MIS. CITADEL FINE PHARMACEUTICALSversusMIS. RAMANIYAM REAL ESTATES P. LTD. & ANR.

               [2011] 13 (ADDL.) S.C.R. 605


       ·MIS. CITADEL FINE PHARMACEUTICALS                      A
                             v.
   MIS. RAMANIYAM REAL ESTATES P. LTD. & ANR.
           (Civil Appeal No. 6437 of 2011)
                     AUGUST 08, 2011
                                                                B
   [G.S. SINGHVI AND ASOK KUMAR GANGULY, JJ.]

      Specific Relief Act, 1963 - s. 9 - Specific Performance
of Contract - Non-performance by plaintiff of its obligation
under the contract within stipulated time - Effect of - C
Defendant-vendor, a partnership firm, owned 66 cents of land
- It entered into an agreement for sale of said land for
consideration of Rs. 1 crore with plaintiff-purchaser, a ·company
engaged in the business of constructing buildings - Of the
said 66 cents, however, 19 cents were considered excess D
urban vacant land under the Tamil Nadu Urban Land (Ceiling
and Regulations) Act - As per clause 7 of agreement, it was
the plaintiff's responsibility to have the land cleared for sale ·
from the urban land ceiling authorities - However plaintiff
failed to get such clearance from the Urban Land Ceiling E
Authorities within stipulated time - Defendant-vendor
cancelled the agreement - Suit for specific performance -
Decreed by Single judge of High Court - Division Bench
partly allowed appeal of defendant holding that plaintiff-
respondents could be given relief of specific performance F
only to the extent of 47 cents of lands that were not part of
the proceedings under the Tamil Nadu Act - Held: In the
instant case, prior to signing of the agreement, the terms were
discussed between the parties and the plaintiff-purchaser
willingly took upon itself the burden of obtaining clearance
from the Urban Land Ceiling Authorities within the time G
stipulated in the agreement - The parties clearly intended
time to· be of the essence of the contract (agreement) which
was a/so evident from the commercial nature of the transaction

                            605                                 H
    606    SUPREME COURT REPORTS [2011] 13 (ADDL.) S.C.R


A and the surrounding circumstances - Since the plaintiff did
  not discharge its burden within the time specified it was not
  entitled to a specific performance of the contract - Moreover,
  prior to filing of the suit, the defendant-vendor, in terms of the
  agreement, had returned the earnest money of Rs.10 lakhs
B by sending an· accounts payee cheque of such amount in
  favour of the plaintiff under registered post which was refused
  by the plaintiff and yet the plaintiff-purchaser made averment
  in the plaint that the defendant-vendor be directed to return
  the advance amount of Rs. 10 lakhs with interest -
C Suppression by the plaintiff of the fact that it refused to accept
  the said cheque of Rs.10 /akhs was a material fact - On that
  ground also the plaintiff-purchaser was not entitled to any relief
  in its suit of specific performance - Approach of the High
  Court both by Single Judge and the Appellate Bench not
  sustainable - Appeal of defendant-vendor allowed while
0
  appeal of plaintiff-purchaser dismissed - Cortract Act, 1872
  - s.55 - Tamil Nadu Urban Land (Ceiling and Regulations)
  Act, 1978.

        Specific Relief Act, 1963 - Plea for discretionary relief
E of specific performance - Suppression of material fact by the
  plaintiff - Effect of - Held: When discretionary remedy is
  prayed for by a party, such party must come to court on proper
  disclosure of facts - The plaint filed before the Court in such
  cases must state all facts with sufficient candour and clarity -
F Where the plaintiff is shown to have materially misled the court
  or to have abused its process, or to have attempted to do so,
  the discretionary relief of specific performance can be denied
  to him - To enable the court to refuse to exercise its
  discretionary jurisdiction suppression must be of a material
G fact - However, what is a material fact, suppression whereof
  would disentitle the suitor to obtain a discretionary relief, would
  depend upon the facts and circumstances of each case -
  Material fact would mean a fact material for the purpose of
  determination of the tis.
H
CITADEL FINE PHARMACEUTICALS v. RAMANIYAM REAL 607
                ESTATES P. LTD.
    Words and Phrases - Material fact - Meaning of.              A
    Mis. Citadel Fine Pharmaceuticals (defendant no.1),
a partnership firm, owned 66 cents of land. It entered into
an agreement for sale of the said land for a consideration
of Rs.1 crore with Mis. Ramaniyam Real Estates Private
                                                                 8
Limited (plaintiff), a company incorporated under the
Companies Act, 1956 and engaged in the business of
constructing buildings. In pursuance to the agreement,
the plaintiff-purchaser paid earnest money of Rs.10 Lakhs
which was received by defendant No.1-vendor.
                                                                 c
    Of the said 66 cents of land, however, 19 cents were
considered excess urban vacant land under the Tamil
Nadu Urban Land (Ceiling and Regulations) Act, 1978,
(hereinafter 'the Tamil Nadu Act'). Subsequently, when the
plaintiff preferred application in Form 37-1 prescribed          D
under Rule 48-L of the Income Tax Rules, 1962, before the
Appropriate Authority for clearance of the land in
question for sale vide section 269UC in Chapter XX of the
Income Tax Act, 1961, the Income Tax Authority refused
such clearance on the ground that as per section 6 of the        E
Tamil Nadu Act, agreement to sell a piece of urban land
declared excess vacant land, or a piece of land, part of
which had been declared excess vacant urban land, was
deemed as null and void.
                                                                 F
    As per clause 7 of the agreement entered between
the parties, it was the plaintiff's responsibility to have the
land in question cleared for sale by the urban land ceiling
authorities. However, the plaintiff-purchaser failed to get
clearance from the Urban Land Ceiling Authorities within
the stipulated time.                                             G

     Since Form 37-1 was not cleared, the plaintiff sent
letter to the defendant requesting that the sale be split up
and two separate agreements be entered into - the first
for the unencumbered 47 cents and the second for 19              H
    608     SUPREME COURT REPORTS [2011] 13 (ADDL) S.C.R.
                            '

A cents termed as excess lana by the urban land ceiling
  authority. This proposal was rejected by the defendant
  no. 1 on grounds that the agreement was not divisible;
  that the bar under section 6 of the Tamil Nadu Act, as
  pointed out by the Appropriate Authority was applicable
B not only in respect of the 19 cents of land termed as
  excess, but in fact the entire 66 cents for the reason that
  the said 19 cents could not be severed from the 66 cents
  and thus the contract was hit by illegality and was thus
  frustrated. The defendant-vendor cancelled the
c agreement, purportedly in terms of clause 9 of the
  agreement and returned the advance money of Rs. 10
  lakhs vide a cheque in terms of clause 9, which was
  refused by the plaintiff.

       Thereafter the plaintiff, the proposed purchaser,
D instituted suit for specific performance of the contract for
  the entire 66 cents of land. The defendant, the proposed
  vendor, resisted the suit contending that the suit was
  liable to be dismissed in view of impossibility of
  performance of the contract and non-performance by the
E plaintiff of its obligation under the contract within the
  stipulated time.

