Case: Lalit Kumar Jain  Vs. Jaipur Traders Corpn. P.Ltd

The plaintiff-Company executed a sale deed on 22.2.1971 in favour of the defendants in respect of an oil mill located at Khurja in UP State with the structures, open land, machinery and fixtures, lease-hold rights in the land etc. for a consideration of Rs. 2 lakhs. A sum of Rs. 50,000/- was to be paid before the Sub-Registrar at the time of registration and it was stipulated in the sale deed that the balance amount will be paid in two instalments falling on 15.3.1971 and 30.4.1971. It was further stipulated that the transferee shall not be entitled to deal with, sell, transfer or assign the property sold, till such time as the entire balance sale price of Rs. 1.50 lakhs was paid to the transferor. A sum of Rs. 50,000/- was accordingly paid to transferor on the date of registration. Possession was admittedly handed over to the defendants. The respondent-plaintiff produced the income tax clearance certificate on the date of registration i.e. 22.2.1971. However, before the formalities of registration viz., copying out the deed was completed, the Sub-Registrar received a communication from the Income Tax Officer that the I.T.C. was cancelled and therefore the Sub-Registrar should stop registration of the property till a fresh certificate was issued by him. Therefore, the Sub-Registrar did not take further steps in the matter. Moreover, the sale deed was impounded on the ground of insufficient stamp and it was sent to the District Registrar for adjudication. By an order dated 4.1.1972, the Income Tax Officer revoked his earlier order and restored the certificate issued by him earlier. On appeal by plaintiff, the Commissioner of Income Tax directed the Income Tax Officer to issue a fresh I.T.C. instead of validating the earlier one. On 13.6.1972, a fresh I.T.C. was issued. The document which was sent for assessment of deficient stamp duty was received back by the Sub- Registrar on 3.5.1973. When there was a notice from the Sub- Registrar in August 1973 to furnish the I.T.C. for the purpose of registration, the plaintiff in its reply dt. 28.8.1973 maintained that the document was no longer effective as the contract stood rescinded on account of the breach committed by the defendants in declining payment of balance sale price. Sub-Registrar was requested to return the document without registration. The Sub-Registrar, by his order dated 19.9.1973, refused to register the document as ITC was not produced. An appeal was filed against the said order by the appellants-defendants before the District Registrar. On 16.10.1973 the appellants also filed a civil suit impleading the respondent, Sub-Registrar and also the I.T.O. for a direction that I.T.C. should be issued and the Sub-Registrar should register the sale deed. On 3.7.1976, the suit out of which the present appeal arises was filed seeking the relieves as stated above. In that suit, a disclosure was made as to obtaining the fresh I.T.C. On 24.12.1976, the District Registrar allowed the appeal and directed the Sub-Registrar to register the sale deed. In view of this subsequent event, the Income Tax Officer also sent a copy of I.T. clearance certificate to the Sub-Registrar. The formalities of registration of sale deed were then completed on 28.12.1976. The suit filed by the appellants therefore became infructuous. The appellants amended the plaint in the present suit questioning the legality of the order of Dy. Registrar and the consequential action of Sub-Registrar in registering the sale deed. On 27.8.1979, offer was made to pay the balance consideration by issuing a notice but the respondent refused to accept payment taking the stand that the matter was sub-judice. The suit in question was dismissed on 2.5.1980 subject to the direction as to the payment of balance of sale money. The money was deposited in court thereafter. The first appeal to the High Court filed by the respondent herein was allowed by the impugned judgment dated 5.7.1996.3. It is now necessary to advert to certain other events that happened between the date of presentation of sale deed for registration and the date of filing of the suit including the exchange of correspondence. On 16.3.1971, plaintiff issued notice to defendants to pay Rs. 50,000/- towards the first instalment specified in the indenture of sale. The defendants expressed their willingness to pay the amount provided that the plaintiff obtained a fresh ITC. On 12.1.1972, a second notice was issued from the plaintiffs side informing the defendants that they have illegally withheld the payment due under the terms of sale for which they were liable to pay interest and further protesting against the demolition of portions of building and sheds and disposing of the building material and machinery. This was replied to by the defendants stating that in the absence of valid Income Tax Clearance Certificate the sale deed could not be delivered after due registration and therefore they were not liable to pay the balance sale price. Moreover, the defendants referred to the fact that one of the Directors of the plaintiff-Company by name Raj Kumar Meattle agreed not to demand the balance unless the fresh clearance certificate was obtained and other formalities connected to the sale were fulfilled. The alleged settlement took place on 17.1.1972 on which date a sum of Rs. 5,000 was paid to the said Director. One more fact, which according to the defendants justified the withholding of payment, was the suit filed by the one Seth Shanti Lal questioning the validity of the sale. In the concluding para it is stated : "I would request you not to stick to your unreasonable demand for the balance money and let the clear picture emerge". I again assure you that the balance will be paid the moment these formalities are complied". A third notice was issued by the plaintiff on 25.5.1973. By that time it may be noted that a fresh ITC was issued