In order to examine this question, it is necessary to first
see the law on the issue as to whether time can be the essence
for performance of an agreement to sell the immovable
property and if so whether plaintiff in this case performed her
part within the time so stipulated in the agreement?
The learned Judge J.C. Shah (as His Lordship then was),
speaking for the Bench examined this issue in
Gomathinayagam Pillai and Ors. Vs. Pallaniswami Nadar,
AIR 1967 SC 868, in the light of English authorities and
Section 55 of the Contract Act and held as under:
“It is not merely because of specification of time at or
before which the thing to be done under the contract is
promised to be done and default in compliance
therewith, that the other party may avoid the contract.
Such an option arises only if it is intended by the
parties that time is of the essence of the contract.
Intention to make time of the essence, if expressed in
writing, must be in language which is unmistakable :
it may also be inferred from the nature of the property
agreed to be sold, conduct of the parties and the
surrounding circumstances at or before the contract.
Specific performance of a contract will ordinarily be
granted, notwithstanding default in carrying out the
contract within the specified period, if having regard to
the express stipulations of the parties, nature of the
property and the surrounding circumstances, it is not
inequitable to grant the relief. If the contract relates to
sale of immovable property, it would normally be
presumed that time was not of the essence of the
contract. Mere incorporation in the written agreement
of a clause imposing penalty in case of default does not
by itself evidence an intention to make time of the
essence. In Jamshed Khodaram Irani v. Burjorji
Dhunjibhai I.L.R. 40 Bom. 289 the Judicial Committee
of the Privy Council observed that the principle
underlying S. 55 of the Contract Act did not differ from
those which obtained under the law of England as
regards contracts for sale of land. The Judicial
Committee observed :
"Under that law equity, which governs the rights of the
parties in cases of specific performance of contracts to
sell real estate, looks not at the letter but at the
substance of the agreement in order to ascertain
whether the parties, notwithstanding that they named
a specific time within which completion was to take
place, really and in substance intended more than that
it should take place within a reasonable time.... Their
Lordships are of opinion that this is the doctrine which
the section of the Indian Statute adopts and embodies
in reference to sales of land. It may be stated concisely
in the language used by Lord Cairns in Tilley v.
Thomas I.L.R. (1867) Ch. 61 :-
‘The construction is, and must be, in equity the same
as in a Court of law. A Court of equity will indeed
relieve against, and enforce, specific performance,
notwithstanding a failure to keep the dates assigned
by the contract, either for completion, or for the steps
towards completion, if it can do justice between the
parties, and if (as Lord Justice Turner said in Roberts
v. Berry (1853) 3 De G.M. G. 284, there is nothing in
the 'express stipulations between the parties, the
nature of the property, or the surrounding
circumstances,' which would make it inequitable to
interfere with and modify the legal right. This is what
is meant, and all that is meant, when it is said that in
equity time is not of the essence of the contract. Of the
three grounds... mentioned by Lord Justice Turner
'express stipulations' requires no comment. The
'nature of the property' is illustrated by the case of
reversions, mines, or trades. The 'surrounding
circumstances' must depend on the facts of each
particular case."
In Govind Prasad Chaturvedi Vs. Hari Dutt Shastri
and Anr., (1977) 2 SCC 539, this Court placing reliance on the
law laid down in Gomathinayagam Pillai (supra), reiterated
the aforesaid principle and held as under:
“…….It may also be mentioned that the language used
in the agreement is not such as to indicate in
unmistakable terms that the time is of the essence of
the contract. The intention to treat time as the essence
of the contract may be evidenced by circumstances
which are sufficiently strong to displace the normal
presumption that in a contract of sale of land
stipulation as to time is not the essence of the
contract.
Apart from the normal presumption that in the case of
an agreement of sale of immovable properly time is not
the essence of the contract and the fact that the terms
of the agreement do not unmistakably state that the
time was understood to be the essence of the contract
neither in the pleadings nor during the trial the
respondents contended that time was of the essence of
the contract.”
Again in the case reported in Smt. Chand Rani vs. Smt.
Kamal Rani, (1993) 1 SCC 519, this Court placing reliance on
law laid down in aforementioned two cases took the same
view. Similar view was taken with more elaboration on the
issue in K.S. Vidyanadam and Ors. v. Vairavan, (1997) 3
SCC 1, wherein it was held as under:
“It has been consistently held by the courts in India,
following certain early English decisions, that in the
case of agreement of sale relating to immovable
property, time is not of the essence of the contract
unless specifically provided to that effect. The period of
limitation prescribed by the Limitation Act for filing a
suit is three years. From these two circumstances, it
does not follow that any and every suit for specific
performance of the agreement (which does not provide
specifically that time is of the essence of the contract)
should be decreed provided it is filed within the period
of limitation notwithstanding the time-limits stipulated
in the agreement for doing one or the other thing by
one or the other party. That would amount to saying
that the time-limits prescribed by the parties in the
agreement have no significance or value and that they
mean nothing. Would it be reasonable to say that
because time is not made the essence of the contract,
the time-limit (s) specified in the agreement have no
relevance and can be ignored with impunity? It would
also mean denying the discretion vested in the court
by both Sections 10 and 20. As held by a Constitution
Bench of this Court in Chand Rani vs. Kamal Rani
(1993) 1 SCC 519:
“....it is clear that in the case of sale of immovable
property there is no presumption as to time being the
essence of the contract. Even if it is not of the essence
of the contract, the Court may infer that it is to be
performed in a reasonable time if the conditions are
(evident?) : (1) from the express terms of the contract;
(2) from the nature of the property; and (3) from the
surrounding circumstances, for example, the object of
making the contract.”
In other words, the court should look at all the
relevant circumstances including the time-limit(s)
specified in the agreement and determine whether its
discretion to grant specific performance should be
exercised. Now in the case of urban properties in India,
it is well-known that their prices have been going up
sharply over the last few decades - particularly after
1973.
“……Indeed, we are inclined to think that the rigor of
the rule evolved by courts that time is not of the
essence of the contract in the case of immovable
properties - evolved in times when prices and values
were stable and inflation was unknown - requires to be
relaxed, if not modified, particularly in the case of
urban immovable properties. It is high time, we do
so…...”
The aforesaid view was upheld in K. Narendra vs. Riviera
Apartments (P) Ltd. (1999) 5 SCC 77.
Reportable
IN THE SUPREME COURT OF INDIA
CIVIL APPELALTE JURISDICTION
CIVIL APPEAL Nos. 9949-9950 OF 2014
(Arising out of SLP (C) Nos.35800-35801 of 2011)
Rathnavathi & Another Appellant(s)
VERSUS
Kavita Ganashamdas Respondent(s)
Citation;2015 ALLSCR8
Read original judgment here;click here
2. The plaintiff filed two suits, one for specific performance
of agreement and other for grant of permanent injunction in
relation to the suit house. The trial court vide common
judgment and decree dated 16.10.2001 dismissed both the
Page 2
suits. The first appellate court, i.e., the High Court, in appeal,
by impugned judgment and decree dated 08.09.2011 reversed
the judgment and decree of the trial court and decreed both
the suits in appeal, against the defendants. Being aggrieved
by the judgment and decree of the High Court, Defendants 1
and 3 have approached this Court in the instant civil appeals.
3. The question arises for consideration in these appeals is
whether the High Court was justified in allowing the first
appeals preferred by the plaintiff, resulting in decreeing the
two civil suits against defendants in relation to suit house?
4. In order to appreciate the controversy involved in the civil
suits, and now in these appeals, it is necessary to state the
relevant facts.
5. For the sake of convenience, description of parties herein
is taken from Original Suit No.223/2000.
6. Defendant no.2 is the original owner of the suit house
and defendant no.1 is the subsequent purchaser of the suit
house from defendant no.2.
2
Page 3
7. The dispute relates to a dwelling house bearing no. 351
Block no.11, Matadahalli Extension, now known as R.T. Nagar
Bangalore (hereinafter referred to as " the suit house “).
8. The suit house was purchased by defendant no. 2 from
Bangalore Development Authority (in short “BDA”) in a
scheme. On 15.02.1989, Defendant no. 2 entered into an
agreement (Annexure-P-1) with plaintiff for sale of suit house
at a total consideration of Rs. 3,50,000/-. In terms of clause 2
of the agreement, the plaintiff paid a sum of Rs. 50,000/- as
advance towards sale consideration. These facts are not in
dispute.
9. On 07.01.2000, the plaintiff filed a civil suit being OS No.
223/2000, initially against 3 defendants for seeking
permanent injunction restraining the defendants jointly and
severally from interfering in plaintiff's possession over the suit
house. In substance, case of the plaintiff was that she entered
into an agreement on 15.02.1989 with defendant no. 2 to
purchase the suit house for Rs. 3,50,000/- and paid a sum of
3
Page 4
Rs. 50,000/- to defendant no. 2 by way of advance towards the
sale consideration. Later, the plaintiff further paid the balance
consideration of Rs. 3 Lacs towards the sale price and
obtained receipts acknowledging the payment so made. It was
alleged that the plaintiff was accordingly placed in actual
physical possession of the suit house and since then she has
been in possession of the suit house. It was alleged that she
also made some improvements therein by spending money and
is paying electricity and water charges etc. It was further
alleged that the plaintiff was and has always been ready and
willing to perform her part of the agreement to get the sale
deed executed in her favour after having performed her part of
the contract. However, defendant no. 2, for the reasons best
known to her, did not execute the sale deed despite having
received the full sale consideration from the plaintiff. It was
alleged that defendant no. 1, who is a total stranger to the suit
house and having no right, title and interest in the suit house,
on 2.1.2000 visited the suit house along with defendant no. 2
4
Page 5
and some other unwanted elements and threatened the
plaintiff to dispossess her from the suit house. It was also
alleged that on 8.1.2000, defendant nos. 1 and 2 again visited
and attempted to assault the plaintiff and unsuccessfully
attempted to commit trespass in the suit house.
10. On seeing the hostile attitude of defendant nos. 1 and 2
and their associates, the plaintiff immediately lodged a
complaint in the concerned police station. Since police
authorities did not take any action, which was required of, the
plaintiff filed the aforesaid civil suit for permanent injunction
restraining the defendants from interfering in her peaceful
possession over the suit house. It was submitted that the
plaintiff has a prima facie case, so also the balance of
convenience and irreparable loss in her favour, which entitles
her to claim permanent injunction against the defendants in
relation to the suit house. The plaintiff also averred that she
reserved her right to file a suit for specific performance of
agreement against the defendants.
5
Page 6
11. The aforesaid suit was contested by defendant nos. 1 and
2. While admitting the ownership of defendant no. 2 over the
suit house and the fact of entering into an agreement with the
plaintiff for its sale to the plaintiff and further while admitting
the receipt of advance payment of Rs 50,000/- from the
plaintiff, the defendants denied all material allegations made
in the plaint. It was alleged that the plaintiff did not pay the
balance consideration as alleged. It was also alleged that
defendant no. 2 on 25.10.1995 cancelled the agreement dt
15.02.1989 by sending legal notice to the plaintiff and then
sold the suit house to defendant no. 1 on 09.02.1998 for Rs. 4
lacs and placed her in its possession.
