Saturday, 26 December 2015

Whether court can rescind contract as per S 28 of specific relief Act if decree holder fails to deposit balance consideration?

 In the case of Chanda (supra) though there was no specific direction of the Trial Court to the decree holder to pay the sale consideration within a particular time but the conduct of the decree holder in not depositing the amount for a long six years was held to be full of mala fide. The contention of the plaintiff that there was no specific direction given to the plaintiff to deposit the balance sale consideration within the stipulated period was not found justified. The direction of the Trial Court was to execute the sale-deed within two months from the date of the decree on payment of balance of sale consideration. It was held that the payment of balance sale consideration was a condition precedent for execution of the sale-deed. It was implicit in the direction that the decree holder was required to deposit the balance consideration in the first instance and it was only then the judgment debtors were required to execute the sale-deed. Since the decree holder did not deposit the balance amount, the order of the Trial Court in rescinding the original contract was found perfectly in order.
Equivalent Citation: AIR2015All180, 2015(6) ALJ 27, 2015 (111) ALR 889, 2015 129 RD144,AIR 2015 ALLAH180
IN THE HIGH COURT OF ALLAHABAD
Writ-C No. 57407 of 2008
Decided On: 26.05.2015
Appellants: Radhey Shyam and Ors.
Vs.
Respondent: Harendra Pal Rathi
Hon'ble Judges/Coram:Sunita Agarwal, J.


1. Heard Sri Pramod Kumar Jain, learned Senior Advocate for the petitioner and Sri U.S. Mishra, learned Counsel for the respondent.
The writ petition is directed against the order of the Revisional Court allowing Civil Revision No. 396 of 2002 holding that the Executing Court has exceeded in its jurisdiction in allowing the application 3 Ga 2 under section 47, C.P.C. read with section 151, C.P.C. filed by the respondents thereby dismissing the execution case.
Brief facts giving rise to the present writ petition are that an Original Suit No. 1221 of 1991 was filed by the respondent Harendra Pal Rathi for specific performance of the agreement to sell alleged to have been executed by the petitioners. The contention was that against the sale consideration of ` 1,18,000/-, the respondent had paid 90,000/- on 7.3.1991 i.e., on the date of execution of agreement. For the remaining 28,000/- the plaintiff has always been ready and willing but the defendants did not execute the sale-deed. The suit was decreed ex-parte. The Trial Court had decreed the suit on 24.2.1996 directing the defendants to execute the sale-deed within two months from the date of decree after receipt of the remaining sale consideration of ` 28,000/-. It appears that the Execution Case No. 61 of 1996 was filed by the decree holder/respondent (in this writ petition). Notices were issued but the judgment debtor/petitioners did not appear. The execution case remained pending and only on 4.4.2000, the respondent deposited the remaining amount of sale consideration pursuant to the decree of year 1996. The judgment debtor/petitioners filed objection dated 9.7.2002 under section 47, C.P.C. that the decree was not executable as the vendee did not deposit the balance sale consideration within the time provided in the decree. No time extension application was filed before the Trial Court and the deposits were made after period of more than four years. The Trial Court had allowed the application under section 47, C.P.C. on the ground that the decree holder did not deposit the balance sale consideration within the time stipulated in the decree. The decree of specific performance cannot be executed as it was a conditional decree and the conditions prescribed therein were not complied with. The bar under section 16 of Specific Relief Act was invoked to conclude that the decree holder had failed to aver and prove that he had performed his part of the contract and has always been ready and willing to perform his part of the contract. He cannot get relief of specific performance of the contract.
2. The relief of performance of the contract would be treated to have been waived of by the vendee in case of non-payment of the balance sale consideration. It was held that the decree was not executable and the proceedings of Execution Case No. 61 of 19% was consigned to record.
3. The Revisional Court, however set aside the order of Executing Court on the ground that the application under section 47, C.P.C. was allowed on misinterpretation of the decree. The Executing Court could not have dropped the proceedings as time barred on the ground that the balance sale consideration was not deposited within the stipulated time for the reason that it was the responsibility of the judgment debtor to receive the balance amount of sale i.e., ` 28,000/- from the decree holder/plaintiff. There was no specific direction in the decree to the plaintiff/decree holder to deposit the balance sale consideration either in the Court or to pay it to the defendants/judgment debtors. The Specific direction was given to the judgment debtors who were under obligation to comply with the decree and execute the sale-deed pursuant to the decree after receipt of the balance sale consideration of ` 28,000/-.
