plaintiff from getting the discretionary relief of specific performance? 4) Whether in law the Courts below failed to take judicial note of the fact that when the price of the suit property being urban property is sky rocketing day by day as evidence from Ex.B-8 and Ex.B9, B.10 and B.11 complied with oral evidence of D.W.2 and the plaintiff has not https://hcservices.ecourts.gov.in/hcservices/ initiated proceedings to take the sale deed within the reasonable time as held in the judgment reported in 2007 2 Law Weekly Page No.7917? 5) Whether in law the Courts below are right in overlooking that the plaintiff failed to prove the extension alleged to have been made in Ex.A-2 and Ex.A-3 was made for vacating the tenants especially when the agreement does not state anything about it? 6) Whether in law the Courts below erred in overlooking that when the suit filed by the plaintiff firm, which was admitted to have been dissolved and in absence of any documents filed to show that the firm was subsisting nor his admission was wrong the suit could not be continued? 7) Whether in law Courts below erred in overlooking that the suit is barred by limitation on failure to prove the validity of the Ex.A-2 and Ex.A-3 on evidence and in law?” 20. The learned counsel appearing on behalf of the appellants had submitted that the Courts below had erred in not considering the evidence available on record in its proper perspective. The Courts below had erred in holding that the plaintiff in the suit, who is the first respondent in the second appeal is entitled to specific performance of the agreement, dated 4.11.1987, overlooking the merits of the contentions raised on behalf of the parties concerned. He had also submitted that the Courts below had erred in overlooking the fact that time was the essence of the contract and that the first respondent was a defaulter. The trial Court, as well as the First Appellate Court ought to have noted the fact that the first respondent had no means to purchase the suit property as evident from the oral evidence of the partner of the first respondent mill, who had been examined on the side of the plaintiff, in O.S.No.371 of 1999, pending on the file of the Subordinate Court, Tiruppur. The Courts below had failed to note that Ex.A-3 is a forged document and that there was no valid extension of time specified for the execution of the sale deed under the agreement, dated 4.11.1987. Hence, it cannot be said that there was a valid extension of time, by means of Ex.A-4 power of attorney. 21. The learned counsel appearing on behalf of the appellants had also submitted that the Courts below ought to have exercised their discretion in denying the relief sought for by the plaintiff in the suit, under Section 20 of the Specific Relief Act. it had also been stated that the additional documents, marked as Ex.B-12 to B-16, before the First Appellate Court had not been considered properly. Further, the money said to have been paid by the plaintiff in the suit, the first respondent in the present second appeal, to the appellants, had not been shown in the yearly accounts. Further, in https://hcservices.ecourts.gov.in/hcservices/ the evidence of P.W.1, it had been admitted that the first respondent mill had been wound up and as such the suit cannot be held to be maintainable. 22. The learned counsel had also submitted that the Courts below ought to have considered the escalation in the value of the suit property, even though it had not been raised by the appellants. The First Appellate Court had simply agreed with the findings of the trial Court, without applying its mind, independently. No proper issues had been framed for its consideration by the First Appellate Court and there was no discussion by the First Appellate Court before arriving at its conclusions. The Courts below ought to have taken note of the fact that the balance amount of sale consideration had not been deposited by the first respondent/plaintiff to show his readiness and willingness to perform its part of the contract. 23. The learned counsel had also submitted that the power of attorney, marked as Ex.A-4, had not given the power to extend the period for the execution of the sale deed to the second defendant. Even otherwise, the second defendant in the suit had not shown that he had exercised his discretion, properly, as the power agent. Ex.A-4 can only pertain to a new contract. The wordings used in the power of attorney would only mean that the earlier contract had been terminated. As such, the suit filed by the first respondent plaintiff is barred by limitation. 24. The learned counsel appearing on behalf of the appellants had relied on the following decisions in support of his contentions: 24.1.In Seeni Ammal V. Veerayee Ammal (1997(I) CTC 360), it had been held as follows: “15………If the findings of the Courts below are not supported by evidence or passed on misconception or erroneous, and perverse this Court can interfere in the second appeal. Moreover, the relief of specific performance being an equitable relief, the same cannot be enforced in favour of a person who fails to prove that she has performed or has always been ready and willing to perform the essential terms of contract which are to be performed by her, other than the terms the performance of which has been prevented or waived by the defendant. In fine, it is clear from the evidence on record that the plaintiff/respondent was not ready and willing to perform her part of the contract and both the Courts below have committed an error in holding in favour of the plaintiff.” 