12. On 31.03.2000, the plaintiff filed another civil suit being
OS No. 2334 of 2000 in the Court of City Civil Judge
Bangalore against the defendants for specific performance of
agreement dated 15.02.1989 in relation to the suit house.
13. After pleading the same facts, which are set out above,
the plaintiff further alleged that she has performed her part of
6
Page 7
the agreement by paying entire sale consideration of Rs.
3,50,000/- and has been in possession of the suit house. It
was alleged that on the one hand, defendant no. 2, despite
having received full sale consideration, did not perform her
part of the agreement by not getting the suit house transferred
in plaintiff's favour as per clause 3 of the agreement and by
doing the acts which she was expected to do in terms of
agreement, and on the other hand, tried to interfere in
plaintiff's lawful possession over the suit house.
14. This led the plaintiff to serve upon defendant no.2 a legal
notice dated 6.3.2000 thereby calling upon defendant no.2 to
execute the sale deed in relation to suit property in plaintiff's
favour. Since despite service of legal notice, defendant no. 2
failed to execute the same, suit for specific performance was
also filed. The plaintiff then by way of amendment also sought
to add one prayer for cancellation of sale deed alleged to have
been executed by defendant no. 2 in favour of defendant no. 1.
This amendment was allowed.
7
Page 8
15. The defendants contested the civil suit. While admitting
the execution of agreement dated 15.02.1989 with the plaintiff
for sale of suit house for Rs. 3,50,000/- and also admitting
payment of Rs. 50,000/- by the plaintiff to defendant no. 2,
the defendants denied all other material allegations and inter
alia alleged that since the plaintiff failed to pay the balance
sale consideration of Rs. 3 lacs to defendant no. 2 in terms of
the agreement, defendant no. 2 on 25.10.1995 sent a legal
notice to the plaintiff cancelling the agreement dated
15.2.1989 and sold the suit house to defendant no. 1 on
09.02.1998 for consideration and placed her in possession of
the suit house. The defendants also alleged that defendant no.
1 was the bona fide purchaser for value and hence her title
cannot be questioned in the suit.
16. The defendants also contested the suit on two legal
grounds. Firstly, it was contended that the suit was not
maintainable, as the bar contained in Order II Rule 2 of Code
of Civil Procedure, 1908 (hereinafter referred to as 'CPC') did
8
Page 9
not permit the plaintiff to file the suit for specific performance
of agreement in question against the defendants. It was alleged
that relief to claim specific performance of agreement was
available to the plaintiff when she filed the first suit (OS No.
223/2000) for permanent injunction against the defendants.
Yet, the plaintiff failed to claim the relief in the first suit,
consequently, the second suit filed to claim specific
performance of agreement in question is hit by rigor contained
in Order II Rule 2 of CPC. It is now barred and hence liable to
be dismissed as not maintainable. Secondly, it was contended
that the suit is otherwise barred by limitation having been filed
beyond the period of three years from the date of accrual of
cause of action as provided in Article 54 of the Limitation Act,
1963. It was, therefore, contended that the suit is liable to be
dismissed as being barred by limitation, as well.
17. The trial court consolidated both the suits for trial.
Issues were framed. Parties adduced evidence. The trial court
vide judgment/decree dated 25.8.2009 though answered some
9
Page 10
issues in plaintiff's favour but eventually dismissed the civil
suits. It was held that the agreement dated 15.02.1989 was
executed between the plaintiff and defendant no. 2 for sale of
suit house; that the plaintiff was not placed in possession of
suit house pursuant to agreement in question; that the
plaintiff was not ready and willing to perform her part of the
agreement; that suit is barred by limitation; that the plaintiff
was not entitled to claim the relief for specific performance of
agreement; that the plaintiff was not entitled to claim the relief
for grant of permanent injunction; that defendant no. 1 is a
bona fide purchaser of the suit house for value; that the
plaintiff was not entitled to challenge the sale deed dt.
9.2.1998, that the suit was hit by the bar contained in Order II
Rule 2 of CPC because the plaintiff did not obtain leave to file
second suit for specific performance while filing the first suit
for grant of permanent injunction against the defendants in
relation to the suit house.
18. Feeling aggrieved, the plaintiff filed two regular first
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Page 11
appeals being R.F.A. Nos. 1092 of 2009 and 1094 of 2009
before the High Court. By common impugned
judgment/decree, the High Court allowed both the appeals,
reversed the judgment/decree of the trial court and decreed
both the civil suits by passing a decree for specific
performance of agreement against the defendants in relation to
suit house and also issued permanent injunction as claimed
by the plaintiff. The High Court answered all the
aforementioned issues in plaintiff's favour and against the
defendants.
19. The High Court in its judgment held that the plaintiff was
in possession of suit house; that the plaintiff performed her
part of the agreement; that the plaintiff paid the entire sale
consideration of Rs. 3,50,000/- to defendant no. 2; that the
plaintiff was ready and willing to perform her part of
agreement; that defendant no. 2 failed to perform her part of
the agreement thereby rendering her liable to perform her part
of agreement; and that subsequent sale even if made by
11
Page 12
defendant no. 2 in favour of defendant no. 1 was not binding
on the plaintiff because it was not bona fide.
20. The High Court, however, after deciding the issues in
favour of the plaintiff, directed that in order to weigh the
equities between the parties and keeping in view the price
escalation, which is unavoidable in present days, the plaintiff
will pay an additional sum of Rs. 4 lacs over and above Rs.
3,50,000/- to defendant no. 2 for obtaining sale deed in her
favour.
21. It is against this judgment/decree of the High Court, the
defendants have filed the present appeals by way of special
leave petitions.
22. Mrs. Nalini Chidambaram, learned Senior Counsel
appearing for the appellants (defendants) while assailing the
legality and correctness of the impugned judgment urged
various submissions. Firstly, she argued that the High Court
erred in allowing plaintiff's first appeals, as according to her,
12
Page 13
both the appeals were liable to be dismissed by upholding the
judgment /decree of the trial court which had rightly
dismissed the suits. Secondly, she argued that second suit
filed for claiming specific performance of the agreement for
sale of suit house to the plaintiff was hit by bar contained in
Order II Rule 2 of CPC for the reason that the plaintiff failed to
secure leave in her first suit and hence the second suit filed by
the plaintiff for grant of specific performance was not
maintainable. Thirdly, she argued that assuming the second
suit was held maintainable, even then it was barred by
limitation prescribed in Article 54 of the Limitation Act. It was
pointed out that cause of action to file suit for specific
performance of contract against the defendants arose in the
year 1989 itself no sooner 60 days period expired from the
date of agreement as provided in clause 2 of the agreement,
whereas, the suit in question seeking specific performance was
filed in year 2000 and hence, it was hopelessly barred applying
the limitation prescribed in Article 54. Fourthly, it was argued
13
Page 14
that in any case, there was no case made out on evidence by
the plaintiff for reversal of the findings relating to grant of
specific performance of agreement because the plaintiff was
neither ready nor willing to perform her part of the agreement
and nor there was any evidence to hold in her favour on this
material issue. Fifthly, she argued that there was no evidence
to hold that the plaintiff was in possession of the suit house;
rather there was enough evidence to hold that after sale of suit
house by defendant no.2 to defendant no.1, it was defendant
no.1, who was in possession. Therefore, it should have been
held that the plaintiff was not in possession of the suit house,
as was rightly held by the trial court. And, lastly she argued
that it should have been held with the aid of evidence that
defendant no. 1 was bona fide purchaser of the suit house for
value, as she purchased it after the owner i.e. defendant no. 2
cancelled the agreement dt 15.2.1989 and then sold the suit
house to defendant no. 1.
23. After arguing at length with reference to documents on
14
Page 15
record, learned counsel for the appellants contended that
impugned judgment /decree deserves to be set aside and that
of the trial court be restored by dismissing both the suits filed
by the plaintiff. Learned counsel also relied upon certain
decisions, which we shall refer later.
24. Mr. P. Vishwanatha Shetty, learned senior counsel for
the respondent (plaintiff) supported the impugned
judgment /decree and contended that it does not call for any
interference. According to learned senior counsel, all the
findings recorded by the High Court, though of reversal,
deserve to be upheld because the High Court, in exercise of its
first appellate powers under Section 96 of CPC, rightly
appreciated the evidence and came to its independent
conclusion which it could legally do and which it rightly did
while allowing the two first appeals. Learned senior counsel
urged that this Court while hearing these appeals cannot and
rather should not undertake the exercise of appreciating the
whole evidence again like that of the first appeal except to find
15
Page 16
out whether there is any apparent legal error in the impugned
judgment so as to call for any interference by this Court.
Learned senior counsel submitted that no such error exists in
the impugned judgment and hence these appeals are liable to
be dismissed.
25. Having heard the learned counsel for the parties at
length and upon perusal of the record of the case, we find no
merit in these appeals as in our considered opinion, the
submissions urged by the learned senior counsel for the
appellants, though argued ably, have no force.
26. Coming first to the legal question as to whether bar
contained in Order II Rule 2 of CPC is attracted so as to nonsuit
the plaintiff from filing the suit for specific performance of
the agreement, in our considered opinion, the bar is not
attracted
27. At the outset, we consider it apposite to take note of law
laid down by the Constitution bench of this Court in Gurbux
Singh v. Bhooralal, AIR 1964 SC 1810, wherein this Court
16
Page 17
while explaining the true scope of Order II Rule 2 of CPC laid
down the parameters as to how and in what circumstances, a
plea should be invoked against the plaintiff. Justice Ayyangar
speaking for the Bench held as under:
“In order that a plea of a bar under Order 2 Rule 2(3)
of the Civil Procedure Code should succeed the
defendant who raises the plea must make out (1) that
the second suit was in respect of the same cause of
action as that on which the previous suit was based;
(2) that in respect of that cause of action the plaintiff
was entitled to more than one relief; (3)that being thus
entitled to more than one relief the plaintiff, without
leave obtained from the Court omitted to sue for the
relief for which the second suit had been filed. From
this analysis it would be seen that the defendant
would have to establish primarily and to start with, the
precise cause of action upon which the previous suit
was filed, for unless there is identity between the
cause of action on which the earlier suit was filed and
that on which the claim in the later suit is based there
would be no scope for the application of the bar…..”