Challenging the order of Revisional Court, the submission of learned Counsel for the petitioners are:
(1) An ex-parte decree was obtained by the decree holder and the execution of the same was filed after a period of more than 10 months from the date of judgment. This apart, the decree holder did not deposit the balance sale consideration in the Executing Court to show his readiness and willingness to get the sale-deed executed.
(2) There is no finding of the Trial Court in the decree with regard to the readiness and willingness of the decree holder to pay the balance sale consideration. In absence of any such finding, the Revisional Court could not have directed for execution of the decree.
(3) The decree holder did not aver in the execution application that he had offered the balance sale consideration to the judgment debtor and they had refused to receive the same.
(4) The balance sale consideration was deposited only on 4.4.2000 through challan before the Executing Court. In the application filed on 14.7.2000, it is stated that since the decree holder had deposited the balance sale consideration on 4.4.2000 and has always been ready and willing to perform his part of contract, the decree for execution of the sale-deed in favour of the decree holder, is executed.
(5) In the objection under section 47, C.P.C., the petitioners/judgment debtors have categorically stated that there was no agreement and the alleged agreement dated 12.3.1997 was an outcome of fraud. Two months' time has been provided by the Trial Court to deposit the sale consideration but the decree holder did not comply with the condition and hence the decree could not be executed.
(6) The objection under section 47 read with 151, C.P.C. was filed by the judgment debtor on 27.1.2000. Only after receipt of the said objection, the decree holder deposited the balance sale consideration before the Executing Court on 4.4.2000 and filed his reply to the objection under section 47, C.P.C. by the judgment debtor.
(7) There is no finding of the Revisional Court that the judgment debtor was ready and willing to get the sale-deed executed after the decree was passed in the year 1996. There has been no consideration that under section 16 read with section 28 of the Specific Relief Act, 1963 a suit for specific performance cannot be decreed in case, the party who is seeking to perform the contract had neither performed his part of the contract nor has always been ready and willing to perform it. Section 28 further provides that in case the purchase money or such other sum which the Court has ordered to pay in the decree is not deposited by the vendee, the vendor may apply to get the contract rescinded in the same suit. In case, the vendor moves such an application, an appropriate order is to be passed by the Court.
(8) The objection raised in the application under section 47, C.P.C., that the decree holder did not offer the balance sale consideration nor deposited the same in the Executing Court, establishes that he has never been ready and willing to perform his part of the contract and hence the decree had become redundant. These objections of the judgment debtor should have been treated as the objections under section 28 of the Specific Relief Act. Merely because the application/objection filed by the petitioners, has wrongly been termed under section 47, C.P.C. it could not have been rejected in this manner by the Revisional Court.
(9) The Trial Court infect has treated the objection of the petitioner in the correct perspective and has rightly observed that the decree could not be executed as the decree holder did not deposit the balance sale consideration within the time allowed by the Trial Court. There was no extension of time granted by the Trial Court nor any application has been moved for the purpose. The Revisional Court has committed grave illegality in interpretation of the directions in the judgment and order dated 24.2.1996 and concluding that the direction was only to the judgment debtor to receive money and decree holder was not under obligation to offer the balance sale consideration or deposit it in the Executing Court.
4. Learned Counsel for the petitioners has placed reliance upon the judgment of the Apex Court in N. Mani v. Sangeetha Theatre and others 2004 (12) SCC 278, to submit that if an authority has a power under the law to pass an order, merely because while exercising that power the source of power is not specifically referred that by itself does not vitiate the exercise of the power so long as the power does exist and can be traced to a source available in law. The contention is that the Executing Court has power to treat the objections, filed by the petitioners under section 47, C.P.C., as an application under section 28 of the Specific Relief Act. The Executing Court had power to look into as to whether the vendee/decree holder did offer the purchase money as ordered by the Court or not. The Executing Court having found that the money was not offered by the vendee nor there was an assertion of refusal by the vendor, had rightly exercised its power under section 28(1) of the Specific Relief Act for rescinding the contract and dismissing the execution application.