       The Single Judge of the High Court decreed the suit
  holding that the suit property was in respect of
F agricultural land and not an urban land as contemplated
  under the Tamil Nadu Act; and thus the same was outside
  the purview of the Act; and that clause 7 of the agreement
  in itself was not a condition precedent to the contract.
  Aggrieved, defendant no.1 preferred appeal. The Division
G Bench partly allowed it holding that the plaintiff-
  respondents could be given the relief of specific
  performance only to the extent of 47 cents of the lands
  that were not part of the ?roceedings under the Tamil
  Nadu Act. Hence the present cross-appeals.

H         Allowing the appeal filed by M/s. Citadel Fine
   CITADEL FINE PHARMACEUTICALS v. RAMANIYAM            609
               REAL ESTATES P. LTD.

Pharmaceuticals and dismissing the appeal filed by Mis. A
Ramaniyam Real Estates Private Limited, the Court

     HELD: 1. The settled law seems to be that in a case
for specific performance of contract relating to immovable
property time is not normally of the essence. However,          8
this is not an absolute proposition and it has several
exceptions. In cases relating to specific performance,
equity, which governs the rights of the parties, does not
look always at the express term of the agreement but at
the substance of it in order to ascertain whether the           C
parties named a specific time within which completion
was to take place and whether the parties in substance
 intended that the completion should take place within a
 reasonable time. Equity can operate in the construction
of a contract "unless excluded by any clearly expressed
stipulation". However, equity will not assist where there       D
 has been undue delay on the part of one party to the
 contract and one party has given notice to the other
 party that the defaulting party must complete the contract
within a definite time. Further, equity will not assist when
other circumstances will result in injustice on application     E
of equitable principle. In this case, prior to the signing of
 the agreement, the terms were discussed between the
 parties and the plaintiff purchaser willingly took upon
 itself the burden of obtaining the clearance within the
time stipulated in the agreement. From the terms of the         F
 agreement in this case it is clear that time was of the
 essence and this was clearly stipulated and understood
 by the parties having regard to the previous
 correspondence and also having regard to the laid down
 terms of the contract and especially when the                  G
 consequence of non-completion of the terms by
 purchaser within the stipulated time was spelt out in
 clause 9. [Paras 31, 32, 33, 34 and 36] [626-8-G; 627-C-D-
 G; 628-8-C]
                                                                H
    610    SUPREME COURT REPORTS [2011] 13 (ADDL) S.C.R


A         Gomathinayagam Pillai and Ors. v. Pa/aniswami Nadar
    AIR 1967 SC 868 - relied on.

          Jamshed Khodaram Irani v. Burjorji Dhunjibhai (1915-
    16) 43 I.A. 26 - referred to.
B       2.1. Time may be implied as essential in a contract
   from the nature of the subject matter with which the
   parties are dealing. In a contract relating to commercial
   enterprise the Court is strongly inclined to hold time to
   be essential, whether the contract is for the purchase of
C land or for such purposes or more 'directly for the
   prosecution of trade'. The aforesaid principles squarely
  apply to the facts of the present case. Here the purchaser
  was admittedly in the business of building construction
  and was entering with agreement for purchasing the plot
D on commercial basis. The instant case relates to a
  contract in commercial transaction and the Court can
  take judicial notice of the fact that in the city of Chennai
  the price of real estate is constantly escalating and the
  clear intention of the parties, as 1i appears from the
E stipulations of the agreement, was to treat time as the
  essence of the contract. The court cannot attribute a
  different intention to the parties and cannot specifically
  enforce the contract at the instance of the plaintiff.
  purchaser who failed to perform his part of the obligation
F within the time stipulated. [Paras 39, 40, 41, 43 and 44]
  [629-E-G-H; 630-A-D-H; 631-A-B]

       2.2. In K. S. Vidyanadam's case, this Court explained
  how discretion is to be exercised by the Court before
  granting specific performance. It was held that the Court
G cannot be oblivious of the reality of constant and
  continuous rise in the value of urban properties and in
  that context the time limit set in the contract has to be
  strictly construed. In the case of Vidyanadam there was
  no such strict stipulation as time being of the essence of
H
   CITADEL FINE PHARMACEUTICALS v. RAMANIYAM           611
               REAL ESTATES P LTD.
the contr~ct as is in the instant case even then the Court A
refused to grant the relief of specific performance. The
same questi.on, whether time was of essence of the
contract was discussed in a Constitution Bench
judgment of this Court in Chand Rani's case. The
Constitution Bench in Chand Rani formulated the B
proposition that even where parties have expressly
 provided time to be of the essence of the contract, such
a stipulation will have to be read along with other terms
 of the contract. Such other terms, on a proper
construction, may exclude the inference that the c
 completion of work by a particular date was meant to be
 fundamental. The Judges indicated the following
 circumstances which may indicate a contrary inference;
 (a) if a contract includes clauses providing for extension
 of time in certain contingencies, or (b) if there are clauses
                                                               0
 for payment of fine or penalty for every day or week the
 work undertaken remains unfinished after the expiry of
 time. The Constitution Bench held that such clauses
 would be construed as rendering ineffective the express
 provision relating to time being of the essence of
 contract. In the instant case, in the said agreement no E
 such clause, as aforesaid, exists. Rather the stipulation
 as time being of the essence of the contract was
 specifically mentioned in clause 10 and the
 consequences of non-completion are mentioned in
 clause 9. So the express terms of the contract and the F
 commercial nature of the transaction and the
 surrounding circumstances make it clear that the parties
 intended time in this case to be of the essence of the
 contract. (Paras 45, 46, 47] (631-C-H; 632-A-F]
                                                               G
       Chand Rani (Smt.) (Dead) by LRs. v. Kamal Rani (Smt.)
  (Dead) by LRs. (1993) 1 SCC 519: 1992 (3) Suppl. SCR 798
 - followed.

                                                              H
    612    SUPREME COURT REPORTS [2011] 13 (ADDL.) S.C.R.


A       K.S. Vidyanadam and Ors. v. Va1ravan (1997) 3 SCC 1:
    1997 (1) SCR 993 - relied on.

        Mis. Hind Construction Contractors by its sole proprietor
    Bhikamchand Mulchand Jain (Dead) by LRs. v. State of
    Maharashtra (1979) 2 sec 70: 1979 ( 2) SCR 1147 ands. V.
8
    Sankaralinga Nadar v. P. TS. Ratnaswami Nadar AIR 1952
    Mad 389 - referred to.

       Chitty on Contracts, (Volume 1, Thirteenth Edition, Sweet
  & Maxwell in paragraph 21-015; Treaties on Specific
C Performance of contracts by Fry (Sixth Edition) and Treaties
  on Specific Performance by Gareth Jones and William
  Goodhart(Second Edition, Butterworths) - referred to.