(Emphasis supplied)
28. This Court has consistently followed the aforesaid
enunciation of law in later years and reference to only one of
such recent decisions in Virgo Industries (Eng.) P. Ltd. Vs
Venturetech Solutions P. Ltd., (2013) 1 SCC 625, would
suffice, wherein this Court reiterated the principle of law in
following words:
17
Page 18
“The cardinal requirement for application of the
provisions contained in Order II Rules 2(2) and (3),
therefore, is that the cause of action in the later suit
must be the same as in the first suit. It will be wholly
unnecessary to enter into any discourse on the true
meaning of the said expression, i.e. cause of action,
particularly, in view of the clear enunciation in a
recent judgment of this Court in the Church of Christ
Charitable Trust and Educational Charitable Society,
represented by its Chairman v. Ponniamman
Educational Trust represented by its
Chairperson/Managing Trustee JT 2012 (6) SC 149.
The huge number of opinions rendered on the issue
including the judicial pronouncements available does
not fundamentally detract from what is stated in
Halsbury's Laws of England, (4th Edition). The
following reference from the above work would,
therefore, be apt for being extracted herein below:
“ ‘Cause of Action’ has been defined as meaning simply
a factual situation existence of which entitles one
person to obtain from the Court a remedy against
another person. The phrase has been held from the
earliest time to include every fact which is material to
be proved to entitle the Plaintiff to succeed, and every
fact which a Defendant would have a right to traverse.
'Cause of action’ has also been taken to mean that
particular action on the part of the Defendant which
gives the Plaintiff his cause of complaint, or the
subject-matter of grievance founding the action, not
merely the technical cause of action.”
29. In the instant case when we apply the aforementioned
principle, we find that bar contained in Order II Rule 2 is not
attracted because of the distinction in the cause of action for
filing the two suits. So far as the suit for permanent injunction
18
Page 19
is concerned, it was based on a threat given to the plaintiff by
the defendants to dispossess her from the suit house on
2.1.2000 and 9.1.2000. This would be clear from reading Para
17 of the plaint. So far as cause of action to file suit for
specific performance of agreement is concerned, the same was
based on non performance of agreement dated 15.2.1989 by
defendant no. 2 in plaintiff's favour despite giving legal notice
dated 6.3.2000 to defendant no. 2 to perform her part.
30. In our considered opinion, both the suits were, therefore,
founded on different causes of action and hence could be filed
simultaneously. Indeed even the ingredients to file the suit for
permanent injunction are different than that of the suit for
specific performance of agreement
31. In case of former, plaintiff is required to make out the
existence of prima facie case, balance of convenience and
irreparable loss likely to be suffered by the plaintiff on facts
with reference to the suit property as provided in Section 38 of
the Specific Relief Act, 1963 (in short “the Act”) read with
19
Page 20
Order 39 Rule 1 & 2 of CPC. Whereas, in case of the later,
plaintiff is required to plead and prove her continuous
readiness and willingness to perform her part of agreement
and to further prove that defendant failed to perform her part
of the agreement as contained in Section 16 of The Act.
32. One of the basic requirements for successfully invoking
the plea of Order II Rule 2 of CPC is that the defendant of the
second suit must be able to show that the second suit was
also in respect of the same cause of action as that on which
the previous suit was based.
33. As mentioned supra, since in the case on hand, this
basic requirement in relation to cause of action is not made
out, the defendants (appellants herein) are not entitled to raise
a plea of bar contained in Order II Rule 2 of CPC to
successfully non suit the plaintiff from prosecuting her suit for
specific performance of the agreement against the defendants.
34. Indeed when the cause of action to claim the respective
reliefs were different so also the ingredients for claiming the
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Page 21
reliefs, we fail to appreciate as to how a plea of Order II Rule 2
could be allowed to be raised by the defendants and how it
was sustainable on such facts.
35. We cannot accept the submission of learned senior
counsel for the appellants when she contended that since both
the suits were based on identical pleadings and when cause of
action to sue for relief of specific performance of agreement
was available to the plaintiff prior to filing of the first suit, the
second suit was hit by bar contained in Order II Rule 2 of CPC.
36. The submission has a fallacy for two basic reasons.
Firstly, as held above, cause of action in two suits being
different, a suit for specific performance could not have been
instituted on the basis of cause of action of the first suit.
Secondly, merely because pleadings of both suits were similar
to some extent did not give any right to the defendants to raise
the plea of bar contained in Order II Rule 2 of CPC. It is the
cause of action which is material to determine the applicability
of bar under Order II Rule 2 and not merely the pleadings. For
these reasons, it was not necessary for plaintiff to obtain any
leave from the court as provided in Order II Rule 2 of CPC for
filing the second suit.
37. Since the plea of Order II Rule 2, if upheld, results in
depriving the plaintiff to file the second suit, it is necessary for
the court to carefully examine the entire factual matrix of both
the suits, the cause of action on which the suits are founded,
reliefs claimed in both the suits and lastly the legal provisions
applicable for grant of reliefs in both the suits.
38. In the light of foregoing discussion, we have no hesitation
in upholding the finding of the High Court on this issue. We,
therefore, hold that second suit (OS No. 2334 of 2000) filed by
the plaintiff for specific performance of agreement was not
barred by virtue of bar contained in Order II Rule 2 CPC.
39. This takes us to the next question as to whether suit for
specific performance was barred by limitation prescribed
under Article 54 of the Limitation Act?
40. In order to examine this question, it is necessary to first
see the law on the issue as to whether time can be the essence
for performance of an agreement to sell the immovable
property and if so whether plaintiff in this case performed her
part within the time so stipulated in the agreement?
41. The learned Judge J.C. Shah (as His Lordship then was),
speaking for the Bench examined this issue in
Gomathinayagam Pillai and Ors. Vs. Pallaniswami Nadar,
AIR 1967 SC 868, in the light of English authorities and
Section 55 of the Contract Act and held as under:
“It is not merely because of specification of time at or
before which the thing to be done under the contract is
promised to be done and default in compliance
therewith, that the other party may avoid the contract.
Such an option arises only if it is intended by the
parties that time is of the essence of the contract.
Intention to make time of the essence, if expressed in
writing, must be in language which is unmistakable :
it may also be inferred from the nature of the property
agreed to be sold, conduct of the parties and the
surrounding circumstances at or before the contract.
Specific performance of a contract will ordinarily be
granted, notwithstanding default in carrying out the
contract within the specified period, if having regard to
the express stipulations of the parties, nature of the
property and the surrounding circumstances, it is not
inequitable to grant the relief. If the contract relates to
sale of immovable property, it would normally be
presumed that time was not of the essence of the
contract. Mere incorporation in the written agreement
of a clause imposing penalty in case of default does not
by itself evidence an intention to make time of the
essence. In Jamshed Khodaram Irani v. Burjorji
Dhunjibhai I.L.R. 40 Bom. 289 the Judicial Committee
of the Privy Council observed that the principle
underlying S. 55 of the Contract Act did not differ from
those which obtained under the law of England as
regards contracts for sale of land. The Judicial
Committee observed :
"Under that law equity, which governs the rights of the
parties in cases of specific performance of contracts to
sell real estate, looks not at the letter but at the
substance of the agreement in order to ascertain
whether the parties, notwithstanding that they named
a specific time within which completion was to take
place, really and in substance intended more than that
it should take place within a reasonable time.... Their
Lordships are of opinion that this is the doctrine which
the section of the Indian Statute adopts and embodies
in reference to sales of land. It may be stated concisely
in the language used by Lord Cairns in Tilley v.
Thomas I.L.R. (1867) Ch. 61 :-
‘The construction is, and must be, in equity the same
as in a Court of law. A Court of equity will indeed
relieve against, and enforce, specific performance,
notwithstanding a failure to keep the dates assigned
by the contract, either for completion, or for the steps
towards completion, if it can do justice between the
parties, and if (as Lord Justice Turner said in Roberts
v. Berry (1853) 3 De G.M. G. 284, there is nothing in
the 'express stipulations between the parties, the
nature of the property, or the surrounding
circumstances,' which would make it inequitable to
interfere with and modify the legal right. This is what
is meant, and all that is meant, when it is said that in
equity time is not of the essence of the contract. Of the
three grounds... mentioned by Lord Justice Turner
'express stipulations' requires no comment. The
'nature of the property' is illustrated by the case of
reversions, mines, or trades. The 'surrounding
circumstances' must depend on the facts of each
particular case."
42. In Govind Prasad Chaturvedi Vs. Hari Dutt Shastri
and Anr., (1977) 2 SCC 539, this Court placing reliance on the
law laid down in Gomathinayagam Pillai (supra), reiterated
the aforesaid principle and held as under:
“…….It may also be mentioned that the language used
in the agreement is not such as to indicate in
unmistakable terms that the time is of the essence of
the contract. The intention to treat time as the essence
of the contract may be evidenced by circumstances
which are sufficiently strong to displace the normal
presumption that in a contract of sale of land
stipulation as to time is not the essence of the
contract.
Apart from the normal presumption that in the case of
an agreement of sale of immovable properly time is not
the essence of the contract and the fact that the terms
of the agreement do not unmistakably state that the
time was understood to be the essence of the contract
neither in the pleadings nor during the trial the
respondents contended that time was of the essence of
the contract.”
43. Again in the case reported in Smt. Chand Rani vs. Smt.
Kamal Rani, (1993) 1 SCC 519, this Court placing reliance on
law laid down in aforementioned two cases took the same
view. Similar view was taken with more elaboration on the
issue in K.S. Vidyanadam and Ors. v. Vairavan, (1997) 3
SCC 1, wherein it was held as under:
“It has been consistently held by the courts in India,
following certain early English decisions, that in the
case of agreement of sale relating to immovable
property, time is not of the essence of the contract
unless specifically provided to that effect. The period of
limitation prescribed by the Limitation Act for filing a
suit is three years. From these two circumstances, it
does not follow that any and every suit for specific
performance of the agreement (which does not provide
specifically that time is of the essence of the contract)
should be decreed provided it is filed within the period
of limitation notwithstanding the time-limits stipulated
in the agreement for doing one or the other thing by
one or the other party. That would amount to saying
that the time-limits prescribed by the parties in the
agreement have no significance or value and that they
mean nothing. Would it be reasonable to say that
because time is not made the essence of the contract,
the time-limit (s) specified in the agreement have no
relevance and can be ignored with impunity? It would
also mean denying the discretion vested in the court
by both Sections 10 and 20. As held by a Constitution
Bench of this Court in Chand Rani vs. Kamal Rani
(1993) 1 SCC 519:
“....it is clear that in the case of sale of immovable
property there is no presumption as to time being the
essence of the contract. Even if it is not of the essence
of the contract, the Court may infer that it is to be
performed in a reasonable time if the conditions are
(evident?) : (1) from the express terms of the contract;
(2) from the nature of the property; and (3) from the
surrounding circumstances, for example, the object of
making the contract.”
In other words, the court should look at all the
relevant circumstances including the time-limit(s)
specified in the agreement and determine whether its
discretion to grant specific performance should be
exercised. Now in the case of urban properties in India,
it is well-known that their prices have been going up
sharply over the last few decades - particularly after
1973.