5. Further reliance has been placed upon judgment of this Court in V.S. Palanichamy Chettiar Firm v. C. Plagappan and another MANU/SC/0049/1999 : AIR 1999 SC 918, wherein it was held that when the Trial Court and the Executing Court are same, the Executing Court can entertain the application under section 28 of the Specific Relief Act for extension of time or rescission of contract or sale. In case such an application is moved before the Executing Court, it would be treated as one filed in the main suit. Further, reliance has been placed upon paragraph 15 and 17 of the said judgment which are quoted below:
"15. In Ramankutty Guptan v. Avara MANU/SC/1564/1994 : (1994) 2 SCC 642, the appellant was the judgment-debtor in a suit for specific performance agreement for sale of immovable property. The question before the Court was whether application under section 28 of the Act was maintainable on the execution side in a decree passed in the same suit by the Appellate Court. Plaintiff-respondents suit for specific performance though dismissed by the Trial Court was decreed by the Appellate Court which granted one month time to deposit the balance amount of consideration. The judgment-debtor filed second appeal in the High Court against the decree which was dismissed. The decree-holder deposited the amount after the time fixed by the Appellate Court but before the second appeal was dismissed. Decree-holder applied for execution of the decree. The judgment-debtor filed an application in these very proceedings under section 28 of the Act for rescission of the contract which had resulted in passing of the decree on the ground that the balance consideration was not deposited within one month of the decree by the Trial Court. The Executing Court dismissed the application on the ground that deposit had been made within the time while holding that the application was not maintainable on the execution side. The High Court on revision also held that the application was not maintainable in the Executing Court. This led the judgment-debtor to come to this Court. This Court observed that when the decree specifies the time for performance of the conditions of the decree, on its failure to deposit the money, section 28(1) itself gives power to the Court to extend the time on such terms as the Court may allow to pay the purchase money or other sum which the Court has ordered him to pay. The Court held, after noticing the conflict of decisions by the Bombay High Court and the Andhra Pradesh High Court, that when the Court which passed the decree and the Executing Court is the same, application under section 28 can be filed in the Executing Court. However, where decree is transferred for execution to a transferee executing then certainly the transferee Court is not the original Court and the Executing Court is not the same Court within the meaning of section 28 of the Act. But when an application has been made in the Court in which the original suit was filed and the execution is being proceeded with, then certainly an application under section 28 is maintainable in the same Court. Then dealing with the contention of the judgment-debtor that deposit was not within the time allowed by the Appellate Court, the Court said:
"The question then is whether it is a fit case for our interference. It is seen that the decree for specific performance became final. While the second appeal was pending, the balance consideration was deposited and no steps have been taken to bring it to the notice of the High Court that the respondent had committed default in compliance of the appellate decree depositing within the given time the balance consideration. Moreover, the respondent has been in possession of the land for a long time. The execution is on midway. Under these circumstances, the command of Article 136 of the Constitution is to draw the curtain and allow the application to lie in quietus where it was laid and dismiss the appeal."
"17. The agreement of sale was entered into as far back on February 16, 1980, about 19 years ago. No explanation is forthcoming as to why the balance amount of consideration could not be deposited within time granted by the Court and why no application was made under section 28 of the Act seeking extension of time of this period. Under Article 54 of the Limitation Act, 3 years period is prescribed for filing the suit for specific performance of contract of sale from the date of the agreement or when the cause of action arises. Merely because a suit is filed within the prescribed period of limitation does not absolve the vendee-plaintiff from showing as to whether he was ready and willing to perform his part of agreement and if there was non-performance was that on account of any obstacle put by the vendor or otherwise. Provisions to grant specific performance of an agreement are quite stringent. Equitable considerations come into play. Court has to see all the attendant circumstances including if the vendee has conducted himself in a reasonable manner under the contract of sale. That being the position of law for filing the suit for specific performance, can the Court as a matter of course allow extension of time for making payment of balance amount of consideration in terms of a decree after 5 years of passing of the decree by the Trial Court and 3 years of its confirmation by the Appellate Court? It is not the case of the respondent-decree holder that on account of any fault on the part of the vendor-judgment-debtor, the amount could not be deposited as per the decree. That being the position, if now time is granted, that would be going beyond the period of limitation prescribed for filing of the suit for specific performance of the agreement though this provision may not be strictly applicable. It is nevertheless an important circumstance to be considered by the Court. That apart, no explanation whatsoever is coming from the decree-holder-respondents as to why they did not pay the balance amount of consideration as per the decree except what the High Court itself thought fit to comment which is certainly not borne out from the record. Equity demands that discretion be not exercised in favour of the decree holder-respondents and no extension of time be granted to them to comply with the decree."