       3. Section 55 of the Indian Contract Act deals with a
0 contract, in which time is of essence. On a combined
  reading of Section 9 of the Specific Relief Act and Section
  55 of The Indian Contract Act it is clear that in this case
  the vendor as a promisee, was within its right to terminate
  the contract by sending the letter daled 4th September,
E 1996 in terms of Clause 9 of the Contract while returning
  the advance money of Rs.10,00,000/-. It is clear that the
  plaintiff had not discharged its burden within the time
  specified and was not entitled to a specific performance
  of the contract. Therefore, the approach of the High Court
F both by the Single Judge and the Appellate Bench cannot
  be sustained. [Paras 50, 51) (633-C-F]

      4:i. Moreover, in the instant case by asking for
  specific performance of the contract, the plaintiff.
  purchaser was praying for a discretionary remedy. It is
G axiomatic that when discretionary remedy is prayed for
  by a party, such party must come to court on proper
  disclosure of facts. The plaint filed before the Court in
  such cases must state all facts with sufficient candour
  and clarity. In the instant case the plaintiff-purchaser
H
CITADEL FINE PHARMACEUTICALS v. RAMANIYAM REAL613
                ESTATES P LTD.

made an averment in the plaint that the defendant-vendor         A
be directed to return the advance amount of Rs.10,00,000/
- at the rate of 24% interest from the date of payment of
the said amount till the realization and an alternative
prayer to that effect was also made. However, the fact
remains that prior to the filing of the suit the defendant-      B
vendor returned the said amount of Rs.10,00,000/- by its
letter dated 4th September, 1996 by an account payee
cheque in favour of the plaintiff and the same was sent
to the plaintiff under registered post which was refused
by the plaintiff on 6.9.1996. The plaintiff suppressed this      C
fact in the plaint and filed the suit on 9.9.1996 with a
totally contrary representation before the court as if the
amount has not been returned to it by the vendor. This
 is suppression of a material fact, and disentitles the
 plaintiff-purchaser from getting any discretionary relief of
                                                                 0
specific performance by Court. [Paras 53, 54] [633-H; 634-
A-E

     4.2. Where the plaintiff is shown to have materially
misled the court or to have abused its process, or to have
attempted to do so, the discretionary relief of specific         E
performance can be denied to him. It is trite law that to
enable the court to refuse to exercise its discretionary
jurisdiction suppression must be of a material fact. Of
course, what is a material fact, suppression whereof
would disentitle the suitor to ,obtain a discretionary relief,   F
would depend upon the facts and circumstances of each
case. However, material fact would mean that fact which
is material for the purpose of determination of the lis. In
the instant case, suppression of the fact that the plaintiff
refused to accept the cheque of Rs.10 lakhs sent to it by        G
the defendant under registered post with A.O. in terms of
Clause 9 of the Contract is a material fact. So on that
ground also the plaintiff-purchaser is not entitled to any
relief in its suit of specific performance. [Paras 55, 56, 57)
[634-F-H 635-A-C]                                                H
    614     SUPREME COURT REPORTS (2011] 13 (ADDL.) S C.R


A         Arunima Baruah v. Union of India and Ors (2007) 6 SCC
     120: 2007 (5) SCR 904 - relied on.

          Armstrong v. Sheppard & Short Ltd. (1959) 2 Q.B. 384.
    p.397 - referred to.

B        5. Mis. Citadel Fine Pharmaceuticals is directed to
    return the amount of Rs.10,00,000/· by an account payee
    cheque to Mis. Ramaniyam Real Estates P. Ltd., if not
    already returned, within 4 weeks from date. In default Mi
    s. Citadel Fine Pharmaceuticals will have to pay interest
C   at the rate of 12% per annum on the same from the expiry
    of the period of 4 weeks from date till actual payment.
    [Para 59] [635-E-F]

                           Case Law Reference:
D          (1915-16) 43 I.A. 26   referred to         Para 32

          AIR 1967 SC 868         relied on           Para 35

          1997 (1) SCR 993        relied on           Para 45

E         AIR 1952 Mad 389        referred to         Para 45

          1992 (3) Suppl. SCR 798          followed   Para 46

          1979 (2) SCR 1147       referred to         Para 46

          (1959) 2 Q.B. 384       referred to         Para 55
F
          2007 (5) SCR 904        relied on           Para 56

        CIVIL APPELLATE JURISDICTION : Civil Appeal No.
    6437 of 2011.

G       From the Judgment & Order dated 02.09.2008 of the High
    Court of Judicature at Madras in O.S.A. No. 332 of 2007.
                                  V'JITH
    Civil Appeal No. 6438 of 2011.
H
   CITADEL FINE PHARMACEL!TICALS v. RAMANIYAM              615
               REAL ESTATES P LTD.
    Abhishek Manu Singhvi, Prashant Mehta, R.                    A
Venkatverdhan, Rishi Agrawala, Amit Kumar Sharma, E.C.
Agrawala for the Appellant.

    Jayanth Muth Raj, Sundaresan for the Respondents.

    The Judgment of !he Court was delivered by                    B

    GANGULY, J. 1. Leave is granted in both the special
leave petitions.

    2. These appeals have been preferred from the judgment
and final order dated 2nd September, 2008 passed in O.S.A. C
No.332/2007 and C.M.P. No.1/2007 by the Division Bench of
the Madras High Court.

     3. The controversy arose out of a suit of specific
performance. Mis. Citadel Fine Pharmaceuticals (defendant D
No.1 ), a partnership firm, owned 66 cents of agricultural land
(hereinafter 'the suit property'), forming a part of total of 2.87
acres of agricultural land in survey nos. 363, 364, 366i1 of
Velachery village, Mamblam, Guindy Taluk, Registration District
of Madras, and entered into an agreement for sale of the suit E
property (hereinafter 'the agreement') for a consideration of
Rs.1,00,00,000i- with Mis. Ramaniyam Real Estates Private
Limited (plaintiff), which was a company incorporated under the
Companies Act, 1956 and engaged in the business of
constructing buildings.                   ·                        F

     4. The agreement dated 7th July, 1995 was the subject
matter of suit between the above parties. As per the
agreement, Rs.10,00,000/- of the sale consideration was to be
paid upfront as earnest money, and the remainder of
Rs.90,00,000/- was to be paid at the time of the registration of G
the sale deed. At the time of agreement, the suit property was
encumbered by way of security with Mis. State Bank of India,
Guindy Branch (defendant No.2) and therefore one of the
conditions of the agreement was that defendant No. 1 would
get the suit property released from such encumbrance before H
    616     SUPREME COURT REPORTS [2011] 13 (ADDL.) S.C.R.


A the final payment of Rs.90,00,000/- was to be made. Apart from
  this encumbrance, it was stated in the agreement, the suit
  property was to be without any other encumbrance; vide clauses
  2 and 6 of the agreement.