“……Indeed, we are inclined to think that the rigor of
the rule evolved by courts that time is not of the
essence of the contract in the case of immovable
properties - evolved in times when prices and values
were stable and inflation was unknown - requires to be
relaxed, if not modified, particularly in the case of
urban immovable properties. It is high time, we do
so…...”
The aforesaid view was upheld in K. Narendra vs. Riviera
Apartments (P) Ltd. (1999) 5 SCC 77.
44. Applying the aforesaid principle of law laid down by this
Court to the facts of the case at hand, we have no hesitation in
holding that the time was not the essence of agreement for its
performance and the parties too did not intend that it should
be so.
45. Clauses 2 and 3 of the agreement (Annexure P-1), which
are relevant to decide this question reads as under:
“2. The purchaser shall pay a sum of Rs.50,000/-
(Rupees Fifty Thousand only) as advance to the seller
at the time of signing this agreement, the receipt of
which the seller hereby acknowledges and the balance
sale consideration amount shall be paid within 60
days from the date of expiry of lease period.
3. The Seller covenants with the Purchaser that efforts
will be made with the Bangalore Development
Authority for the transfer of the schedule property in
favour of the Purchaser after paying penalty. In case it
is not possible then the time stipulated herein for the
balance payment and completion of the sale
transaction will be agreed mutually between the
parties.”
46. Reading both the clauses together, it is clear that time to
perform the agreement was not made an essence of contract
by the parties because even after making balance payment
after the expiry of lease period, which was to expire in 1995,
defendant no. 2 as owner had to make efforts to transfer the
land in the name of plaintiff. That apart, we do not find any
specific clause in the agreement, which provided for
completion of its execution on or before any specific date.
47. Since it was the case of the plaintiff that she paid the
entire sale consideration to defendant no. 2 and was
accordingly placed in possession of the suit house, the threat
of her dispossession in 2000 from the suit house coupled with
the fact that she having come to know that defendant no. 2
28
Page 29
was trying to alienate the suit house, gave her a cause of
action to serve legal notice to defendant no. 2 on 6.3.2000
calling upon defendant no. 2 to perform her part and convey
the title in the suit house by executing the sale deed in her
favour. Since defendant no. 2 failed to convey the title, the
plaintiff filed a suit on 31.3.2000 for specific performance of
the agreement.
48. Article 54 of the Limitation Act which prescribes the
period of limitation for filing suit for specific performance
reads as under:
54. For specific
performance of a
contract.
Three
years
The date of fixed for the
performance, or, if no such date is
fixed, when the plaintiff has notice
that performance is refused.
49. Mere reading of Article 54 of the Limitation Act would
show that if the date is fixed for performance of the agreement,
then non-compliance of the agreement on the date would give
a cause of action to file suit for specific performance within
three years from the date so fixed. However, when no such
date is fixed, limitation of three years to file a suit for specific
performance would begin when the plaintiff has noticed that
the defendant has refused the performance of the agreement.
50. The case at hand admittedly does not fall in the first
category of Article 54 of the Limitation Act because as
observed supra, no date was fixed in the agreement for its
performance. The case would thus be governed by the second
category viz., when plaintiff has a notice that performance is
refused.
51. As mentioned above, it was the case of the plaintiff that
she came to know on 02.01.2000 and 09.01.2000 that the
owner of the suit house along with the so-called intending
purchaser are trying to dispossess her from the suit house on
the strength of their ownership over the suit house. This event
was, therefore, rightly taken as starting point of refusal to
perform the agreement by defendant no.2, resulting in giving
notice to defendant no.2 by the plaintiff on 6.3.2000 and then
filing of suit on 31.3.2000.
52. In the light of the foregoing discussion, we uphold the
findings of the High Court and accordingly hold that the suit
filed by the plaintiff for specific performance of the agreement
was within limitation prescribed under Article 54 of the
Limitation Act.
53. This takes us to the last question as to whether the High
Court was justified in granting specific performance of
agreement in plaintiff's favour by reversing the
judgment/decree of the trial court which had dismissed the
suit.
54. We may observe that notice of SLP was issued essentially
to examine the two legal issues arising in the case as
discussed above. These two issues have been dealt with and
answered against the appellants. However, since learned
senior counsel for the appellants also questioned the legality
and correctness of the finding of the High Court on all other
factual issues, we have, therefore, examined the other issues
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Page 32
as well.
55. Learned senior counsel for the appellants contended that
the High Court was not justified in holding that defendant no.
1 was not a bona fide purchaser of the suit house for value.
Another submission was that the plaintiff was not ready and
willing to perform her part of the agreement; and lastly her
submission was that the plaintiff was never in actual
possession of the suit house despite execution of agreement
and making part payment of Rs. 50,000/- to defendant no. 2.
Learned senior counsel for the appellants urged these factual
submissions with equal force like the two legal issues dealt
with supra.
56. In our considered opinion, the High Court being the last
Court of appeal on facts /law while hearing first appeal under
Section 96 of CPC was well within its powers to appreciate the
evidence and came to its own conclusion independent to that
of the trial court's decision. One can not dispute the legal
proposition that the grant/refusal of specific performance is a
32
Page 33
discretionary relief, and, therefore, once it is granted by the
appellate court on appreciation of evidence, keeping in view
the legal principle applicable for the grant then further
appellate court should be slow to interfere in such finding,
unless the finding is found to be either against the settled
principle of law, or is arbitrary or perverse.
57. This Court while hearing appeal under Article 136 is not
inclined to again appreciate the entire ocular/documentary
evidence like that of first appellate court unless the
parameters noticed above are successfully made out in the
case. Such does not appear to be a case of this nature.
58. The High Court, in our considered opinion, properly
appreciated the evidence for recording findings in plaintiff's
favour that she was ready and willing to perform her part of
the agreement and in fact did perform her part, firstly, by
paying Rs. 50,000/- as advance and then paid balance of Rs.
3,00,000/- towards sale consideration to defendant no.2; that
plaintiff was placed in possession of the suit house by
33
Page 34
defendant no. 2 pursuant to agreement; and, lastly defendant
no. 2 did not perform her part of the agreement.
59. It is pertinent to mention that despite holding that the
plaintiff paid the entire sale consideration of Rs. 3,50,000/- to
defendant no 2, the High Court directed the plaintiff to pay an
additional sum of Rs 4 lacs over and above Rs. 3,50,000/- to
defendant no. 2 towards sale consideration. Though no
reasons were assigned by the High Court while rendering this
finding, but it seems that it must have been done either to
balance the equities between the parties and/or to compensate
defendant no. 2 the loss caused to her due to escalation in
prices of immoveable properties.
60. Be that as it may, since the plaintiff has not challenged
this finding by filing any appeal or cross objection in these
appeals, this Court refrains from going into its correctness in
these appeals filed by the defendants.
61. In the light of the foregoing discussion, we do not find
any merit in the submissions urged by the learned senior
34
Page 35
counsel for the appellants and accordingly we uphold the
findings of the High Court on the issues relating to merits.
62. Before concluding we consider apposite to take note of
two more issues. The High Court while passing the decree
directed both the defendants i.e. owner of the suit house
(vendor) defendant no.2 and subsequent purchaser (defendant
no. 1) to execute the sale deed of the suit house jointly in
favour of the plaintiff' to avoid any legal complications,
provided the plaintiff pays Rs. 4 lacs over and above Rs.
3,50,000/- to the owner of suit house (defendant no. 2).
63. A direction of this nature is permissible. It was so held by
this Court way back in the year 1954 in Lala Durga Prasad
and Anr. Vs. Lala Deep Chand and Ors., AIR 1954 SC 75,
wherein the learned Judge Vivian Bose J. known for his subtle
power of expression and distinctive style of writing while
speaking for the bench held as under:
“In our opinion, the proper form of decree is to direct
specific performance of the contract between the
vendor and the plaintiff and direct the subsequent
35
Page 36
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. This was the course followed by
the Calcutta High Court in Kafiladdin v. Samiraddin
AIR1931Cal67 and appears to be the English practice.
See Fry on Specific Performance, 6th edition, page 90,
paragraph 207; also Potter v. Sanders 67 E.R. 1057.
We direct accordingly.”
64. We respectfully follow these observations and accordingly
uphold the direction issued by the High Court for execution of
the sale deed.
65. There is, however, one more aspect of the case which
needs to be taken note of and has arisen in the case as a
result of passing of the impugned decree in plaintiff's favour by
the High Court and upheld by this Court.
66. The effect of execution of sale deed in plaintiff's favour by
the defendants in terms of decree would obviously result in
cancellation of contract of sale of the suit house between the
owner (defendant no. 2) and subsequent purchaser (defendant
no. 1). The reason is not far to seek.
67. In a contract for sale of immovable property for
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Page 37
consideration, if a seller fails to transfer the title to the
purchaser, for any reason, on receipt of consideration towards
the sale price then a seller has no right to retain the sale
consideration to himself and he has to refund the same to the
purchaser. When the contract fails then parties to the contract
must be restored to their respective original position which
existed prior to execution of contract as far as possible
provided there is no specific term in the contract to the
contrary.
68. The contract between defendant no.2 and defendant
no.1, i.e., owner and subsequent purchaser, stands frustrated
due to impugned judgment/decree because now defendant
no.2 would not be in a position to sell the suit house to
defendant no.1 though she has received Rs.4 lacs from
defendant no.1 for such sale of suit house in her favour. It is
for this reason, defendant no.2 is liable to refund Rs.4 lacs to
defendant no.1.
69. Though this litigation is not between inter se owner and
37
Page 38
subsequent purchaser of the suit house yet in order to do
substantial justice between the parties and to see the end of
this long litigation and to prevent a fresh suit being instituted
by defendant no.1 against defendant no.2 for refund of sale
consideration which will again take years to decide and lastly
when neither it involve any intricate adjudication of facts, nor
it is going to cause any prejudice to the parties, we consider it
just and proper to invoke our power under Article 142 of the
Constitution of India in the peculiar facts and circumstances
of the case as narrated above and accordingly direct defendant
no. 2 (owner of the suit house) to refund Rs. 4 lacs to
defendant no. 1 within three months after execution of sale
deed by them in favour of plaintiff pursuant to the impugned
judgment/decree.
70. We also direct that failure to refund the amount within
three months, would carry interest at the rate of 9% payable
on the unpaid amount from the date of this order till recovery
and defendant no. 1, in the event of non-payment by
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Page 39
defendant no. 2, would be entitled to levy execution against
defendant no. 2 for realization of outstanding money along
with interest as awarded treating this order to be a decree in
appropriate executing court in accordance with law.
71. We, however, make it clear that we have given this
direction because this Court alone has power to pass such
directions in an appropriate case and in our view, this is a
case wherein we consider it appropriate to do so, to do
substantial justice to all parties.
72. For the foregoing reasons and directions, these appeals
are accordingly disposed of. No costs.
……………………………………………………J.
[FAKKIR MOHAMED IBRAHIM KALIFULLA]
.….…...............................J.