6. Further, on the strength of the judgment of the Apex Court in Chanda (dead) through L.Rs. v. Rattni and another MANU/SC/7245/2007 : 2007 (67) ALR 798 (SC) : 2007 (54) AIC 150. It is submitted that the power under section 28 of the Specific Relief Act is discretionary. Even if there was no specific time provided by the Trial Court for deposition of the balance sale consideration, it was incumbent upon the decree holder to offer or deposit the balance amount, otherwise the Trial Court can rescind the original contract.
7. He further placed reliance upon judgment of this Court in Narottam v. Ganpat Sahkari Avas Samiti Limited and others MANU/UP/1329/2007 : 2008 (1) AWC 7, that in the absence of averment of decree holder that he had offered money and the judgment debtor had refused to receive the same, it cannot be accepted that the decree holder has performed his part of the contract. The contract ought to have been rescinded.
8. Repelling the above submissions, learned Counsel for the respondent Sri U.S. Mishra contends that the Executing Court cannot go behind the decree. It has no right to determine the controversial question which are the basis of the decree to be executed. The reliance has been placed upon judgment of this Court in Jagbir Singh v. 6th Additional District Judge, Bijnor and others MANU/UP/1285/1997 : 1997 (15) LCD 836, judgment of the Apex Court in Dhurandhar Prasad Singh v. Jai Prakash University MANU/SC/0381/2001 : 2001 (44) ALR 579 (SC). He further submits that the Court had wrongly interpreted the decree passed by the Civil Court. There was specific direction to the judgment debtor to receive the balance sale consideration and to execute the sale-deed. The judgment debtor did not ask the degree holder to pay the sale money as per the direction of the Court. The decree holder was not under obligation to offer balance sale consideration of ` 28,000/- as per the decree. Moreover, in the execution case, that money has been deposited and hence the Trial Court was under obligation to execute the decree.
9. Heard learned Counsel for the parties and perused the record. There is no dispute between the parties about the dates of filing of the execution application and the deposit of balance sale consideration by the decree holder in the Court. To deal with the controversy, it would be apt to go through the relevant provisions of Specific Relief Act. Section 16 and 28 of the Specific Relief Act read as under:
"16. Personal bars to relief.--Specific performance of a contract cannot be enforced in favour of a person--
(a) who would not be entitled to recover compensation for its breach; or
(b) who has become incapable of performing, or violates any essential term of, the contract that on his part remains to be performed, or acts in fraud of the contract, or wilfully acts at variance with, or in subversion of, the relation intended to be established by the contract; or
(c) who fails to aver and prove that he has performed or has always been ready and willing to perform the essential terms of the contract which are to be performed by him, other than terms the performance of which has been prevented or waived by the defendant.
Explanation.--For the purposes of clause (c),--
(i) where 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;
(ii) the plaintiff must aver performance of, or readiness and willingness to perform, the contract according to its true construction."
28. Rescission in certain circumstances of contracts for the sale or lease of immovable property, the specific performance of which has been decreed.--
(1) Where in any suit a decree for specific performance of a contract for the sale or lease of immovable property has been made and the purchaser or lessee does not, within the period allowed by the decree or such further period as the Court may allow, pay the purchase money or other sum which the Court has ordered him to pay, the vendor or lessor may apply in the same suit in which the decree is made, to have the contract rescinded and on such application the Court may, by order, rescind the contract either so far as regards the party in default or altogether, as the justice of the case may require.
(2) Where a contract is rescinded under sub-section (1), the Court--
(a) shall direct the purchaser or the lessee, if he has obtained possession of the property under the contract, to restore such possession to the vendor or lessor, and
(b) may direct payment to the vendor or lessor of all the rents and profits which have accrued in respect of the property from the date on which possession was so obtained by the purchaser or lessee until restoration of possession to the vendor or lessor, and, if the justice of the case so requires, the refund of any sum paid by the vendee or lessee as earnest money or deposit in connection with the contract.
(3) If the purchaser or lessee pays the purchase money or other sum which he is ordered to pay under the decree within the period referred to in sub-section (1), the Court may, on application made in the same suit, award the purchaser or lessee such further relief as he may be entitled to, including in appropriate cases all or any of the following relief's, namely:
(a) the execution of a proper conveyance or lease by the vendor or lessor;
(b) the delivery of possession, or partition and separate possession, of the property on the execution of such conveyance or lease.