B       5. Of the said 66 cents, however, 19 cents were
  considered excess urban vacant land under the Tamil Nadu
   Urban Land (Ceiling and Regulations) Act (24 of 1978),
  (hereinafter 'the Tamil Nadu Act') As per clause 7 of the
  agreement, it was for the plaintiff to have the land cleared for
C sale from the urban land ceiling authorities. Under clauses 8,
  10 and 11 of the agreement, the sale was made time bound.
  Clause 10 stated that time was the essence of this contract.
  Clause 8 mandated that under all circumstances, the sale had
  to materialize within a year from the date of the agreement. In
  terms of clause 9, if the sale failed on account of lapses on
D plaintiffs part, the sale was to stand completely cancelled, and
  the earnest money of Rs.10,00,000/- was to be returned. As
  per clause 11, however, if the sale failed because of defendant
  No. 1, the plaintiff was at liberty to sue for specific performance
  of the contract.
E
       6. In pursuance to the agreement, the earnest money was
  paid by the plaintiff and received by defendant No. 1. The
  plaintiff then preferred an application in Form 37-1 prescribed
  under Rule 48-L of the Income Tax Rules, 1962, before the
F Appropriate Authority for the clearance of the suit property for
  sale vide section 269UC in Chapter XX of the Income Tax Act,
  1961.
       7. However, the Income Tax Authority refused such
  clearance on the ground that as per section 6 of the Tamil Nadu
G Act, agreement to sell a piece of urban land declared excess
  vacant land, or a piece of land, part of which had been declared
  excess vacant urban land, was deemed as null and void.

      8. From the Statement and Objects and Reasons of the
H Tamil Nadu Act it appears that it was enacted to impose a
CITADEL FINE PHARMACEUTICALS v. RAMANIYAM REAL 617
    ESTATES P LTD. [ASOK KUMAR GANGULY, J]

ceiling on the quantum of land that could be held or owned           A
within an urban agglomeration. The object of the Act was to
prevent concentration of ownership of urban land in the hands
of a few, and to regulate the construction of buildings on such
lands, speculative trading of urban land and illegal profiteering.
Under the Act, the ceiling limit had been fixed by Section 5.        B
Section 6 of the Act prevented transfer of such excess vacant
urban land by its owner to any other person. Section 6 is set
 out:

     6. Transfer of vacant land. - No person holding in excess C
     of the ceiling limit immediately before the commencement
     of this Act, vacant land, shall transfer any such land or part
     thereof by way of sale, mortgage, gift, lease or otherwise
     until he has furnished a statement under section 7 and a
     notification regarding the excess vacant land held by him
     has been published under sub section (1) of section 11; D
     and any such transfer made in contravention of this
     provision shall be deemed to be null and void.

     9. The section thus enjoined that landowners holding
excess vacant land are to furnish a statement under Section 7.       E
In this case, 19 cents were considered excess urban vacant
land vide case no. R.C.6160/86 and defendant No. 1 filed its
statement under Section 7.

     10. Section 9 provided for preparation of a draft statement     F
as regards the excess vacant land. Under clause (5) of Section
9, the Competent Authority, so designated under the Tamil
Nadu Act, was to consider objections preferred by a land
owner, and then pass orders with respect to the question of
excess land. Defendant no. 1 preferred its objections before
the Competent Authority. The objections however were                 G
dismissed. The defendant no. 1 then preferred an appeal before
the Special Commissioner (Land Reforms), Madras and the
appeal was kept pending.

     11. In accordance with Section 11 (1), a notification           H
    618   SUPREME COURT REPORTS [2011] 13 (ADDL) S C.R


A regarding the 19 cents being excess vacant land was published
  and any transfer made in contravention of this provision was
  deemed to be null and void. Section 11 provided for acquisition
  of such vacant urban land by the State Government.

8        12. Defendant no. 1 also preferred an application for
    exemption of that 19 cents of land under the provisions of
    Section 21. Section 21 empowered the State Government to
    exempt a piece of vacant excess land from acquisition
    mentioned above.

C       13. That application was also dismissed. Defendant no. 1
  then preferred Writ Petition No. 13906/2008 before the High
  Court challenging the declaration in R C. 6160/86. In the writ
  petition, defendant no. 1 prayed for a stay of the proceedings
  and which was allowed. However, during the pendency of this
D writ petition the Tamil Nadu Act was repealed on 16th June,
  1999 by the Tamil Nadu Urban Land (Ceiling and Regulation)
  Repeal Act, 1999 (20of1999) (hereinafter 'the Repealing Act').
  Under Section 4 of the repealing Act, all proceedings relating
  to any order made or purported to be made under the Principal
E Act, that is the Tamil Nadu Act, shall abate. Section 4 of the
  Repealing Act is as follows:-

        "4. Abatement of legal proceedings. - All proceedings
        relating to any order made or purported to be made under
        the Principal Act pending immediately before the
F       commencement of this Act before any court, tribunal or any
        authority shall abate.

       Provided that this section shall not apply to the proceedings
       relating to Sections 12, 13, 14, 15, 15-B and 16 of the
G      Principal Act in so far as such proceedings are relatable
       to the land, possession of which has been taken over by
       the State Government of any person duly authorised by the
       State Government in this behalf or by the competent
       authority.''
H
  CITADEL FINE PHARMACEUTICALS v. RAMANIYAM                  619
 REAL ESTATES P LTD. [ASOK KUMAR GANG ULY, J ]

    1A. Admittedly, possession of 19 cents of land. in respect       A
of which proceeding was pending, was not taken over by the
Government. So the pending proceeding in respect of that land
under the Principal Act. that is the Tamil Nadu Act. shall abate
in view of Section 4 of the Repealing Act.

     15. However, Income Tax authorities, as noted above, had        B
refused to process Form 37-1 in view of the proceedings initiated
under the Tamil Nadu Act. Having referred to section 6 of the
Act, the appropriate authority, while rejecting form 37-1 stated:

     " ... In column 8, it has been mentioned that an extent of 19   C
     cents has been declared as excess vacant land under
     section 9 (5) of Tamil Nadu Urban Land (Ceiling and
     Regulations) Act, 1978 that an appeal is pending before
     the Special Commissioner (Land Reforms), Madras and
     that the transferor has also applied to the State Government    D
     for exemption under Section 21 of the said Act but the
     same has been rejected and the matter is pending in W.
     P. No. 13906/1988, before the High Court, Madras.

     2. It transpires, therefore, that the transferor intends to     E
     transfer the entire extent of 66 cents, inclusive of the 19
     cents of land which is declared as excess vacant land by
     the Competent Authority under the Urban Land Ceiling Act,
     which is prohibited by section 6 of the Tamil Nadu Urban
     Land (Ceiling and Regulations) Act, 1978 .....
                                                                     F
           In view of the prohibition contained in section 6,
     quoted above, the agreement .entered into between the
     parties on 7.7.95 to transfer the entire land, including the
     excess vacant land of 19 cents, shall be deemed to be null
     and void. In view of this legal prohibition, we are unable to   G
     process the 37-1 statement filed by you and there.fore, the
     same is lodged in this office. If you are so advised, you
     may file a fresh 37-1 statement for transfer of the balance
     land only."
                                                                     H
    620    SUPREME COURT REPORTS [2011] 13 (ADDL) S.C.R.