[ABHAY MANOHAR SAPRE]
New Delhi;
October 29, 2014.
39
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see the law on the issue as to whether time can be the essence
for performance of an agreement to sell the immovable
property and if so whether plaintiff in this case performed her
part within the time so stipulated in the agreement?
The learned Judge J.C. Shah (as His Lordship then was),
speaking for the Bench examined this issue in
Gomathinayagam Pillai and Ors. Vs. Pallaniswami Nadar,
AIR 1967 SC 868, in the light of English authorities and
Section 55 of the Contract Act and held as under:
“It is not merely because of specification of time at or
before which the thing to be done under the contract is
promised to be done and default in compliance
therewith, that the other party may avoid the contract.
Such an option arises only if it is intended by the
parties that time is of the essence of the contract.
Intention to make time of the essence, if expressed in
writing, must be in language which is unmistakable :
it may also be inferred from the nature of the property
agreed to be sold, conduct of the parties and the
surrounding circumstances at or before the contract.
Specific performance of a contract will ordinarily be
granted, notwithstanding default in carrying out the
contract within the specified period, if having regard to
the express stipulations of the parties, nature of the
property and the surrounding circumstances, it is not
inequitable to grant the relief. If the contract relates to
sale of immovable property, it would normally be
presumed that time was not of the essence of the
contract. Mere incorporation in the written agreement
of a clause imposing penalty in case of default does not
by itself evidence an intention to make time of the
essence. In Jamshed Khodaram Irani v. Burjorji
Dhunjibhai I.L.R. 40 Bom. 289 the Judicial Committee
of the Privy Council observed that the principle
underlying S. 55 of the Contract Act did not differ from
those which obtained under the law of England as
regards contracts for sale of land. The Judicial
Committee observed :
"Under that law equity, which governs the rights of the
parties in cases of specific performance of contracts to
sell real estate, looks not at the letter but at the
substance of the agreement in order to ascertain
whether the parties, notwithstanding that they named
a specific time within which completion was to take
place, really and in substance intended more than that
it should take place within a reasonable time.... Their
Lordships are of opinion that this is the doctrine which
the section of the Indian Statute adopts and embodies
in reference to sales of land. It may be stated concisely
in the language used by Lord Cairns in Tilley v.
Thomas I.L.R. (1867) Ch. 61 :-
‘The construction is, and must be, in equity the same
as in a Court of law. A Court of equity will indeed
relieve against, and enforce, specific performance,
notwithstanding a failure to keep the dates assigned
by the contract, either for completion, or for the steps
towards completion, if it can do justice between the
parties, and if (as Lord Justice Turner said in Roberts
v. Berry (1853) 3 De G.M. G. 284, there is nothing in
the 'express stipulations between the parties, the
nature of the property, or the surrounding
circumstances,' which would make it inequitable to
interfere with and modify the legal right. This is what
is meant, and all that is meant, when it is said that in
equity time is not of the essence of the contract. Of the
three grounds... mentioned by Lord Justice Turner
'express stipulations' requires no comment. The
'nature of the property' is illustrated by the case of
reversions, mines, or trades. The 'surrounding
circumstances' must depend on the facts of each
particular case."
In Govind Prasad Chaturvedi Vs. Hari Dutt Shastri
and Anr., (1977) 2 SCC 539, this Court placing reliance on the
law laid down in Gomathinayagam Pillai (supra), reiterated
the aforesaid principle and held as under:
“…….It may also be mentioned that the language used
in the agreement is not such as to indicate in
unmistakable terms that the time is of the essence of
the contract. The intention to treat time as the essence
of the contract may be evidenced by circumstances
which are sufficiently strong to displace the normal
presumption that in a contract of sale of land
stipulation as to time is not the essence of the
contract.
Apart from the normal presumption that in the case of
an agreement of sale of immovable properly time is not
the essence of the contract and the fact that the terms
of the agreement do not unmistakably state that the
time was understood to be the essence of the contract
neither in the pleadings nor during the trial the
respondents contended that time was of the essence of
the contract.”
Again in the case reported in Smt. Chand Rani vs. Smt.
Kamal Rani, (1993) 1 SCC 519, this Court placing reliance on
law laid down in aforementioned two cases took the same
view. Similar view was taken with more elaboration on the
issue in K.S. Vidyanadam and Ors. v. Vairavan, (1997) 3
SCC 1, wherein it was held as under:
“It has been consistently held by the courts in India,
following certain early English decisions, that in the
case of agreement of sale relating to immovable
property, time is not of the essence of the contract
unless specifically provided to that effect. The period of
limitation prescribed by the Limitation Act for filing a
suit is three years. From these two circumstances, it
does not follow that any and every suit for specific
performance of the agreement (which does not provide
specifically that time is of the essence of the contract)
should be decreed provided it is filed within the period
of limitation notwithstanding the time-limits stipulated
in the agreement for doing one or the other thing by
one or the other party. That would amount to saying
that the time-limits prescribed by the parties in the
agreement have no significance or value and that they
mean nothing. Would it be reasonable to say that
because time is not made the essence of the contract,
the time-limit (s) specified in the agreement have no
relevance and can be ignored with impunity? It would
also mean denying the discretion vested in the court
by both Sections 10 and 20. As held by a Constitution
Bench of this Court in Chand Rani vs. Kamal Rani
(1993) 1 SCC 519:
“....it is clear that in the case of sale of immovable
property there is no presumption as to time being the
essence of the contract. Even if it is not of the essence
of the contract, the Court may infer that it is to be
performed in a reasonable time if the conditions are
(evident?) : (1) from the express terms of the contract;
(2) from the nature of the property; and (3) from the
surrounding circumstances, for example, the object of
making the contract.”
In other words, the court should look at all the
relevant circumstances including the time-limit(s)
specified in the agreement and determine whether its
discretion to grant specific performance should be
exercised. Now in the case of urban properties in India,
it is well-known that their prices have been going up
sharply over the last few decades - particularly after
1973.
“……Indeed, we are inclined to think that the rigor of
the rule evolved by courts that time is not of the
essence of the contract in the case of immovable
properties - evolved in times when prices and values
were stable and inflation was unknown - requires to be
relaxed, if not modified, particularly in the case of
urban immovable properties. It is high time, we do
so…...”
The aforesaid view was upheld in K. Narendra vs. Riviera
Apartments (P) Ltd. (1999) 5 SCC 77.
Reportable
IN THE SUPREME COURT OF INDIA
CIVIL APPELALTE JURISDICTION
CIVIL APPEAL Nos. 9949-9950 OF 2014
(Arising out of SLP (C) Nos.35800-35801 of 2011)
Rathnavathi & Another Appellant(s)
VERSUS
Kavita Ganashamdas Respondent(s)
Citation;2015 ALLSCR8
Read original judgment here;click here
2. The plaintiff filed two suits, one for specific performance
of agreement and other for grant of permanent injunction in
relation to the suit house. The trial court vide common
judgment and decree dated 16.10.2001 dismissed both the
Page 2
suits. The first appellate court, i.e., the High Court, in appeal,
by impugned judgment and decree dated 08.09.2011 reversed
the judgment and decree of the trial court and decreed both
the suits in appeal, against the defendants. Being aggrieved
by the judgment and decree of the High Court, Defendants 1
and 3 have approached this Court in the instant civil appeals.
3. The question arises for consideration in these appeals is
whether the High Court was justified in allowing the first
appeals preferred by the plaintiff, resulting in decreeing the
two civil suits against defendants in relation to suit house?
4. In order to appreciate the controversy involved in the civil
suits, and now in these appeals, it is necessary to state the
relevant facts.
5. For the sake of convenience, description of parties herein
is taken from Original Suit No.223/2000.
6. Defendant no.2 is the original owner of the suit house
and defendant no.1 is the subsequent purchaser of the suit
house from defendant no.2.
2
Page 3
7. The dispute relates to a dwelling house bearing no. 351
Block no.11, Matadahalli Extension, now known as R.T. Nagar
Bangalore (hereinafter referred to as " the suit house “).
8. The suit house was purchased by defendant no. 2 from
Bangalore Development Authority (in short “BDA”) in a
scheme. On 15.02.1989, Defendant no. 2 entered into an
agreement (Annexure-P-1) with plaintiff for sale of suit house
at a total consideration of Rs. 3,50,000/-. In terms of clause 2
of the agreement, the plaintiff paid a sum of Rs. 50,000/- as
advance towards sale consideration. These facts are not in
dispute.
9. On 07.01.2000, the plaintiff filed a civil suit being OS No.
223/2000, initially against 3 defendants for seeking
permanent injunction restraining the defendants jointly and
severally from interfering in plaintiff's possession over the suit
house. In substance, case of the plaintiff was that she entered
into an agreement on 15.02.1989 with defendant no. 2 to
purchase the suit house for Rs. 3,50,000/- and paid a sum of
3
Page 4
Rs. 50,000/- to defendant no. 2 by way of advance towards the
sale consideration. Later, the plaintiff further paid the balance
consideration of Rs. 3 Lacs towards the sale price and
obtained receipts acknowledging the payment so made. It was
alleged that the plaintiff was accordingly placed in actual
physical possession of the suit house and since then she has
been in possession of the suit house. It was alleged that she
also made some improvements therein by spending money and
is paying electricity and water charges etc. It was further
alleged that the plaintiff was and has always been ready and
willing to perform her part of the agreement to get the sale
deed executed in her favour after having performed her part of
the contract. However, defendant no. 2, for the reasons best
known to her, did not execute the sale deed despite having
received the full sale consideration from the plaintiff. It was
alleged that defendant no. 1, who is a total stranger to the suit
house and having no right, title and interest in the suit house,
on 2.1.2000 visited the suit house along with defendant no. 2
4
Page 5
and some other unwanted elements and threatened the
plaintiff to dispossess her from the suit house. It was also
alleged that on 8.1.2000, defendant nos. 1 and 2 again visited
and attempted to assault the plaintiff and unsuccessfully
attempted to commit trespass in the suit house.
10. On seeing the hostile attitude of defendant nos. 1 and 2
and their associates, the plaintiff immediately lodged a
complaint in the concerned police station. Since police
authorities did not take any action, which was required of, the
plaintiff filed the aforesaid civil suit for permanent injunction
restraining the defendants from interfering in her peaceful
possession over the suit house. It was submitted that the
plaintiff has a prima facie case, so also the balance of
convenience and irreparable loss in her favour, which entitles
her to claim permanent injunction against the defendants in
relation to the suit house. The plaintiff also averred that she
reserved her right to file a suit for specific performance of
agreement against the defendants.
5
Page 6
11. The aforesaid suit was contested by defendant nos. 1 and
2. While admitting the ownership of defendant no. 2 over the
suit house and the fact of entering into an agreement with the
plaintiff for its sale to the plaintiff and further while admitting
the receipt of advance payment of Rs 50,000/- from the
plaintiff, the defendants denied all material allegations made
in the plaint. It was alleged that the plaintiff did not pay the
balance consideration as alleged. It was also alleged that
defendant no. 2 on 25.10.1995 cancelled the agreement dt
15.02.1989 by sending legal notice to the plaintiff and then
sold the suit house to defendant no. 1 on 09.02.1998 for Rs. 4
lacs and placed her in its possession.
