Case: R. C. Chandiok &amp; Anr Vs. Chuni Lal Sabharwal &amp; Ors

2. On July 18, 1955, the appellants entered into an agreement with the respondents for the purchase of plot No. 8 measuring 1500 Sq. Yds in Jangpura B. New Delhi for Rs.. The contract was evidenced by receipt Exhibit P 6 which was in the following terms;"Received with thanks from Messrs. Ramesh Chandra Chandiok and Kailash Chander Chandiok the sum of Rs. 7,500/(Rupees Seven thousand and five hundred only) as earnest money of the purchase money of Rs. 22,500/(Rupees Twenty two thousand and five hundred) for the sale of Plot No. 8 measuring 1500 sq. yds. in Jangpura B. purchased from the Rehabilitation Ministry and owned by us. The balance of Rs. 15,000 (Rupees Fifteen Thousand only) shall be paid to us by them within one month of the execution of this receipt on the execution of the sale deed by us in their favour."It is common ground that the aforesaid plot had been allotted by the Rehabilitation Ministry to the respondents and that its possession was to be delivered after payment of rent of lease moneye and after execution of the lease deed. The lease deed was actually executed in favour of the respondents on April 21, 1956. Meanwhile on August 11, 1955 the respondents wrote a letter to the appellants as follows:"With reference to the receipt dated5 executed by us in your favour, acknowledging receipt of Rs. 7,500/as earnest money for the sale of Plot No. 8 measuring 1500 sq. yds in Jungpura B. owned by us and agreed to be sold to you by us, since it will take about a month more to obtain sanction of the Rehabilitation Ministry, the execution of the sale deed by us cannot be complete without the said sanction, it is hereby mutually agreed between us or orally that the period for execution of the sale deed shall remain extended till the time of the receipt of the said sanction and we hereby confirm the said oral agreement. We will inform you as soon as the said sanction is received and within a week thereof, we will execute the necessary sale deed in your favour and get the same registered against payment of the Balance money. Please sign the duplicate of this letter in confirmation of the said oral arrangement."A notice dated June 15, 1956 was served by counsel for the respondents on the appellants saying that the balance of consideration according to the terms of the agreement dated July 18, 1955 was to be paid by the appellants and the sale deed was to be got registered within one month of. It was further stated that extension had been given as desired by the appellants but the balance amount had not been paid. In para 3 it was stated"my clients are not prepared to wait indefinitely and therefore cancel your agreement for want of certainty and hereby give you an offer, without prejudice to their legal rights, to receive back the sum of Rs. 7500/paid by you as earnest money less the amount of loss suffered by them on account of lease and interest etc. within one week of the receipt of this letter, failing which my clients would be entitled to forfeit the earnest money and treat the agreement cancelled."3. A reply dated June 22, 1956 was sent by counsel for the appellants in which reference was made to the letter dated August 11, 1955 and it was pointed out that no information had been sent by the respondents about the sanction having been obtained from the Rehabilitation Ministry. The respondents were called upon to obtain the requisite sanction and to execute the sale deed against receipt of balance of purchase money. On July 4, 1956 counsel for the respondents sent a reply saying that sanction had not been granted till then and inquiries made by respondents revealed that it might not be forthcoming for an indefinite period and that it was absolutely uncertain as to when it would be granted. It was claimed that the agreement had become void on account of uncertainty and without prejudice to their legal rights the respondents were prepared "ex gratia" to have the sale deed registered on payment of the balance within a week of the receipt of the letter without waiting sanction of the Rehabilitation Ministry. On November 11, 1956 the respondents are stated to have applied for sanction for transfer of the plot and it was granted on November 20, 1956. The appellants had themselves made inquiries from the Housing and Rent Officer on Augst 9, 1956 to ascertain whether sanction had been granted and how much time it would take to accord the sanction. By a letter dated 27/ 29th November 1956 the aforesaid officer informed the appellants that permission to transfer had been given on November 20,1956. The appellants had also taken steps to inform other prospective buyers about the existence of the agreement