Case: Coromandel Indag Products(P) Ltd Vs. Garuda Chit &amp; Trading Co. P. Ltd

(a) The appellant is a Private Limited Company (hereinafter referred to asappellant-Company) registered under the Companies Act, 1956 and is carrying on the business of manufacturing, selling, exporting, trading in and distribution of Pesticides, Chemicals and Agro Chemicals. Respondent No. 1 is also a Private Limited Company (hereinafter referred to as) registered under the Companies Act, 1956 in which Mr. T.P. Narayanan - respondent No.2 is the Chairman and Director and appeal against him stood dismissed vide this Courts order dated 19.07.2004. Mr. T.K. Gopinath (since died) was the Managing Director - respondent No.3 and his legal representatives are on record. In the year 1981, the appellant-Company required a property around Mount Road Area near Mylapore, Madras for establishing a Research and Development Centre. Respondent-Company, on coming to know about the said requirement, offered its property measuring 12 grounds 33 sq. ft. with buildings at Door No. 46, Cathedral Road, Madras. The officials of the appellant-Company inspected the property and after getting it evaluated by an Authorized Valuer offered a price of Rs.82 lakhs for the entire property and the Respondent Nos. 2 & 3 herein accepted the same. Thereafter, an Agreement for Sale was executed between the parties on 28.08.1981 and a sum of Rs. 2 lakhs was paid by way of cheque as advance.(b) Pending investigation of title of the respondent-Company to the suit property, the appellant-Company entered into the said agreement since the respondents desired a firm commitment to be made. Clauses 3 and 4 of the said Agreement put the vendor under an obligation to produce all documents of title in its possession or control relating to the suit property for the investigation and approval of the appellant-Company. Besides, getting other necessary clearances, the respondents were also required to get the Income Tax Clearance Certificate as specified under Section 230-A of the Income Tax Act, 1961.(c) In accordance with the above, the appellant-Company called upon the respondents to furnish the documents of title, the details of the encumbrances on the property, if any, and also Income Tax Clearance Certificate and other necessary clearances to complete the sale. On 09.09.1981, the respondents furnished the Income Tax Clearance Certificate dated 07.09.1981 and promised to furnish the other required documents very soon. They also demanded a further payment of Rs. 10 lakhs as advance pending finalization of the sale to which the appellant-Company did not agree.(d) As the respondents did not furnish the required documents, the appellant-Company issued a letter dated 14.09.1981 calling upon them to furnish the required documents. Instead of furnishing all the required documents, as sought for, the respondents, vide letter dated 15.09.1981, called upon the appellant-Company to expedite the sale. Thereafter, on 19.09.1981, the appellant-Company again requested the respondents to furnish the solvency certificate. In response to the above-said letters, the respondents orally apologized for the delay and promised to furnish the required details at the earliest and respondent No.2 also requested for a further payment of Rs.10 lakhs as advance to enable them to discharge the mortgage subsisting in favour of Bank of India. The appellant-Company paid Rs. 5 lakhs to respondent No.2 on 21.09.1981 on the undertaking that the documents called for would be sent by 30.09.1981. Again on the request of respondent No.2, the appellant-Company paid a further sum of Rs. 5 lakhs to meet the Urban Land Ceiling Clearance. A total sum of Rs. 12 lakhs was paid to the respondents. On 19.10.1981, respondent No.2 again requested a sum of Rs. 2 lakhs to meet certain statutory compliance which was a charge on the property. Taking full details of such liabilities, the appellant-Company paid a sum of Rs.1,10,000/-. As the respondents did not furnish the required documents till the end of 1981, the appellant-Company sent a notice dated 19.01.1982 calling upon them to perform their obligation under the agreement dated 28.08.1981 as also to fulfil their personal undertakings. Notice was served only on respondent No.2 but the notice on respondent Nos. 1 and 3 were returned back with the remarksIn reply to the said notice, respondent No.2 said that he is not personally liable for the payment made by the appellant-Company.(e) In the said circumstances, the appellant-Company was compelled to file a suit for specific performance on 10.05.1982 in the High Court of Judicature at Madras and the same was numbered as C.S. No. 287 of 1982. The learned single Judge of the High court by judgment dated 01.06.1993 decreed the suit and directed the respondents herein to execute the sale deed in favour of the appellant-Company and granted three months time to the appellant-Company to pay the balance of the sale consideration.(f) Challenging the judgment of the learned single Judge, the respondents preferred O.S.A. No. 163 of 1994 before the High Court. By impugned judgment dated 17.02.2003, the Division Bench of the High Court allowed the appeal. Aggrieved by the said judgment of the Division Bench, the appellant-Company preferred this appeal by way of special leave petition before this Court.