24.2. In Rajeshwari V. Puran Indoria (2005(7) SCC 60), it had been held as follows: https://hcservices.ecourts.gov.in/hcservices/ “The proper test for determining whether a question of law raised in the case is substantial would be whether it is of general public importance or whether it directly and substantially affects the rights of the parties and if so whether it is either an open question in the sense that it is not finally settled by the Supreme Court or by the Privy Council or by the Federal Court or is not free from difficulty or calls for discussion of alternative views. If the question is settled by the highest court or the general principles to be applied in determining the question are well settled and there is a mere question of applying those principles or that the plea raised is palpably absurd, the question would not be a substantial question of law. Thus a question of law would be a substantial question of law if it directly and substantially affects the rights of the parties and if it was not covered by a decision of the Supreme Court or of the Privy Council or of the Federal Court. Normally, a suit for specific performance of an agreement for sale of immovable property involves the following 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 laches 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, by an 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, https://hcservices.ecourts.gov.in/hcservices/ the High Court was not justified in dismissing the second appeal in the manner in which it has done.” 24.3. In Chinnakannu Naidu and another V. Chinnappan (2007-2- L.W. 791), it has been held as follows: “Court can take judicial notice of the fact that the price of urban properties are sky-racketing day by day. Jurisdiction to decree specific relief is discretionary and the Court can consider the circumstances to decide whether such relief is to be granted. Guidelines contained in Section 20 shall be in the forefront in the mind of the Court.” 24.4. In Banshilal Soni V. Kastoor chand Begani (2007(6) MLJ 1505 (SC), it has been held as follows: “The last date for execution of sale deed was 10.4.1991 but for nearly 20 months there was no notice or demand. The person seeking specific performance of contract should show that he has always been ready and willing to perform his part of the contract.” 24.5. In M.Ranganathan V. M.Thulasi Naicker (2008(5) CTC 428), it has been held as follows: “Purchase of stamp papers cannot amount to prove essential ingredient of reading and willingness as contemplated under Section 16(c) of the Specific Relief Act. As held by the Supreme Court readiness and willingness has to be determined from the facts and attendant circumstances of the case. In the present case, the suit was filed nearly after two years, thereby inducing the defendant to change his position. Though, increase in price may not be a ground for refusing decree for specific performance, escalation of price of the land will have to be necessarily kept in view.” 24.6. In Manoharakumari V. Anitha (2010 (3) CTC 411), it had been held as follows: “In a suit for Specific performance, the plaintiff must allege and prove the continuous readiness and willingness to perform the contract on his/her part from the date of the contract. The onus is on the plaintiff. The requirement of law is two-fold: (i) the Plaintiff must aver in the Plaint, and (ii) that she must prove by evidence that she has always been ready and willing to perform her part of the contract. https://hcservices.ecourts.gov.in/hcservices/ As per Section 20 of the Specific Relief Act, discretion as to decreeing Specific Performance, grant of decree for Specific Performance of contract is not automatic and is on of the discretions of the Court and the Court has to consider whether it would be fair, just and equitable. But the discretion of the Court is not arbitrary. But the one of the sound and reasonable and discretion guided by Principles of Justice, equity and good conscience. In Section 20(2) of the Act, certain circumstances have been mentioned as to under what circumstances, the Court shall exercise such discretion. If under the term 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. In exercising discretion, Court is obliged to take into consideration circumstances of the case, conduct of the parties and respective interests under the contracts.” 25. Per contra, the learned counsel appearing on behalf of the respondents had submitted that there was no plea raised by the appellants before the Courts below, with regard to the maintainability of the suit. The statements made by P.W.1, with regard to the winding up of the first respondent Mill