as they apprehended that the respondents intended transferring the same to some other party. On July 29, 1956 an advertisement was published by them in the Times of India declaring the existence of the agreement entered into between the appellants and the respondents with regard to the sale of the aforesaid plot. On December 4, 1956 the suit out of which the present appeal has arisen was filed by the appellants claiming specific performance of the contract dated July 18, 1955 and in the alternative for refund of Rs. 7500/being the amount of eamest money and Rs. 15000/as damages together with interest4. Apart from taking all the necessary pleas it was averred in the plaint that thet had always been ready and willing to perform their part of the contract. The suit was contested by the defendants respondents and among the material issues which were framed by the trial court were the following:"(5) Whether the specific performance of the agreement in suit should be refused u/s 21 or 22 of the Specific Relief Act?(6) Whether the plaintiffs were ready and willing to perform their part of the contract?"The admitted case of the parties was that according to the conditions of the lease granted to the respondents, which had, however, not been produced the transfer of the leasehold rights could be effected only with the sanction of the Rehabilitation Ministry. The trial Court was of the opinion that in spite of this condition the respondents had a subsisting though defensible interest in the lease hold rights which could very well be the subject matter of sale. It was held that the appellants did not perform the contract for about 1 1/2 years even though the respondents had repudiated it much earlier. Any party to the contract could subsequently make time the essence of the contract by a reasonable notice and this had been done by the respondents by Exhibits8 and, namely the letters dated June 15, 1956 and August 24, 1956. Issue No. 5 was thus decided against the appellants. On issue No.6 the trial Court found that the appellants were not ready and willing to pay the balance of consideration in accordance with the original agreement as they insisted on sanction of the Rehabilitation Ministry being obtained before the completion of sale though no such condition existed in the original contract. However, a decree was granted to the appellants in the sum of Rs. 7,500/on the ground that the same constituted part payment of consideration and was not liable to be forfeited. On March 31, 1959 the appellants filed an application before the trial Court stating that they intended to prefer an appeal against the dismissal of the suit for specific performance but as the respondents were trying to dispose of the plot they should be restrained by an injunction from doing so. It appears that no injunction was granted by the Court. An appeal was filed to the High Court and, during the pendency of the appeal, the amount of Rs. 7,500/ was deposited by the respondents in satisfaction of the decree passed by the trial Court. According to the respondents the appellants had taken out execution of the decree and it was for that reason that the said amount was deposited. It was not however, withdrawn by the appellants during the pendency of the appeal5. The High Court found that both the respondents were bound by the letter Exhibit7 dated August 11, 1955 to which reference has already been made. It was noticed that sanction of the Rehabilitation Ministry was required before the sale could be completed but it was held that there was nothing to indicate that the absence of such a sanction invalidated the transfer AB initio or rendered it void. In agreement with the trial Court the High Court held that even a defensible interest could be the subject matter of sale: in other words the sale could be effected without the sanction having been previously obtained. The view of the High Court was that Exhibit7 did not contain any such language which would justify the importing of a condition that until the respondents obtained sanction for the transfer of the property the appellants were not bound to get the sale completed. It was also decided that the appellants had not satisfactorily shown that they had sufficient funds to pay the balance amount of Rupees 15,000/from which it could be concluded that they were not ready and willing to perform their part of the contract Yet another point was decided against the appellants on the basis of certain execution proceedings stated at the Bar to have been taken during the pendency of the appeal. According to the High Court once the appellants had obtained satisfaction of the decree for Rs. 7,500/they became disentitled to a decree for specific performance.