to the plaintiff and the document which was impounded for assessment of deficient duty was received back in the office of the Sub-Registrar, Khurja. By the notice dated 25.5.1973, the plaintiff found fault with the defendants in declining payment of balance money on the ground of cancellation of ITC and alleged that the defendants committed breach of contract by wrongfully withholding the payment and also demolishing and dealing with the property quite contrary to the prohibition contained in the sale deed. The plaintiff then gave last opportunity to make the balance sale price together with interest at the rate of one per month within a period of 15 days upon which the requisite certificate under Section 230-A of the Income Tax Act will be produced. The defendants were further warned that in case of failure to make the payment, the contract of sale dated 22.2.1971 will stand rescinded and the defendants will be liable to restore the possession of all the properties covered by the sale deed and to compensate the plaintiff for the damage done to the properties. The defendants sent a reply reiterating that there was a clear agreement on 17.6.1971 arrived at on the intervention of plaintiffs Director Shri Raj Kumar Mittal and the payment of Rs. 5,000/- made pursuant to such agreement. The defendants once again referred to the suit filed by Seth Shanti Lal Jain impleading both the plaintiff and the defendants. The defendants also called upon the plaintiff to bear the amount of Rs. 2,980/- on account of extra stamp expenses. In the concluding para it is stated, "I hope you will wait for the payment till the formalities are completed and the suit of Seth Shanti Lal is decided finally". A month later i.e. on 3.7.1973, the 4th and final notice came to be issued by the plaintiff. In that notice it was stated that Shri Raj Kumar Mittal had no authority to give any assurance or make any commitment on behalf of the plaintiff-Company, that too without any resolution of the Board of Directors. The plaintiff offered to give credit to the additional stamp duty said to have been paid by the defendants of Rs. 2,980/-. The defendants were then informed of the dismissal of the suit filed by Shanti Jain for default. Moreover, the plaintiff took the stand that the suit of Shanti Lal Jain was a frivolous suit and that the pendency of the suit ought not to be a ground to withhold the payment. The plaintiff was even willing to waive the claim for interest and handover the requisite certificate under Section 230-A of the Income Tax Act, provided that balance consideration of Rs. 1.50 lakhs subject to adjustment of Rs. 5,000 and the excess stamp duty, was paid to it within 15 days. The defendants were warned that if they failed to make the payment as aforesaid within the stipulated time which is of essence, the contract of sale dated 22.2.1971 shall stand rescinded in which case the defendants will have to restore all the properties to it within 15 days thereafter. On 19.7.1973, the defendants sent a rely through their lawyers wherein it was asserted that the plaintiff was legally bound to complete the formalities pertaining to registration and to deliver the sale deed before they could ask for the balance sale money. Further, the plaintiff was notified that the demand of balance money even before the suit of Seth Shanti Lal was finally decided, was unjustified. An assurance was given that the entire balance amount will be paid when all the formalities are completed and the title was proved in the pending litigation. The plaintiff was called upon to produce the ITC before 3.9.1973 as per the requisition made by the Sub-Registrar. Thereafter, the plaintiff sent a letter on 28.8.1973 to the Sub-Registrar stating that the defendants committed breach of contract of sale and therefore, the contract stood rescinded. The Sub-Registrar was informed that the document was no longer effective and the question of registration of that document on the production of ITC as required in his letter did not arise at all. The Sub-Registrar was requested to return the document without registration. It appears that the suit of Seth Shanti Lal Jain which was filed on 7.4.1971 was finally dismissed on 10.4.1978. It was dismissed for default earlier and restored.4. The Trial Court held that the defendants did not commit breach of the contract in not paying the balance price before the registration of the sale deed and the plaintiff had no right to rescind the contract. In fact, there was no rescission because the plaintiff did not send specific intimation of rescission of contract with effect from a particular date. The learned trial Judge further held that the contract was neither voidable nor terminable by the plaintiff and therefore Section 27 or 31 of the Specific Relief Act was not attracted. According to the trial court, the sale was complete and title passed irrespective of non-payment of balance sale price. The following were the circumstances relied upon by the Trial Court for reaching the conclusion that no breach was committed by the defendants and the plaintiff was not entitled to put an end to the contractThe plaintiff got the I.T.C. cancelled by setting up his relative by name Shri R.K. Meattle to file a complaint;2. After the certificate was restored on 4.1.1972, the plaintiff instead of filing the order of I.T.O., challenged that order on the ground that fresh certificate should have been issued, for which there was no bona fides on the part of the plaintiff. Moreover, the factum of restoration of issuance of fresh clearance certificate was not intimated to the Sub-Registrar;3. The plaintiff having knowledge of the fact that the document has not been registered for want of I.T.C. was not justified in making demand for payment of balance money;4. On the intervention of Shri R.K. Meattle - one of the Directors of the plaintiff-Company, a binding agreement came into being according to which