12. On 31.03.2000, the plaintiff filed another civil suit being
OS No. 2334 of 2000 in the Court of City Civil Judge
Bangalore against the defendants for specific performance of
agreement dated 15.02.1989 in relation to the suit house.
13. After pleading the same facts, which are set out above,
the plaintiff further alleged that she has performed her part of
6
Page 7
the agreement by paying entire sale consideration of Rs.
3,50,000/- and has been in possession of the suit house. It
was alleged that on the one hand, defendant no. 2, despite
having received full sale consideration, did not perform her
part of the agreement by not getting the suit house transferred
in plaintiff's favour as per clause 3 of the agreement and by
doing the acts which she was expected to do in terms of
agreement, and on the other hand, tried to interfere in
plaintiff's lawful possession over the suit house.
14. This led the plaintiff to serve upon defendant no.2 a legal
notice dated 6.3.2000 thereby calling upon defendant no.2 to
execute the sale deed in relation to suit property in plaintiff's
favour. Since despite service of legal notice, defendant no. 2
failed to execute the same, suit for specific performance was
also filed. The plaintiff then by way of amendment also sought
to add one prayer for cancellation of sale deed alleged to have
been executed by defendant no. 2 in favour of defendant no. 1.
This amendment was allowed.
7
Page 8
15. The defendants contested the civil suit. While admitting
the execution of agreement dated 15.02.1989 with the plaintiff
for sale of suit house for Rs. 3,50,000/- and also admitting
payment of Rs. 50,000/- by the plaintiff to defendant no. 2,
the defendants denied all other material allegations and inter
alia alleged that since the plaintiff failed to pay the balance
sale consideration of Rs. 3 lacs to defendant no. 2 in terms of
the agreement, defendant no. 2 on 25.10.1995 sent a legal
notice to the plaintiff cancelling the agreement dated
15.2.1989 and sold the suit house to defendant no. 1 on
09.02.1998 for consideration and placed her in possession of
the suit house. The defendants also alleged that defendant no.
1 was the bona fide purchaser for value and hence her title
cannot be questioned in the suit.
16. The defendants also contested the suit on two legal
grounds. Firstly, it was contended that the suit was not
maintainable, as the bar contained in Order II Rule 2 of Code
of Civil Procedure, 1908 (hereinafter referred to as 'CPC') did
8
Page 9
not permit the plaintiff to file the suit for specific performance
of agreement in question against the defendants. It was alleged
that relief to claim specific performance of agreement was
available to the plaintiff when she filed the first suit (OS No.
223/2000) for permanent injunction against the defendants.
Yet, the plaintiff failed to claim the relief in the first suit,
consequently, the second suit filed to claim specific
performance of agreement in question is hit by rigor contained
in Order II Rule 2 of CPC. It is now barred and hence liable to
be dismissed as not maintainable. Secondly, it was contended
that the suit is otherwise barred by limitation having been filed
beyond the period of three years from the date of accrual of
cause of action as provided in Article 54 of the Limitation Act,
1963. It was, therefore, contended that the suit is liable to be
dismissed as being barred by limitation, as well.
17. The trial court consolidated both the suits for trial.
Issues were framed. Parties adduced evidence. The trial court
vide judgment/decree dated 25.8.2009 though answered some
9
Page 10
issues in plaintiff's favour but eventually dismissed the civil
suits. It was held that the agreement dated 15.02.1989 was
executed between the plaintiff and defendant no. 2 for sale of
suit house; that the plaintiff was not placed in possession of
suit house pursuant to agreement in question; that the
plaintiff was not ready and willing to perform her part of the
agreement; that suit is barred by limitation; that the plaintiff
was not entitled to claim the relief for specific performance of
agreement; that the plaintiff was not entitled to claim the relief
for grant of permanent injunction; that defendant no. 1 is a
bona fide purchaser of the suit house for value; that the
plaintiff was not entitled to challenge the sale deed dt.
9.2.1998, that the suit was hit by the bar contained in Order II
Rule 2 of CPC because the plaintiff did not obtain leave to file
second suit for specific performance while filing the first suit
for grant of permanent injunction against the defendants in
relation to the suit house.
18. Feeling aggrieved, the plaintiff filed two regular first
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Page 11
appeals being R.F.A. Nos. 1092 of 2009 and 1094 of 2009
before the High Court. By common impugned
judgment/decree, the High Court allowed both the appeals,
reversed the judgment/decree of the trial court and decreed
both the civil suits by passing a decree for specific
performance of agreement against the defendants in relation to
suit house and also issued permanent injunction as claimed
by the plaintiff. The High Court answered all the
aforementioned issues in plaintiff's favour and against the
defendants.
19. The High Court in its judgment held that the plaintiff was
in possession of suit house; that the plaintiff performed her
part of the agreement; that the plaintiff paid the entire sale
consideration of Rs. 3,50,000/- to defendant no. 2; that the
plaintiff was ready and willing to perform her part of
agreement; that defendant no. 2 failed to perform her part of
the agreement thereby rendering her liable to perform her part
of agreement; and that subsequent sale even if made by
11
Page 12
defendant no. 2 in favour of defendant no. 1 was not binding
on the plaintiff because it was not bona fide.
20. The High Court, however, after deciding the issues in
favour of the plaintiff, directed that in order to weigh the
equities between the parties and keeping in view the price
escalation, which is unavoidable in present days, the plaintiff
will pay an additional sum of Rs. 4 lacs over and above Rs.
3,50,000/- to defendant no. 2 for obtaining sale deed in her
favour.
21. It is against this judgment/decree of the High Court, the
defendants have filed the present appeals by way of special
leave petitions.
22. Mrs. Nalini Chidambaram, learned Senior Counsel
appearing for the appellants (defendants) while assailing the
legality and correctness of the impugned judgment urged
various submissions. Firstly, she argued that the High Court
erred in allowing plaintiff's first appeals, as according to her,
12
Page 13
both the appeals were liable to be dismissed by upholding the
judgment /decree of the trial court which had rightly
dismissed the suits. Secondly, she argued that second suit
filed for claiming specific performance of the agreement for
sale of suit house to the plaintiff was hit by bar contained in
Order II Rule 2 of CPC for the reason that the plaintiff failed to
secure leave in her first suit and hence the second suit filed by
the plaintiff for grant of specific performance was not
maintainable. Thirdly, she argued that assuming the second
suit was held maintainable, even then it was barred by
limitation prescribed in Article 54 of the Limitation Act. It was
pointed out that cause of action to file suit for specific
performance of contract against the defendants arose in the
year 1989 itself no sooner 60 days period expired from the
date of agreement as provided in clause 2 of the agreement,
whereas, the suit in question seeking specific performance was
filed in year 2000 and hence, it was hopelessly barred applying
the limitation prescribed in Article 54. Fourthly, it was argued
13
Page 14
that in any case, there was no case made out on evidence by
the plaintiff for reversal of the findings relating to grant of
specific performance of agreement because the plaintiff was
neither ready nor willing to perform her part of the agreement
and nor there was any evidence to hold in her favour on this
material issue. Fifthly, she argued that there was no evidence
to hold that the plaintiff was in possession of the suit house;
rather there was enough evidence to hold that after sale of suit
house by defendant no.2 to defendant no.1, it was defendant
no.1, who was in possession. Therefore, it should have been
held that the plaintiff was not in possession of the suit house,
as was rightly held by the trial court. And, lastly she argued
that it should have been held with the aid of evidence that
defendant no. 1 was bona fide purchaser of the suit house for
value, as she purchased it after the owner i.e. defendant no. 2
cancelled the agreement dt 15.2.1989 and then sold the suit
house to defendant no. 1.
23. After arguing at length with reference to documents on
14
Page 15
record, learned counsel for the appellants contended that
impugned judgment /decree deserves to be set aside and that
of the trial court be restored by dismissing both the suits filed
by the plaintiff. Learned counsel also relied upon certain
decisions, which we shall refer later.
24. Mr. P. Vishwanatha Shetty, learned senior counsel for
the respondent (plaintiff) supported the impugned
judgment /decree and contended that it does not call for any
interference. According to learned senior counsel, all the
findings recorded by the High Court, though of reversal,
deserve to be upheld because the High Court, in exercise of its
first appellate powers under Section 96 of CPC, rightly
appreciated the evidence and came to its independent
conclusion which it could legally do and which it rightly did
while allowing the two first appeals. Learned senior counsel
urged that this Court while hearing these appeals cannot and
rather should not undertake the exercise of appreciating the
whole evidence again like that of the first appeal except to find
15
Page 16
out whether there is any apparent legal error in the impugned
judgment so as to call for any interference by this Court.
Learned senior counsel submitted that no such error exists in
the impugned judgment and hence these appeals are liable to
be dismissed.
25. Having heard the learned counsel for the parties at
length and upon perusal of the record of the case, we find no
merit in these appeals as in our considered opinion, the
submissions urged by the learned senior counsel for the
appellants, though argued ably, have no force.
26. Coming first to the legal question as to whether bar
contained in Order II Rule 2 of CPC is attracted so as to nonsuit
the plaintiff from filing the suit for specific performance of
the agreement, in our considered opinion, the bar is not
attracted
27. At the outset, we consider it apposite to take note of law
laid down by the Constitution bench of this Court in Gurbux
Singh v. Bhooralal, AIR 1964 SC 1810, wherein this Court
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Page 17
while explaining the true scope of Order II Rule 2 of CPC laid
down the parameters as to how and in what circumstances, a
plea should be invoked against the plaintiff. Justice Ayyangar
speaking for the Bench held as under:
“In order that a plea of a bar under Order 2 Rule 2(3)
of the Civil Procedure Code should succeed the
defendant who raises the plea must make out (1) that
the second suit was in respect of the same cause of
action as that on which the previous suit was based;
(2) that in respect of that cause of action the plaintiff
was entitled to more than one relief; (3)that being thus
entitled to more than one relief the plaintiff, without
leave obtained from the Court omitted to sue for the
relief for which the second suit had been filed. From
this analysis it would be seen that the defendant
would have to establish primarily and to start with, the
precise cause of action upon which the previous suit
was filed, for unless there is identity between the
cause of action on which the earlier suit was filed and
that on which the claim in the later suit is based there
would be no scope for the application of the bar…..”