A       16. As per clause (7) of the agreement, it was the plaintiffs
  responsibility to have the suit property cleared for sale by the
  urban land ceiling authorities. Since Form 37-1 was not
  cleared, the plaintiff sent two letters dated 10th June, 1996 and
  3rd July, 1996 to the defendant requesting that the sale be split
  up and two separate agreements be entered into. The first for
8
  the unencumbered 47 cents and the second for 19 cents termed
  as the excess land by the urban land ceiling authority. This
  proposal was rejected by the defendant no. 1 o·~ the grounds
  that the agreement is not divisible. According to defendant
C No.1, the splitting up of the agreement into two in effect meant
  the writing of an entirely new contract. The bar under section 6
  of the Tamil Nadu Act, as pointed out by the Appropriate
  Authority was applicable not only in respect of the 19 cents of
  land termed as excess, but in fact the entire 66 cents for the
  reason that the said 19 cents could not be severed from the
D 66 cents. The defendant No. 1 urged that the contract was hit
  by illegality and was thus frustr;.: '.ed.

       17. The plaintiff, the proposed purchaser, under these
  circumstances instituted on 9th September, 1998 the suit for
E specific performance of the contract, viz. C. S. 589/1996 for
  the entire 66 cents of land.

       18. The plaint case is that at the time the agreement for
  sale was entered into, it was known to both the parties that 19
F cents of the suit property had been declared excess land under
  the Tamil Nadu Act, and that an appeal to the Special
  Commissioner (Land Reforms), Madras was pending. It also
  submitted that the parties knew that a writ petition challenging
  the State Government's refusal to exempt the property under
  section 21 of the Tamil Nadu Act was also pending. With
G knowledge the parties entered into the agreement to sell. The
  plaintiff submitted that this meeting of minds was reflected in
  clause 7 of the agreement. There was thus no new and
  unforeseen development leading to the frustration of contract
  as such the relief for specific performance of the contract was
H prayed or in the alternative, it was prayed the plaintiff be
CITADEL FINE PHARMACEUTICALS v. RAMANIYAM REAL 621
    ESTATES P. LTD. [ASOK KUMAR GANGULY, J.]

allowed a refund of the earnest money with an interest of 25%     A
per annum and liquidated damages to the tune of Rs.75,00,000/
- along with costs.

      19. The defendant, the proposed vendor, resisted the suit
by submitting that the agreement to sell was with respect to the 8
entire suit property, Le. 66 cents, and thus could not have been
split into separate agreements to sell for 4 7 cents and 19 cents.
It submitted that in view of the bar placed because of section 6
of the Tamil Nadu Act and the consequential refusal by the
appropriate authority under the income tax department to allow C
the execution of the sale, the contract itself had become
frustrated and thus unenforceable in law.

      20. It was further urged that time was the essence of \he
contract and it was for the plaintiff purchaser to seek exemption
for the said 19 cents land from the urban land ceiling D
department, which however it failed to do. As a result of this
failure, the sale could not be affected within ~ year's time. This
clearly rendered the contract void in terms of clauses 8 and 10
insofar as the contract was not performed within a year's time.
Hence, clause 9 was attracted and the contract stood cancelled E
for default of the plaintiff. It submitted that in terms of clause 9,
the proposed vendor (defendant no.1) refunded the earnest
money to the plaintiff-purchaser. However the cheque sent under
registered post came back to the defendant no. 1 'refused'. It
appears that the same refused by the plaintiff-purchaser either F
by 6th or 7th September, 1996.

     21. As such the defendant no. 1 prayed for dismissal of
the suit in view of impossibility of performance of the contract
and non-performance by the plaintiff of its obligation under the
contract within the stipulated time.                             G

     22. However, the learned Single Judge held that the suit
property was in respect of agricultural land and not about an
urban land as contemplated under the Tamil Nadu Act. It was
further noted by the learned Judge that as the Tamil Nadu Act      H
    622    SUPREME COURT REPORTS [2011] 13 (ADDL) S.C.R.

A   had been repealed in 1999, its application itself would be
    limited to only those instances where possession of the excess
    vacant land had been taken over by the State Government.

       23. The learned Judge noted that the suit property in the
B instant case did not attract any of the provisions mentioned in
  Section 3 of the Repealing Act. According to the learned Judge,
  there were two reasons for which the provisions of Tamil Nadu
  Act would not apply to the instant agreement: firstly, the suit
  property was agricultural in nature and thus the same was
C outside the purview of the Act. Secondly, after the repeal of the
  Tamil Nadu Act in 1999, none of its provisions affected the
  agreement. The Judge held that clause (7) in itself, however,
  was not a condition precedent to the contract. It merely stated
  that clearance of the said 19 cents from the urban land ceiling
  authorities was upon the plaintiff, and that in the event the
D plaintiff was unable to have it cleared, the defendant no. 1 shall
  not be provided with any alternative pie.ce of land or any
  compensation. Thus, the learned Judge held that the plaintiff
  was entitled to specific performance of the contract and
  decreed the suit.
E
       24. Aggrieved, the defendant no. 1 preferred an appeal.
  The learned Division Bench partly allowed it holding that the
  respondents could be given the relief of specific performance
  only to the exlent of 47 cents of the lands that were not part of
F the proceedings under the Tamil Nadu Act.

       25. Apart from upholding the judgment of the learned
  Judge with respect to the agricultural nature of the suit property,
  the Division Bench noted that in none of the letters exchanged
  between the parties it had come on record that the agreement
G had become illegal in view of the provisions of Section 6 of the
  Tamil Nadu Act. On the contrary, in all these communications,
  the only position that the defendant no. 1 had insisted upon was
  the satisfaction of the conditions mentioned in clause (7) of the
  agreement, viz., permission for the sale of 19 cents by the urban
H land ceiling authorities. The learned Division Bench noted that
CITADEL FINE PHARMACEUTICALS v. RAMANIYAM REAL 623
    ESTATES P-LTD [ASOK KUMAR GANGULY. J.]

if this was the stance of the defendant no. 1, it could not be         A
allowed to resist the suit on the grounds of illegality of contract.

      26. However, it disagreed with the decision of the learned
Judge to the extent the repeal of the Tamil Nadu Act did not in
itself released 19 cents of the excess vacant land from the
                                                                       B
proceedings initiated under that Act. It held that Section 3 of
the Repeal Act provided that repealing of the Tamil Nadu Act
would not affect the vesting of any vacant land under sub section
(3) of Section 11 of the Tamil Nadu Act in cases where the
possession of such vacant land had been taken over by the
State Government. Relying upon and following decision of a Full        C
Bench of the High Court in P. Gopirathnam and 4 Others v.
Ferrodous Estate (Private) Limited, represented by its Power
of Attorney Holder Sri G. John Arthur, 1999 (2) Current Tamil
Nadu Cases 181, the learned Bench held that the proceedings
with respect to the said 19 cents had been initiated and that          D
the same were pending. The Division Bench held that decree
for specific performance as given by the learned Judge had to
be modified to the extent that the same was possible only to
the extent of the unencumbered portion of the land.
                                                                       E
    27. One of the main questions which arise for
consideration in the facts of this Court is whether in the said
agreement time is of the essence of the contract. In order to
appreciate this question, the Court has to consider several
clauses in the said agreement. The relevant clauses are                F
clauses 7, 8, 9 & 10, which are set out below:

     "7. The vendor states that an extent of 770 sq.mis. in
     S.No.363/1 B & 363/1 C forming part of the property
     described below and agreed to be sold has been
     declared as excess vacant land under Sec 9(5) of the Tamil        G
     Nadu Urban Land Ceiling (C&R) Act, 1978. An appeal is
     pending before the Special Commissioner (Land
     Reforms), Madras. The Vendor also applied to the State
     Government for exemption under Sec 21 of the Act but the
     same has been rejected and the matter is pending in               H
    624      SUPREME COURT REPORTS [2011] 13 (ADDL.) S.C.R


A         W.P.13906/1988 before the High Court, Madras. It shall
          be the sole responsibility of the Purchaser to get clearance
          from the Urban Land Ceiling Authorities by negotiation or
          getting exemption under the Act or permission to sell, at
          his own cost and the Vendor shall not be responsible for
B         the same. But, the Vendor shall sign all applications or
          petitions necessary for this purpose. While, getting
          permission to sell or exemption under the Act in respect
          of the property agreed to be sold, the Purchaser shall
          ensure that no compensatory claim or alternate land is
c         claimed by the Urban Land Ceiling authorities in the rest
          of the land to be retained by the Vendor.

          8. The time for completion of the purchase shall be one
          year from the date of this agreement.

D         9. If the purchaser fails to complete the transaction within
          the time stipulated, this agreement shall stand cancelled
          and a sum of Rs.10,00,000/- (Rupees Ten Lakhs only) paid
          as earnest money will be returned without interest to the
          Purchaser and the Vendor shall be at liberty to sell the
E         property to whomsoever he likes.

          10. Time shall be the essence of the contract."

       28. Admittedly, the agreement was entered into on 7th July,
  1995 and the period of one year expired by 6th July, 1996.
F Within that period the plaintiff-purchaser could not get clearance
  from the Urban Land Ceiling Authorities nor could they obtain
  the exemption under the Act for permission to sell a part of the
  property in respect of which the suit for specific performance
  was filed.
G
       29. It is not the case of the plaintiff-purchaser that the
  vendor in any way delayed the signing of application or petition
  necessary for getting such permission for clearance. From
  some correspondence exchanged between the parties it is
H clear that purchaser took a few steps but.could not get the
CITADEL FINE PHARMACEUTICALS v. RAMANIYAM REAL 625
    ESTATES P LTD. [ASOK KUMAR GANG ULY. J ]

clearance within the time agreed by it. The Vendor, however, A
by a letter dated 4th September, 1996 cancelled the
agreement in terms of clause 9 of the agreement and returned
the advance money of Rs.10,00,000/- vide a cheque in terms
of clause 9. The said letter written by the vendor is set out
below:-                                                       B

    "CITADEL FINE PHARMACEUTICALS

    Ref: 3852/96
                                          4th September 1996      C
    Mis. Ramaniyam Real Estates Pvt. Ltd.,
    Rep. by Mr. V. Jagannathan,
    Managing Director,
    'Sruthi'. No.11, 2nd Main Raad,
    Gandhi Nagar,                                                 D
    Madras 600 020.
    Dear Sir,

          Re: 1. Our letter dated 11.7.96
                2. Your letter dated 19.7.96.                     E

    As would be appreciated by you, at the meeting had with
    you, by ourself through our Mr. Rajiv and further by
    telephone on 30.8.1996 as you have expressed your
    reluctance in accepting our terms put to you on the sale of   F
    the property, we are returning the advance money of
    Rs.10,00,000/- vide SBI, Guindy, Cheque No.904014
    dt.4.9.1996 in terms of Clause 9 of the Agreement dated
    7th July, 1995.

    Kindly acknowledge the receipt of this.                       G

    Thanking you,
    Yours faithfully,

                                                                  H
    626      SUPREME COURT REPORTS [2011] 13 (ADDL.) S.C.R.


A         For CITADEL FINE PHARMACEUTICALS
          Sd/-
          Partner
          Encl: as above"

B         30. Under these circumstances, the question is whether
    from the facts of this case vendor can raise a defence to the
    suit for specific performance of the contract that time being of
    the essence of this contract. the Court c_annot order its specific
    performance when plaintiff failed to discharge its part of the
c   contract within time and when after expiry of time, the contract
    was cancelled by the vendor in terms of clause 9 of the Contract.

         31. The settled law seems to be that in a case for specific
    performance of contract relating to immovable property time is
    not normally of the essence. However, this is not an absolute
D   proposition and it has several exceptions.

        32. Reference in this connection may be made to the
  decision of Privy Council in Jamshel' Khodaram Irani v.
  Burjorji Dhunjibhai reported in (1915-16) 43 I.A. 26. Viscount
E Haldane delivering the judgment for the Judicial Committee of
  the Privy Council held that the law applicable to this question
  is contained in Section 55 of the Indian Contract Act and the
  learned Law Lord was of the opinion that Section 55 of the
  Indian Contract Act does not lay down any principle which is
F different from those which obtain under the law of England with
  regard to contracts for sale of land. It was further held that in
  cases relating to specific performance, equity, which governs
  the rights of the parties, does not look always at the express
  term of the agreement but at the substance of it in order to
G ascertain whether the parties named a specific time within
  which completion was to take place and whether the parties in
  substance intended that the completion should take place within
  a reasonable time. The legal position was as follows:-

                •... A Court of Equity will indeed relieve against and
H         enforce specific performance, notwithstanding a failure to
  CITADEL FINE PHARMACEUTICALS v. RAMANIYAM                  627
 REAL ESTATES P. LTD. [ASOK KUMAR GANGULY, J.]

    keep the dates assigned by the contract; either for A
    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 [3 D.M.& G. 284 at 289)
    there is nothing in the 'express stipulation between the
    parties, the nature of the property, or the surrounding          s
    circumstances', which would make it inequitable to
    interfere with and modify the legal right. ... " (page 32 of the
    report)

      33. The learned Law Lord made it clear that equity can
operate in the construction of a contract "unless excluded by C
any clearly expressed stipulation". However, it was made clear
that equity will not assist where there has been undue delay on
the part of one party to the contract and one party has given
notice to the other party that the defaulting party must complete
the contract within a definite time. A further caution was added D
by saying that equity will not assist when other circumstances
will result in injustice on application of equitable principle. In the
words of Lord Haldane the principles have been formulated as
follows:-
                                                                     E
     " ... Nor will it (equity) exercise its jurisdiction when the
     character of the property or other circumstances would
     render such exercise likely to result in injustice. In such
     cases the circumstances themselves, apart from any
     question of expressed intention, exclude the jurisdiction.      F
     Equity will further infer an intention that time should be of
     the essence from what has passed between the parties
     prior to the signing of the contract.. .. " (Page 33 of the
     report)

     34. In this case, prior to the signing of the agreement, the G
terms were discussed between the parties and the plaintiff
purchaser willingly took upon itself the burden of obtaining the
clearance within the time stipulated in the agreement.

     35. The aforesaid principles in Jamshed Khodaram                H
    628      SUPREME COURT REPORTS [2011] 13 (ADDL) S.C.R.