Court's reasoning:
it is desirable to verify the relevant clauses from the Agreement for Sale dated 28.08.1981. In the beginning, the Vendor-Respondents herein, specifically asserted that they are the sole and absolute owner and in exclusive possession and enjoyment of all the land mentioned in the Schedule together with a multi- storey building, sheds, garages, outhouses, fixtures and fittings thereon situated at Cathedral Road, Teynampet, Madras bearing present Door No. 46, Old No. 31, T.S. No. 1238/1A, R.S. No. 1233/1 and 1233/5 measuring 12 grounds 33 sq. ft. The Agreement clearly stipulates that the Vendor requires substantial cash for meeting its business purposes and, therefore, decided to sell the said property. It makes it clear that by resolution dated 16.07.1981, the Board of Directors of the Vendor have authorized Shri K.S. Hari, General Manager, to negotiate and sell the said property and to execute the sale deed. It also makes it clear that the Vendor has agreed to sell and the purchaser has agreed to purchase the said property at a price consideration of Rs. 82 lakhs free from all encumbrances and claims whatsoever on the terms and conditions set out in theterms of Section 16(c) of the Specific Relief Act, 1963, it is incumbent on the party, who wants to enforce the specific performance of a contract, to aver and prove that he has performed or has always been ready and willing to perform the essential terms of the contract. Explanation appended to this sub-section (c) makes it clear that if a contract involves the payment of money, it is not essential for the plaintiff to actually tender to the defendant or to deposit in Court any money except when so directed by the Court. However, the plaintiff must aver performance of, or readiness and willingness to perform, the contract according to its true construction. It is seen from the pleadings that necessary averments have been made in terms of sub-section (c) of Section 16. On the side of the plaintiff, James Fadric was examined as PW-1. He explained the urgency and the need to sell the property. He also explained that the company had a cash crunch problem. No doubt, he also referred that the company was facing liquidity proceedings before the High Court of Bombay and necessary application had been filed before the Company Court at Bombay for settlement of the scheme to avoid liquidation which we are not concerned. The fact remains that at the relevant time, Vendor/Respondent-Company was in dire need of money for their commercial transactions and decided to sell the property in question, particularly, to meet the immediate need of their creditors. We have already adverted to the payment of Rs. 2 lakhs as advance on the date of execution of the agreement dated 28.08.1981. On 21.09.1981, a further sum of Rs. 5 lakhs was paid and by mutual consent, the time was extended to 30.09.1981. On 06.10.1981, another sum of Rs. 5 lakhs was advanced by the appellant-Company and the time for completion of the Sale Agreement was extended up to 14.10.1981. Again, for the third time, that is on 19.12.1981, time was extended for the completion of the transaction up to 31.12.1981 on payment of Rs.1,10,000/-. As rightly pointed out by Shri K.K. Venugopal and Shri V. Giri, learned senior counsel appearing for the respondents, the payment of money in short intervals and also the extension of time for completion of the transaction within the prescribed period clearly show that both the parties wanted to complete the transaction as early as possible without further extension. Inasmuch as the Vendor was in dire need of money at every occasion and the need for such short term extension clearly shows that the parties intended to treat the time as essence of the contract. It is also relevant to point out that Clause 7 of the Agreement, which we have already extracted, makes it clear that at any time of registration of the sale deed, the appellant shall pay a sum of Rs. 50 lakhs, after deducting the advance amounts already paid and the balance of Rs. 32 lakhs is to be paid after registration of the sale deed in three installments as mentioned above. This would also reveal the intention of the parties to treat the time as essence of the contract. From the various clauses in the Agreement for Sale which we have referred to, pleadings, evidence and the conduct of the parties, we hold that parties have agreed that the time is essence of the contract and the same has to be adhered tois further seen that after payment of Rs. 2 lakhs as advance on the date of execution of the Agreement, monies to the extent of Rs. 11,10,000/- were paid on various dates in order to satisfy and comply with all statutory requirements. It is relevant to point out in the Agreement that there is no specific reference to the production of an order from the competent authority under the Urban Land Ceiling Act with regard to exemption. From the materials placed, we are satisfied that the appellant-Company was not justified in calling for several documents when admittedly, their lawyers perused all the relevant documents and on their advise, draft sale deed was prepared and that too after proper inspection of the site and building. In other words, production of clearance certificate from the competent authority under the Urban Land Ceiling Act was not specifically intended at any point of time. We are satisfied that as rightly argued by learned senior counsel for the respondents that the information sought for by the appellant-Company was only to delay the transaction and it was not always ready and willing to perform in terms of Section 16(c) of the Specific Relief Act, 1963. Conduct of theIt is also brought to our notice that the State Government in 1995 nearly 10 years after the filing of the suit, claimed 872 sq.mts. as being the excess land above the ceiling limit for which the appellant-Company had filed a writ petition being No. 6312 of 2000 before the High Court. Though the filing of the said writ petition and the ultimate order on 04.08.2005 were not brought to our notice by filing appropriate petition inasmuch as the said fact was not in dispute, we referred to the said decision of the High Court rendered in Writ Petition No. 6312 of 2000. That writ petition came to be filed by the respondent Company for issuance of a writ of mandamus to forebear the State and the competent authority under the Urban Land Ceiling from enforcing the provisions of the Act which has been repealed by Tamil Nadu Act No. 20 of 1999 w.e.f. 16.06.1999 insofar as the land of the petitioner therein (respondents herein at Door No. 46, Cathedral Road, Chennai in R.S. No. 1238/9 Mylapore, Village) is concerned. 2517) It is true that despite the fact that there was no provision in the Act laying down the process for seeking an exemption from its operation, the respondent-Company wrote to the Deputy Secretary, Revenue Department, Government of Tamil Nadu on 26.12.1979 seeking such exemption. As there was no response, as rightly pointed out, it was understood that as the proviso to Section 3 applies to the land and no further exemption was needed. It is relevant to point out that the appellant-Company made further applications on behalf of the respondents but to no avail. The entire land is in the enjoyment and possession of the respondent-Company and no part of the land has been taken over by the Government.