(Emphasis supplied)
28. This Court has consistently followed the aforesaid
enunciation of law in later years and reference to only one of
such recent decisions in Virgo Industries (Eng.) P. Ltd. Vs
Venturetech Solutions P. Ltd., (2013) 1 SCC 625, would
suffice, wherein this Court reiterated the principle of law in
following words:
17
Page 18
“The cardinal requirement for application of the
provisions contained in Order II Rules 2(2) and (3),
therefore, is that the cause of action in the later suit
must be the same as in the first suit. It will be wholly
unnecessary to enter into any discourse on the true
meaning of the said expression, i.e. cause of action,
particularly, in view of the clear enunciation in a
recent judgment of this Court in the Church of Christ
Charitable Trust and Educational Charitable Society,
represented by its Chairman v. Ponniamman
Educational Trust represented by its
Chairperson/Managing Trustee JT 2012 (6) SC 149.
The huge number of opinions rendered on the issue
including the judicial pronouncements available does
not fundamentally detract from what is stated in
Halsbury's Laws of England, (4th Edition). The
following reference from the above work would,
therefore, be apt for being extracted herein below:
“ ‘Cause of Action’ has been defined as meaning simply
a factual situation existence of which entitles one
person to obtain from the Court a remedy against
another person. The phrase has been held from the
earliest time to include every fact which is material to
be proved to entitle the Plaintiff to succeed, and every
fact which a Defendant would have a right to traverse.
'Cause of action’ has also been taken to mean that
particular action on the part of the Defendant which
gives the Plaintiff his cause of complaint, or the
subject-matter of grievance founding the action, not
merely the technical cause of action.”
29. In the instant case when we apply the aforementioned
principle, we find that bar contained in Order II Rule 2 is not
attracted because of the distinction in the cause of action for
filing the two suits. So far as the suit for permanent injunction
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Page 19
is concerned, it was based on a threat given to the plaintiff by
the defendants to dispossess her from the suit house on
2.1.2000 and 9.1.2000. This would be clear from reading Para
17 of the plaint. So far as cause of action to file suit for
specific performance of agreement is concerned, the same was
based on non performance of agreement dated 15.2.1989 by
defendant no. 2 in plaintiff's favour despite giving legal notice
dated 6.3.2000 to defendant no. 2 to perform her part.
30. In our considered opinion, both the suits were, therefore,
founded on different causes of action and hence could be filed
simultaneously. Indeed even the ingredients to file the suit for
permanent injunction are different than that of the suit for
specific performance of agreement
31. In case of former, plaintiff is required to make out the
existence of prima facie case, balance of convenience and
irreparable loss likely to be suffered by the plaintiff on facts
with reference to the suit property as provided in Section 38 of
the Specific Relief Act, 1963 (in short “the Act”) read with
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Page 20
Order 39 Rule 1 & 2 of CPC. Whereas, in case of the later,
plaintiff is required to plead and prove her continuous
readiness and willingness to perform her part of agreement
and to further prove that defendant failed to perform her part
of the agreement as contained in Section 16 of The Act.
32. One of the basic requirements for successfully invoking
the plea of Order II Rule 2 of CPC is that the defendant of the
second suit must be able to show that the second suit was
also in respect of the same cause of action as that on which
the previous suit was based.
33. As mentioned supra, since in the case on hand, this
basic requirement in relation to cause of action is not made
out, the defendants (appellants herein) are not entitled to raise
a plea of bar contained in Order II Rule 2 of CPC to
successfully non suit the plaintiff from prosecuting her suit for
specific performance of the agreement against the defendants.
34. Indeed when the cause of action to claim the respective
reliefs were different so also the ingredients for claiming the
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Page 21
reliefs, we fail to appreciate as to how a plea of Order II Rule 2
could be allowed to be raised by the defendants and how it
was sustainable on such facts.
35. We cannot accept the submission of learned senior
counsel for the appellants when she contended that since both
the suits were based on identical pleadings and when cause of
action to sue for relief of specific performance of agreement
was available to the plaintiff prior to filing of the first suit, the
second suit was hit by bar contained in Order II Rule 2 of CPC.
36. The submission has a fallacy for two basic reasons.
Firstly, as held above, cause of action in two suits being
different, a suit for specific performance could not have been
instituted on the basis of cause of action of the first suit.
Secondly, merely because pleadings of both suits were similar
to some extent did not give any right to the defendants to raise
the plea of bar contained in Order II Rule 2 of CPC. It is the
cause of action which is material to determine the applicability
of bar under Order II Rule 2 and not merely the pleadings. For
these reasons, it was not necessary for plaintiff to obtain any
leave from the court as provided in Order II Rule 2 of CPC for
filing the second suit.
37. Since the plea of Order II Rule 2, if upheld, results in
depriving the plaintiff to file the second suit, it is necessary for
the court to carefully examine the entire factual matrix of both
the suits, the cause of action on which the suits are founded,
reliefs claimed in both the suits and lastly the legal provisions
applicable for grant of reliefs in both the suits.
38. In the light of foregoing discussion, we have no hesitation
in upholding the finding of the High Court on this issue. We,
therefore, hold that second suit (OS No. 2334 of 2000) filed by
the plaintiff for specific performance of agreement was not
barred by virtue of bar contained in Order II Rule 2 CPC.
39. This takes us to the next question as to whether suit for
specific performance was barred by limitation prescribed
under Article 54 of the Limitation Act?
40. In order to examine this question, it is necessary to first
see the law on the issue as to whether time can be the essence
for performance of an agreement to sell the immovable
property and if so whether plaintiff in this case performed her
part within the time so stipulated in the agreement?
41. The learned Judge J.C. Shah (as His Lordship then was),
speaking for the Bench examined this issue in
Gomathinayagam Pillai and Ors. Vs. Pallaniswami Nadar,
AIR 1967 SC 868, in the light of English authorities and
Section 55 of the Contract Act and held as under:
“It is not merely because of specification of time at or
before which the thing to be done under the contract is
promised to be done and default in compliance
therewith, that the other party may avoid the contract.
Such an option arises only if it is intended by the
parties that time is of the essence of the contract.
Intention to make time of the essence, if expressed in
writing, must be in language which is unmistakable :
it may also be inferred from the nature of the property
agreed to be sold, conduct of the parties and the
surrounding circumstances at or before the contract.
Specific performance of a contract will ordinarily be
granted, notwithstanding default in carrying out the
contract within the specified period, if having regard to
the express stipulations of the parties, nature of the
property and the surrounding circumstances, it is not
inequitable to grant the relief. If the contract relates to
sale of immovable property, it would normally be
presumed that time was not of the essence of the
contract. Mere incorporation in the written agreement
of a clause imposing penalty in case of default does not
by itself evidence an intention to make time of the
essence. In Jamshed Khodaram Irani v. Burjorji
Dhunjibhai I.L.R. 40 Bom. 289 the Judicial Committee
of the Privy Council observed that the principle
underlying S. 55 of the Contract Act did not differ from
those which obtained under the law of England as
regards contracts for sale of land. The Judicial
Committee observed :
"Under that law equity, which governs the rights of the
parties in cases of specific performance of contracts to
sell real estate, looks not at the letter but at the
substance of the agreement in order to ascertain
whether the parties, notwithstanding that they named
a specific time within which completion was to take
place, really and in substance intended more than that
it should take place within a reasonable time.... Their
Lordships are of opinion that this is the doctrine which
the section of the Indian Statute adopts and embodies
in reference to sales of land. It may be stated concisely
in the language used by Lord Cairns in Tilley v.
Thomas I.L.R. (1867) Ch. 61 :-
‘The construction is, and must be, in equity the same
as in a Court of law. A Court of equity will indeed
relieve against, and enforce, specific performance,
notwithstanding a failure to keep the dates assigned
by the contract, either for completion, or for the steps
towards completion, if it can do justice between the
parties, and if (as Lord Justice Turner said in Roberts
v. Berry (1853) 3 De G.M. G. 284, there is nothing in
the 'express stipulations between the parties, the
nature of the property, or the surrounding
circumstances,' which would make it inequitable to
interfere with and modify the legal right. This is what
is meant, and all that is meant, when it is said that in
equity time is not of the essence of the contract. Of the
three grounds... mentioned by Lord Justice Turner
'express stipulations' requires no comment. The
'nature of the property' is illustrated by the case of
reversions, mines, or trades. The 'surrounding
circumstances' must depend on the facts of each
particular case."
42. In Govind Prasad Chaturvedi Vs. Hari Dutt Shastri
and Anr., (1977) 2 SCC 539, this Court placing reliance on the
law laid down in Gomathinayagam Pillai (supra), reiterated
the aforesaid principle and held as under:
“…….It may also be mentioned that the language used
in the agreement is not such as to indicate in
unmistakable terms that the time is of the essence of
the contract. The intention to treat time as the essence
of the contract may be evidenced by circumstances
which are sufficiently strong to displace the normal
presumption that in a contract of sale of land
stipulation as to time is not the essence of the
contract.
Apart from the normal presumption that in the case of
an agreement of sale of immovable properly time is not
the essence of the contract and the fact that the terms
of the agreement do not unmistakably state that the
time was understood to be the essence of the contract
neither in the pleadings nor during the trial the
respondents contended that time was of the essence of
the contract.”
43. Again in the case reported in Smt. Chand Rani vs. Smt.
Kamal Rani, (1993) 1 SCC 519, this Court placing reliance on
law laid down in aforementioned two cases took the same
view. Similar view was taken with more elaboration on the
issue in K.S. Vidyanadam and Ors. v. Vairavan, (1997) 3
SCC 1, wherein it was held as under:
“It has been consistently held by the courts in India,
following certain early English decisions, that in the
case of agreement of sale relating to immovable
property, time is not of the essence of the contract
unless specifically provided to that effect. The period of
limitation prescribed by the Limitation Act for filing a
suit is three years. From these two circumstances, it
does not follow that any and every suit for specific
performance of the agreement (which does not provide
specifically that time is of the essence of the contract)
should be decreed provided it is filed within the period
of limitation notwithstanding the time-limits stipulated
in the agreement for doing one or the other thing by
one or the other party. That would amount to saying
that the time-limits prescribed by the parties in the
agreement have no significance or value and that they
mean nothing. Would it be reasonable to say that
because time is not made the essence of the contract,
the time-limit (s) specified in the agreement have no
relevance and can be ignored with impunity? It would
also mean denying the discretion vested in the court
by both Sections 10 and 20. As held by a Constitution
Bench of this Court in Chand Rani vs. Kamal Rani
(1993) 1 SCC 519:
“....it is clear that in the case of sale of immovable
property there is no presumption as to time being the
essence of the contract. Even if it is not of the essence
of the contract, the Court may infer that it is to be
performed in a reasonable time if the conditions are
(evident?) : (1) from the express terms of the contract;
(2) from the nature of the property; and (3) from the
surrounding circumstances, for example, the object of
making the contract.”
In other words, the court should look at all the
relevant circumstances including the time-limit(s)
specified in the agreement and determine whether its
discretion to grant specific performance should be
exercised. Now in the case of urban properties in India,
it is well-known that their prices have been going up
sharply over the last few decades - particularly after
1973.