A   (supra) were accepted by a three-Judge Bench of this Court
    in the case of Gomathinayagam Pillai and others v.
    Palaniswami Nadar reported in AIR 1967 SC 868.

         36. From the terms of agreement in this case which have
8   been set out in the earlier part of the judgment it is clear that
    the time is of the essence and this is clearly stipulated and
    understood by the parties having regard to the previous
    correspondence and also having regard to the laid down terms
    of the contract and especially when the consequence of non-
e   completion of the terms by purchaser within the stipulated time·
    was spelt out in clause 9.

         37. In a case where time is of the essence of the contract,
    the consequence of non-performance of such term has been
    very succinctly explained by Chitty on Contracts, (Volume 1,
D   Thirteenth Edition, Sweet & Maxwell in paragraph 21-015) and
    the same is set out:

                 "Consequences of time bein'.J "of the essence". In
          determining the consequences of a stipulation that time is
          to be "of the essence" of an obligation. it is vital to
E
          distinguish between the case where both parties agree that
          time is to be of the essence of the obligation and the case
          where, following a breach of a non-essential term of the
          contract, the innocent party serves a notice on the other
          stating that time is to be of the essence. In the former case
F
          the effect of declaring time to be of the essence is to
          elevate the term to the status of a "condition" with the
          consequences that a failure to perform by the stipulated
          time will entitle the innocent party to: (a) terminate
          performance of the contract and thereby put an end to all
G         the primary obligations of both parties remaining
          unperformed; and (b) claim damages from the contract-
          breaker on the basis that he has committed a fundamental
          breach of the contract ("a breach going to the root of the
          contract") depriving the innocent party of the benefit of the
H
  CITADEL FINE PHARMACEUTICALS v. RAMANIYAM                     629
 REAL ESTATES P. LTD. [ASOK KUMAR GANG ULY. J]

    contract ("damages for loss of the whole transaction".              A
    (page 1410)

    38. Fry in his Treaties on the Specific Performance of
Contracts (Sixth Edition) has dealt with this aspect in
paragraph 1075:-
                                                                        B
          "Time is originally of the essence of the contract, in
    the view of;;; Court of Equity, whenever it appears to have
    been part of the real intention of the parties that it should
    be so, and not to have been inserted as a merely formal
    part of the contract. As this intention may either be               C
    separately expressed, or may be implied from the nature
    or structure of the contract, it follows that time may be
    originally of the essence of a contract, as to any one or
    more of its terms, either by virtue of an express condition
    in the contract itself making it so, or by re3son of its being      D
    implied .... " (page 502)

     39. In paragraph 1079, the learned author has explained
the position further by saying the time may be implied as
essential in a contract from the nature of the subject matter with
                                                                        E
which the parties are dealing. The learned author explained this
by saying:-

             "1079. Time may be implied as essential in a
     contract, from the nature of the subject-matter with which
     the parties are dealing. "If, therefore," said Alderson B., "the   F
     thing sold be of greater or less value according to the
     effluxion of time, it is manifest that time is of the essence
     of the contract: and a stipulatio~ as to time must then be
     literally complied with in Equity as well as in Law .... " (page
     504)                                                               G

      40. At paragraph 1081 page 505, the learned author made
it very clear that in a contract relating to commercial enterprise
the Court is strongly inclined to hold time to be essential,
whether the contract is for the purchase of land or for such            H
    630     SUPREME COURT REPORTS [2011] 13 (ADDL.) S.C.R.


A purposes or more 'directly for the prosecution of trade'. The
  elaboration of this point by the learned author is as follows:-

                 "1081. And so, again, where the object of the
          contract is a commercial enterprise, the Court is strongly
          inclined to hold time to be essential, whether the contract
B
          be for the purchaser of land for such purposes, or more
          directly for the prosecution of trade. This principle has been
          acted on in the matter of a contract respecting land which
          had been purchased for the erection of mills, also in relation
          to a sale of pasture lands, required by the purchaser, as
c         the vendor new, for stocking, and in several cases of
          contracts for the sale of public-houses as going
          concerns .... " (page 505)

       41. The aforesaid principles squarely apply to the facts of
D the present case. Here the purchaser is admittedly in the
  business of building construction and is entering with agreement
  for purchasing the plot on commercial basis.

      42. Gareth Jones and William Goodhart in their Treaties
E on Specific Performance (Second Edition, Butterworths)
  expressed similar views by saying:

              "If the parties have expressly agreed that time is to
        be of the essence, the courts will generally if not always
        give effect to that stipulation. An intention that a stipulation
F       as to time should be of the essence may be implied from
        the circumstances. In the absence of agreement to the
        contrary, time will generally be considered of the essence
        in mercantile contracts and in contracts for the sale of a
        business or of property which has a fluctuating or
G       speculative value .... " (page 74)

       43. The instant case obviously relates to a contract in
  commercial transaction and the Court can take judicial notice
  of the fact that in the city of Chennai the price of real estate is
H constantly escalating and the clear intention of the parties, as
CITADEL FINE PHARMACEUTICALS v. RAMANIYAM REAL631
    ESTATES P. LTD [ASOK KUMAR GANGULY, J.]

it appears from the stipulations of the agreement, was to treat       A
time as the essence of the contract.

     44. Having regard to the aforesaid principles the court
cannot attribute a different intention to the parties and cannot
specifically enforce the contract at the instance of the plaintiff-   B
purchaser who has failed to perform his part of the obligation
within the time stipulated.

      45. In K.S. Vidyanadam and others v. Vairavan reported
in (1997) 3 SCC 1 this Court explained how discretion is to
be exercised by the Court before granting specific C
performance. This Court held that in cases of urban properties
in India it is well known that prices are going up sharply over
the last few decades particularly after 1973. In Vidyanadam
(supra) the court was dealing with a property in Madurai in the
State of Tamil Nadu and it was argued before this Court by D
 referring to the Madras High Court judgment in S. V.
Sankaralinga Nadar v. P. T.S. Ratnaswami Nadar (AIR 1952
 Mad 389) that mere rise in price is no ground for denying the
 specific performance. This Court did not agree with the
decision of the Madras High Court and held that the Court E
 cannot be oblivious of the reality of constant and continuous rise
 in the value of urban properties. In that context the time lirnit set
 in the contract has to be strictly construed. In the case of
  Vidyanadam (supra) there is no such strict stipulation as time
 being of the essence of the contract as is in the instant case F
 even then the Court refused to grant the relief of specific
 performance.

     46. In Vidyanadam (supra) reference was made to a
Constitution Bench judgment of this Court in Chand Rani (Smt.)
(Dead) by LRs. v. Kamal Rani (Smt.) (Dead) by LRs. reported G
in (1993) 1 SCC 519. The same question, whether time was
of essence of the contract was discussed in Chand Rani
(supra). The Constitution Bench of this Court while dealing with
this question referred to another decision of this Court in the
case of Mis. Hind Construction Contractors by its sole H
    632     SUPREME COURT REPORTS [2011] 13 (ADDL) S.C.R.