the terms of the contract as to the payment of balance money got altered. The undertaking given by Shri R.K. Meattle on 17.8.1971 was binding on the plaintiff and in fact the plaintiff acted according to that undertaking by not demanding the payment for about a year; and5. On account of the suit filed by the Seth Shanti Lal Jain in the year 1971 claiming to be the co-owner of the properties, there was a bona fide doubt in the mind of the defendants as regards title and that is the reason why a commitment was made by the plaintiff through its Director, Shri R.K. Meattle.6. In the circumstances of the case the time for payment stipulated in the sale deed cannot be regarded as the essence of thelearned trial Judge observedfact, it was a breach of the contract from the side of the plaintiff, who deliberately did not manage the affairs in such a way that the clearance certificate may be produced before the Sub-Registrar, Khurja, at an earlier and the registration of the document could be completed. It appears to me that the plaintiff was only interested in the payment of balance sale consideration of Rs. One lac fifty thousand and he was not interested in the registration of the document. The circumstances and conduct of the plaintiff are as such which go against the plaintiff and show that it was the plaintiff on whose account the document could not be registered. The non payment on the stipulated dates by the defendants was justifiable because the time was not the essence of the contract".The High Court was of the view that under the contract title to the property would pass only on the payment of the entire sale consideration, that the Trial Court committed an error of law by holding that time was not essence of the contract and title had passed even before the payment of balance money. The High Court then observed that Section 47 of the Registration Act does not come to the aid of the defendants because the contract was terminated for valid reason before the document was registered. Referring to the suit of Seth Shanti Lal Jain, the High Court observed that the defendants having enjoyed property after taking possession should have made the payment first and sue the plaintiff for indemnification, if necessary. Referring to the alleged agreement entered into between Shri R.K. Meattle and the defendants, the High Court observed that the alleged agreement was not believable. The High Court then observed that the appellant should have made the payment at least after the final notice sent in July, 1973, wherein it was mentioned that I.T.C. was procured and the sale deed could be got registered on payment of balance money. The High Court was therefore of the view that the defendants failed to fulfil the contractual obligation on their part and therefore the contract was voidable and could be repudiated by the plaintiff. The appeal was therefore allowed and the suit was decreed.

Reasoning: 8. We are of the view that the High Court failed to address itself to certain crucial factors which disentitles the plaintiff to equitable relief. The High Court reversed a well considered judgment of trial Court without adverting to the reasoning of trial Court except in a cursory manner. In the view we are taking, it is not necessary for us to dilate on various legal issues debated before us. We shall proceed on the basis that in law the plaintiff could annul the contract of the sale before the act of registration got completed and title passed to the appellants. We shall further assume that the plaintiff in fact rescinded the contract with effect from the date of expiry of the time stipulated in the 4th and final notice dated 3.7.1973. If such rescission or termination of contract is not justifiable on facts or having regard to the conduct of the plaintiff, the equitable relief under Section 27 or 31 of the Specific Relief Act has to be denied to the plaintiff, no further question arises for consideration. In such a case, the appellantsâ€™ plea has to be accepted and the suit is liable to be dismissed.The result of the foregoing discussion is that the suit is liable to be dismissed and it has been rightly dismissed by the trial Court. However, in view of the fact that the defendants are not free from blame as discussed above and they have utilised the property to the best of their advantage right from day one without, at the same time, paying the balance sale price for several years we put it to the counsel for the appellants whether they are willing to pay to the plaintiff a substantial amount over and above the sale price already deposited in the Court, in order to do justice to the parties. In fact, in the course of arguments by the learned counsel for the appellants, there was an indication that the appellants were prepared to offer a reasonable amount, without prejudice to their contentions. The learned counsel for the appellants has filed a letter dated 18.4.2002 stating that "the appellants can pay and agree to pay a further sum of Rs. 35 lacs (Rupees thirty five lacs) in 3 instalments of Rs. 15 lacs and Rs. 10 lacs and Rs. 10 lacs", in three weeks, by the end of August and by the end of November, 2002 respectively. When we suggested to the learned counsel that it would be fair if some more amount is offered, the learned counsel for the appellants agreed on behalf of his clients for payment of Rs. 40 lacs in lump sum within a period of six months commencing from today. Having regard to the offer made in the letter coupled with the oral representation made today and to mere out justice to the parties, we direct that the undertaking to pay the sum of Rs. 40 lacs within six months should form part of the decree in the suit. This shall be in addition to the sale price already deposited in the Court. The same shall be deposited in the Court within a period of six months and the appellants are entitled to withdraw the same in addition to the amount already deposited.