“……Indeed, we are inclined to think that the rigor of
the rule evolved by courts that time is not of the
essence of the contract in the case of immovable
properties - evolved in times when prices and values
were stable and inflation was unknown - requires to be
relaxed, if not modified, particularly in the case of
urban immovable properties. It is high time, we do
so…...”
The aforesaid view was upheld in K. Narendra vs. Riviera
Apartments (P) Ltd. (1999) 5 SCC 77.
44. Applying the aforesaid principle of law laid down by this
Court to the facts of the case at hand, we have no hesitation in
holding that the time was not the essence of agreement for its
performance and the parties too did not intend that it should
be so.
45. Clauses 2 and 3 of the agreement (Annexure P-1), which
are relevant to decide this question reads as under:
“2. The purchaser shall pay a sum of Rs.50,000/-
(Rupees Fifty Thousand only) as advance to the seller
at the time of signing this agreement, the receipt of
which the seller hereby acknowledges and the balance
sale consideration amount shall be paid within 60
days from the date of expiry of lease period.
3. The Seller covenants with the Purchaser that efforts
will be made with the Bangalore Development
Authority for the transfer of the schedule property in
favour of the Purchaser after paying penalty. In case it
is not possible then the time stipulated herein for the
balance payment and completion of the sale
transaction will be agreed mutually between the
parties.”
46. Reading both the clauses together, it is clear that time to
perform the agreement was not made an essence of contract
by the parties because even after making balance payment
after the expiry of lease period, which was to expire in 1995,
defendant no. 2 as owner had to make efforts to transfer the
land in the name of plaintiff. That apart, we do not find any
specific clause in the agreement, which provided for
completion of its execution on or before any specific date.
47. Since it was the case of the plaintiff that she paid the
entire sale consideration to defendant no. 2 and was
accordingly placed in possession of the suit house, the threat
of her dispossession in 2000 from the suit house coupled with
the fact that she having come to know that defendant no. 2
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Page 29
was trying to alienate the suit house, gave her a cause of
action to serve legal notice to defendant no. 2 on 6.3.2000
calling upon defendant no. 2 to perform her part and convey
the title in the suit house by executing the sale deed in her
favour. Since defendant no. 2 failed to convey the title, the
plaintiff filed a suit on 31.3.2000 for specific performance of
the agreement.
48. Article 54 of the Limitation Act which prescribes the
period of limitation for filing suit for specific performance
reads as under:
54. For specific
performance of a
contract.
Three
years
The date of fixed for the
performance, or, if no such date is
fixed, when the plaintiff has notice
that performance is refused.
49. Mere reading of Article 54 of the Limitation Act would
show that if the date is fixed for performance of the agreement,
then non-compliance of the agreement on the date would give
a cause of action to file suit for specific performance within
three years from the date so fixed. However, when no such
date is fixed, limitation of three years to file a suit for specific
performance would begin when the plaintiff has noticed that
the defendant has refused the performance of the agreement.
50. The case at hand admittedly does not fall in the first
category of Article 54 of the Limitation Act because as
observed supra, no date was fixed in the agreement for its
performance. The case would thus be governed by the second
category viz., when plaintiff has a notice that performance is
refused.
51. As mentioned above, it was the case of the plaintiff that
she came to know on 02.01.2000 and 09.01.2000 that the
owner of the suit house along with the so-called intending
purchaser are trying to dispossess her from the suit house on
the strength of their ownership over the suit house. This event
was, therefore, rightly taken as starting point of refusal to
perform the agreement by defendant no.2, resulting in giving
notice to defendant no.2 by the plaintiff on 6.3.2000 and then
filing of suit on 31.3.2000.
52. In the light of the foregoing discussion, we uphold the
findings of the High Court and accordingly hold that the suit
filed by the plaintiff for specific performance of the agreement
was within limitation prescribed under Article 54 of the
Limitation Act.
53. This takes us to the last question as to whether the High
Court was justified in granting specific performance of
agreement in plaintiff's favour by reversing the
judgment/decree of the trial court which had dismissed the
suit.
54. We may observe that notice of SLP was issued essentially
to examine the two legal issues arising in the case as
discussed above. These two issues have been dealt with and
answered against the appellants. However, since learned
senior counsel for the appellants also questioned the legality
and correctness of the finding of the High Court on all other
factual issues, we have, therefore, examined the other issues
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as well.
55. Learned senior counsel for the appellants contended that
the High Court was not justified in holding that defendant no.
1 was not a bona fide purchaser of the suit house for value.
Another submission was that the plaintiff was not ready and
willing to perform her part of the agreement; and lastly her
submission was that the plaintiff was never in actual
possession of the suit house despite execution of agreement
and making part payment of Rs. 50,000/- to defendant no. 2.
Learned senior counsel for the appellants urged these factual
submissions with equal force like the two legal issues dealt
with supra.
56. In our considered opinion, the High Court being the last
Court of appeal on facts /law while hearing first appeal under
Section 96 of CPC was well within its powers to appreciate the
evidence and came to its own conclusion independent to that
of the trial court's decision. One can not dispute the legal
proposition that the grant/refusal of specific performance is a
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discretionary relief, and, therefore, once it is granted by the
appellate court on appreciation of evidence, keeping in view
the legal principle applicable for the grant then further
appellate court should be slow to interfere in such finding,
unless the finding is found to be either against the settled
principle of law, or is arbitrary or perverse.
57. This Court while hearing appeal under Article 136 is not
inclined to again appreciate the entire ocular/documentary
evidence like that of first appellate court unless the
parameters noticed above are successfully made out in the
case. Such does not appear to be a case of this nature.
58. The High Court, in our considered opinion, properly
appreciated the evidence for recording findings in plaintiff's
favour that she was ready and willing to perform her part of
the agreement and in fact did perform her part, firstly, by
paying Rs. 50,000/- as advance and then paid balance of Rs.
3,00,000/- towards sale consideration to defendant no.2; that
plaintiff was placed in possession of the suit house by
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defendant no. 2 pursuant to agreement; and, lastly defendant
no. 2 did not perform her part of the agreement.
59. It is pertinent to mention that despite holding that the
plaintiff paid the entire sale consideration of Rs. 3,50,000/- to
defendant no 2, the High Court directed the plaintiff to pay an
additional sum of Rs 4 lacs over and above Rs. 3,50,000/- to
defendant no. 2 towards sale consideration. Though no
reasons were assigned by the High Court while rendering this
finding, but it seems that it must have been done either to
balance the equities between the parties and/or to compensate
defendant no. 2 the loss caused to her due to escalation in
prices of immoveable properties.
60. Be that as it may, since the plaintiff has not challenged
this finding by filing any appeal or cross objection in these
appeals, this Court refrains from going into its correctness in
these appeals filed by the defendants.
61. In the light of the foregoing discussion, we do not find
any merit in the submissions urged by the learned senior
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counsel for the appellants and accordingly we uphold the
findings of the High Court on the issues relating to merits.
62. Before concluding we consider apposite to take note of
two more issues. The High Court while passing the decree
directed both the defendants i.e. owner of the suit house
(vendor) defendant no.2 and subsequent purchaser (defendant
no. 1) to execute the sale deed of the suit house jointly in
favour of the plaintiff' to avoid any legal complications,
provided the plaintiff pays Rs. 4 lacs over and above Rs.
3,50,000/- to the owner of suit house (defendant no. 2).
63. A direction of this nature is permissible. It was so held by
this Court way back in the year 1954 in Lala Durga Prasad
and Anr. Vs. Lala Deep Chand and Ors., AIR 1954 SC 75,
wherein the learned Judge Vivian Bose J. known for his subtle
power of expression and distinctive style of writing while
speaking for the bench held as under:
“In our opinion, the proper form of decree is to direct
specific performance of the contract between the
vendor and the plaintiff and direct the subsequent
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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. This was the course followed by
the Calcutta High Court in Kafiladdin v. Samiraddin
AIR1931Cal67 and appears to be the English practice.
See Fry on Specific Performance, 6th edition, page 90,
paragraph 207; also Potter v. Sanders 67 E.R. 1057.
We direct accordingly.”
64. We respectfully follow these observations and accordingly
uphold the direction issued by the High Court for execution of
the sale deed.
65. There is, however, one more aspect of the case which
needs to be taken note of and has arisen in the case as a
result of passing of the impugned decree in plaintiff's favour by
the High Court and upheld by this Court.
66. The effect of execution of sale deed in plaintiff's favour by
the defendants in terms of decree would obviously result in
cancellation of contract of sale of the suit house between the
owner (defendant no. 2) and subsequent purchaser (defendant
no. 1). The reason is not far to seek.
67. In a contract for sale of immovable property for
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consideration, if a seller fails to transfer the title to the
purchaser, for any reason, on receipt of consideration towards
the sale price then a seller has no right to retain the sale
consideration to himself and he has to refund the same to the
purchaser. When the contract fails then parties to the contract
must be restored to their respective original position which
existed prior to execution of contract as far as possible
provided there is no specific term in the contract to the
contrary.
68. The contract between defendant no.2 and defendant
no.1, i.e., owner and subsequent purchaser, stands frustrated
due to impugned judgment/decree because now defendant
no.2 would not be in a position to sell the suit house to
defendant no.1 though she has received Rs.4 lacs from
defendant no.1 for such sale of suit house in her favour. It is
for this reason, defendant no.2 is liable to refund Rs.4 lacs to
defendant no.1.
69. Though this litigation is not between inter se owner and
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subsequent purchaser of the suit house yet in order to do
substantial justice between the parties and to see the end of
this long litigation and to prevent a fresh suit being instituted
by defendant no.1 against defendant no.2 for refund of sale
consideration which will again take years to decide and lastly
when neither it involve any intricate adjudication of facts, nor
it is going to cause any prejudice to the parties, we consider it
just and proper to invoke our power under Article 142 of the
Constitution of India in the peculiar facts and circumstances
of the case as narrated above and accordingly direct defendant
no. 2 (owner of the suit house) to refund Rs. 4 lacs to
defendant no. 1 within three months after execution of sale
deed by them in favour of plaintiff pursuant to the impugned
judgment/decree.
70. We also direct that failure to refund the amount within
three months, would carry interest at the rate of 9% payable
on the unpaid amount from the date of this order till recovery
and defendant no. 1, in the event of non-payment by
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defendant no. 2, would be entitled to levy execution against
defendant no. 2 for realization of outstanding money along
with interest as awarded treating this order to be a decree in
appropriate executing court in accordance with law.
71. We, however, make it clear that we have given this
direction because this Court alone has power to pass such
directions in an appropriate case and in our view, this is a
case wherein we consider it appropriate to do so, to do
substantial justice to all parties.
72. For the foregoing reasons and directions, these appeals
are accordingly disposed of. No costs.
……………………………………………………J.
[FAKKIR MOHAMED IBRAHIM KALIFULLA]
.….…...............................J.
[ABHAY MANOHAR SAPRE]
New Delhi;
October 29, 2014.
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