A proprietor Bhikamchand Mulchand Jain (Dead) by LRs. v.
   State of Maharashtra reported in (1979) 2 SCC 70. By
   referring to various judgments, the Constitution Bench in Chand
  Rani (supra) formulated the proposition that even where parties
  have expressly provided time to be of the essence of the
B contract, such a stipulation will have to be read along with other
  terms of the contract. Such other terms, on a proper
  construction, may exclude the inference that the completion of
  work by a particular date was meant to be fundamental. The
  learned Judges indicated the following circumstances which
c may indicate a contrary inference; (a) if a contract includes
  clauses providing for extension of time in certain contingencies,
  or (b) ·if there are clauses for payment of fine or penalty for
  every day or week the work undertaken remains unfinished
  after the expiry of time. The Constitution Bench held that such
  clauses would be construed as rendering ineffective the
D express provision relating to time being of the essence of
  contract (see para 22 at page 528 of the report).

         47. In the instant case, in the said agreement no such
    clause, as aforesaid, exists. Rather the stipulation as time
E   being of the essence of the contract was specifically mentioned
    in clause 10 and the consequences of non-completion are
    mentioned in clause 9. So from the express terms of the
    contract and the commercial nature of the transaction and the
    surrounding circumstances make it clear that the parties
F   intended time in this case was intended to be of the essence
    of the contract.

         48. Keeping the above principle if we look at the portion
    of Law in India, it is clear that under Section 9 of the Specific
G   Relief Act, 1963 ii is provided as follows:-

        "9. Defences respecting suits for relief based on contract.-
        Except as otherwise provided herein, where any relief is
        claimed under this Chapter in respect of a contract, the
        person against whom the relief is claimed may plead by
H
CITADEL FINE PHARMACEUTICALS v. RAMANIYAM REAL633
    ESTATES P LTD. [ASOK KUMAR GANGULY, J.]

     way of defence any ground which is available to him under         A
     any law relating to contracts."

     49. It is clear from Section 9 of the Specific Relief Act, 1963
that Section 55 of The Indian Contract Act, 1872 enables a
defendant against whom suit for the specific performance has
                                                                       8
been filed to raise the defence under Section 55 of the Indian
Contract Act

    50. Section 55 of the Indian Contract Act which deals with
a contract, in which time is of essence is as follows:-
                                                                       c
     "Section 55 - Effect of failure to perform at a fixed time, in
     contract in which time is essential. - When a party to a
     contract promises to do a certain thing at or before a
     specified time, or certain things at or before specified
     times, and fails to do any such thing at or before the D
     specified time, the contract, or so much of it as has not
     been performed, becomes voidable at the option of the
     promisee, if the intention of the parties was that time should
     be of the essence of the contract."

     51. On a combined reading of Section 9 of the Specific            E
Relief Act and Section 55 of The Indian Contracts Act it is clear
that in this case the vendor as a promisee, was within its right
to terminate the contract by sending the letter dated 4th
September, 1996 in terms of Clause 9 of the Contract while
returning the advance money of Rs.10,00,000/-. It is clear that        F
the plaintiff has not discharged its burden within the time
specified and is not entitled to a specific performance of the
contract.

    52. Therefore, the approach of the High Court both by the          G
Single Judge and the Appellate Bench cannot be sustained.

     53. There is another aspect of the matter also. In the instant
case by asking for specific performance of the contract, the
plaintiff-purchaser is praying for a discretionary remedy. It is
                                                                       H
    634    SUPREME COURT REPORTS [2011] 13 (ADDL) S.C.R.


A   axiomatic that when discretionary remedy is prayed for by a
    party, such party must come to court on proper disclosure of
    facts. The plaint which it filed before the Court in such cases
    must state all facts with sufficient candour and clarity. In the
    instant case the plaintiff-purchaser made an averment in the
B   plaint that the defendant-vendor be directed to return the
    advance amount of Rs.10,00,000/- at the rate of 24% interest
    from the date of payment of the said amount till the realization
    and an alternative prayer to that effect was also made in the
    prayer clause (c).
c       54. However. the fact remains that prior to the filing of the
  suit the defendant-vendor returned the said amount of
  Rs.10,00,000/- by its letter dated 4th September. 1996 by an
  account payee cheque in favour of the plaintiff and the same
  was sent to the plaintiff under registered post which was refused
D by the plaintiff on 6.9.1996. The plaintiff suppressed this fact
  in the plaint and filed the suit on 9.9.1996 with a totally contrary
  representation before the court as if the amount has not been
  returned to it by the vendor. This is suppression of a material
  fact, and disentitles the plaintiff-purchaser from getting any
E discretionary relief of specific performance by Court.

         55. In this connection we may refer to the Principle of
     Equitable Remedies by l.C.F SPRY, Fourth Edition (Sweet &
    Maxwell, 1990). Dealing with the question of 'Clean Hands' the
F   learned author opined that where the plaintiff is shown to have
    materially misled the court or to have abused its process, or to
    have attempted to do so, the discretionary relief of specific
    performance can be denied to him. In laying down this principle,
    the learned author relied on a decision of the English Court in
    the case of Armstrong v. Sheppard & Short Ltd. (1959) 2 Q.B.
G   384 at page 397. (See SPRY Equitable Remedies page 243).

         56. This Court has also taken the same view in the case
    of Arunima Baruah v. Union of India and others reported in
    (2007) 6 SCC 120. At paragraph 12, page 125 of the report,
H
   CITADEL FINE PHARMACEUTICALS v. RAMANIYAM   635
  REAL ESTATES P. LTD. [ASOK KUMAR GANGULY, J]
this Court held that it is trite law that to enable the court to refuse A
to exercise its discretionary jurisdiction suppression must be
of a material fact. This Court, of course, held what is a material
fact, suppression whereof would disentitle the suitor to obtain
a discretionary relief, would depend upon the facts and
circumstances of each case. However, by way of guidance this B
Court held that material fact would mean that fact which is
material for the purpose of determination of the lis.

      57. Following the aforesaid tests, this Court is of the
opinion that the suppression of the fact that the plaintiff refused C
to accept the cheque of Rs. 10 lac sent to it by the defendant
under registered post with A.O. in terms of Clause 9 of the
Contract is a material fact. So on that ground the plaintiff-
purchaser is not entitled to any relief in its suit of specific
performance.
                                                                    D
      58. For the reasons aforesaid, this Court allows the appeal
filed by Mis. Citadel Fine Pharmaceuticals [SLP(C) No.282511
2008] and dismisses the appeal filed by the Mis Ramaniyam
 Real Estates P. Ltd., [SLP(C) No.3126912008).
                                                                    E
      59. The Court directs Mis. Citadel Fine Pharmaceuticals
 to return the amount of Rs.10,00,0001- by an account payee
cheque to Mis. Ramaniyam Real Estates P. Ltd., if not already
 returned, within 4 weeks from date. In default Mis. Citadel Fine
 Pharmaceuticals will have to pay interest at the rate of 12% per F
annum on the same from the expiry of the period of 4 weeks
 from date till actual payment.

    60. Having regard to the facts and circumstances of this
case there will be no order as to costs.
                                                                       G
B.B.B.                                      Appleas disposed of.