(4) No separate suit in respect of any relief which may be claimed under this section shall lie at the instance of a vendor, purchaser, lessor or lessee, as the case may be.
(5) The costs of any proceedings under this section shall be in the discretion of the Court."
10. In the case of Chanda (supra) though there was no specific direction of the Trial Court to the decree holder to pay the sale consideration within a particular time but the conduct of the decree holder in not depositing the amount for a long six years was held to be full of mala fide. The contention of the plaintiff that there was no specific direction given to the plaintiff to deposit the balance sale consideration within the stipulated period was not found justified. The direction of the Trial Court was to execute the sale-deed within two months from the date of the decree on payment of balance of sale consideration. It was held that the payment of balance sale consideration was a condition precedent for execution of the sale-deed. It was implicit in the direction that the decree holder was required to deposit the balance consideration in the first instance and it was only then the judgment debtors were required to execute the sale-deed. Since the decree holder did not deposit the balance amount, the order of the Trial Court in rescinding the original contract was found perfectly in order.
11. In Narottam (supra) relying upon judgment of the Apex Court in Chanda, this Court has held that the decree holder was required to deposit the money in the Court, in case, the judgment debtor did not execute the sale-deed within the time granted in the decree. In absence of any affidavit filed by the decree holder that the judgment debtor had refused to accept the balance amount and execute the sale-deed, the execution application cannot be allowed.
12. In the instant case, the decree was an ex parte decree which has become final between the parties as it was not challenged by the judgment debtors. The Trial Court had decreed the suit in the absence of the defendants without recording any finding regarding readiness and willingness of the plaintiff to get the sale-deed executed.
13. The argument of the learned Counsel for the respondent that there was no direction of the Trial Court to the decree holder to deposit the balance sale consideration and it was the duty of the judgment debtor to get money from the decree holder, cannot be accepted. The decree holder did not deposit the money till 4.4.2000 i.e., for a period of more than 4 years from the decree. Specific ground has not been made out by the decree holder for extension of time to make deposits. At no stage, the decree holder gave any explanation for condonation of delay in making the deposits. There was even no averment of the decree holder that he had offered money to the judgment debtor and the judgment debtor had refused to accept. The money was not deposited at the time of filing of the execution application in the year 1996. The Executing Court has recorded that the decree holder had never moved any application for making the deposit or extension of time for deposit of the balance sale consideration. The Executing Court has held that the balance sale consideration was not offered to the judgment debtor nor it was deposited in the Court by the decree holder for a period of four years.
14. The Revisional Court has erred in law in holding that there was no direction at all to the decree holder to deposit the balance sale consideration rather the direction was given to the defendants to execute the sale-deed after receiving the balance sale consideration. This interpretation of the judgment of the Trial Court given by the Revisional Court is on misconception of law of specific performance of agreement.
15. So far as the objection under section 47, C.P.C. filed by the defendants is concerned, the petitioners/judgment debtors had objected to the execution of the decree on the ground that the balance sale consideration was not paid by the decree holder. The decree for specific performance is a preliminary decree. The Court passing the decree did not cease to have power after decreeing the suit for specific performance rather final decree is to be passed only after the conditions of the preliminary decree have been complied with. The time specified in the decree for specific performance of the conditions of the decree has to be adhered to. In case of failure to deposit the money, the Court has power to extend the time on the application of the decree holder.
16. The decree holder did not file any application seeking extension of time. On the other hand, in the objection under section 47, C.P.C., the judgment debtor had pleaded that the final decree could not be passed as the decree holder did not pay the balance sale consideration in compliance of the preliminary decree. The Executing Court had adopted correct approach of law in looking into the facts that whether the decree for specific performance can be executed by giving extension of time to the decree holder to deposit the balance sale consideration. In its discretion, it has refused to accept the deposits made beyond the period of four years, without any explanation of delay by the decree holder. The Revisional Court ought not to have interfered in the matter in its limited jurisdiction. This Court, therefore, is of the opinion that the impugned judgment and orders dated 24.2.1996 and 30.9.2008 cannot be sustained and are accordingly set aside. The order of the Executing Court dated 9.5.2002 in Execution Case No. 61 of 1996 is upheld. The writ petition is allowed. The Execution application is consigned to record.

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