Court's reasoning:
6. We are unable to concur with the reasoning or the conclusions of the High Court on the above main points. It is significant that the lease deed was not executed in favour of the respondents by the Government until May 21, 1956. So long as their own title was incomplete there was no question of the sale being completed. It is also undisputed that according to the conditions of the lease the respondents were bound to obtain the sanction of the Rehabilitation Ministry before transferring the plot to any one else. The respondents were fully aware and conscious of this situation much earlier and that is the reason why on5 it was agreed while extending the period for execution of the sale deed that the same shall be got executed after receipt of the sanction. The statement contained in Exhibit7 that that the execution of the sale deed"by us cannot be complete without the said sanction" was unqualified and unequivocal. The respondents further undertook to inform the appellants as soon as sanction was received and there after the sale deed had to be executed within a week and got registered on payment of the balance amount of consideration. We are wholly unable to understand how in the presence of Exhibit7 it was possible to hold that the appellants were bound to get the sale completed even before any information was received from the respondents about the sanction having been obtained. It is quite obvious from the letter Exhibit8 dated June 15, 1956 that the respondents were having second thoughts and wanted to wriggle out of the agreement because presumably they wanted to transfer it for better consideration to some one else or to transfer it in favour of their own relation as is stated to have been done later. The respondents never applied for any sanction after August 11, 1955 and took up the position that they were not prepared to wait indefinitely in the matter and were therefore cancelling the agreement "for want of certainty."We are completely at a loss to understand this attitude nor has any light been thrown on the uncertainty contemplated in the aforesaid letter. It does not appear that there would have been any difficulty in obtaining the sanction if the respondents had made any attempt to obtain it. This is obvious from the fact that when they actually applied for sanction on November 11, 1956 it was granted after almost a week. The statement contained in Exhibit0 dated July 4, 1956 that the sanction was not forthcoming has not been, substantiated by any cogent evidence as no document was placed on the record to show that any attempt was made to obtain sanction prior to November 11. 1956. Be that as it may the respondents could not call upon the appellants to complete the sale and pay the balance money until the undertaking given in Exhibit7 dated August 11, 1955 had been fulfilled by them. The sanction was given in November 1956 and even then the respondents did not inform the appellants about it so as to enable them to perform their part of the agreement of sale. There was no question of time having ever been made the essence of the contract by the letters sent by the respondents nor could it be said that the appellants had failed to perform their part of the agreement within a reasonable time.The appellants were carrying on business and there is nothing to indicate that they were not in a position to arrange for the remaining sum to make up the total of Rs.e are, therefore, unable to accept that the appellants. Who had all along been trying their utmost to purchase the plot did not have the necessary funds or could not arrange for them when the sale deed had to be executed and registered after the sanction had been obtained8. Coming to the last point the High Court has held that the appellants were disentitled to a decree for specific performance because a statement was made at the Bar that during the pendency of the appeal they had executed the decree of the trial Court and an amount at Rs. 7,500/had been deposited by the respondents pursuant to the execution proceedings. It is true that the appellant could not accept satisfaction of the decree of the trial Court and yet prefer an appeal against that decree. That may well have brought them within the principle that when the plaintiff has elected to proceed in some other manner than for specific performance he cannot ask for the latter reliefIn the present case, however, the above rule cannot apply because the appellants had by consistent and unequivocal conduct, made it clear that they were not willing to accept the judgment of the trial Court as correct. It has already been mentioned at a previous stage that after the decision of the trial court the appellants had even applied on March 31, 1958 for an injunction restraining the respondents from selling or otherwise disposing of the plot as it was apprehended that they were trying to do so. It was stated in this application that the plaintiffs would be preferring an appeal but it would take time to secure certified copies. An appeal was in fact preferred and seriously pressed before the High Court on the relief relating to specific performance. This relief is discretionary but not arbitrary and discretion must be exercised in accordance with the sound and reasonable judicial principles. We are unable to hold that the conduct of the appellants, which is always an important element for consideration, was such that it precluded them from obtaining a decree for specific performance9. It is common ground that the plot in dispute has been transferred by the respondents and therefore the proper form of the decree would be the same as indicated at page 369 in Lala Durge Prasad v. Lala Deep Chand, 1954 SCR 360   = (AIR 1954 SC 75  ) viz.. "to direct specific performance of the contract between the vendor and the plaintiff and direct the subsequent transferee to join in the conveyance so as to pass on the title which resides in him to the plaintiff. He does not join in any special covenants made between the plaintiff and his vendor, all he does is to pass on his title to the plaintiff.