Supreme Court of India
MRS. SARADAMANI KANDAPPANversusMRS. S. RAJALAKSHMI & ORS.
- Citation
- 2011 INSC 446
- Decided
- 4 July 2011
- Disposal
- Disposed off
- Bench
- R V RAVEENDRAN
Holding
The contract made time of payment the essence, so the respondents were entitled to cancel the agreement, deny specific performance, and refund the advance with interest at 12% from the cancellation date.
Summary
The appellant entered into an agreement of sale for immovable property, paying an advance and agreeing to pay the balance in three instalments, with clause 6 expressly making timely payment the essence of the contract. The respondents cancelled the agreement when the appellant failed to pay the second and third instalments on the stipulated dates and later sought specific performance, an injunction, and a refund of amounts paid. The Supreme Court held that the contract clearly made time of payment essential, that the parties did not condition payment on the vendors' satisfaction of title, and that the respondents were justified in cancelling the agreement; consequently, specific performance and the injunction were denied. The Court also found no pleaded or proved fraud regarding undisclosed encumbrances and held that the evidence of the fourth defendant sufficed, so no adverse inference was warranted. The Court upheld the lower court's order to refund the total advance of Rs.3,50,000 but modified the interest rate to 12% per annum from the date of cancellation (2 August 1981) to the date of payment. The contempt petitions were dismissed and the remaining appeals were rejected.
Issues considered
- Whether the time stipulated for payment of the balance consideration was the essence of the contract and justified the respondents' cancellation of the agreement.
- Whether the parties had agreed that payment of the balance was conditional upon the vendors satisfying the purchaser about title.
- Whether the vendors committed fraud by failing to disclose encumbrances, thereby warranting an extension of time or invalidating the cancellation.
- Whether an adverse inference should be drawn from the non‑examination of defendants 1‑3 who were the vendors.
- Whether specific performance, a permanent injunction, and a refund of the advance were appropriate reliefs.
Legislation cited
- Indian Contract Act, 1872s. 50, s. 51, s. 52, s. 53, s. 54, s. 55
- Specific Relief Act, 1963
- Transfer of Property Act, 1882s. 34, s. 55
Subjects
contract lawtime of essencespecific performancesale of immovable propertybreach of contractrefund of advanceinterest ratefraudencumbranceevidencecontempt
Judgment
[2011] 8 S.C.R. 874
A MRS. SARADAMANI KANDAPPAN
v.
MRS. S. RAJALAKSHMI & ORS.
(Civil Appeal Nos. 7254-7256 of 2002)
And
B (Contempt Petition (C) No. 28-29 of 2009)
JULY 4, 2011
[R.V. RAVEENDRAN AND K.S. RADHAKRISHNAN, JJ.]
C Contract Act 1872:
s. 55 - Effect of failure to perform at a fixed time in
contracts in which time is essential - Held: In a contract
relating to sale of immovable property if time is specified for
0 payment of sale consideration but not in regard to the
execution of sale deed, time will become the essence only
with reference to payment of sale consideration but not in
regard to execution of sale deed - Normally in regard to
contracts relating to sale of immovable properties, time is not
E considered to be the essence of the contract unless such an
intention can be gathered either from the express terms of the
contract or impliedly from the intention of the parties as
expressed by the terms of the contract - In the instant case,
in the agreement for sale, there was a conscious effort to de/ink
the terms relating to payment of balance sale consideration
F from the term relating to execution of sale deed and making
the time essence only in regard to the payment of the balance
sale consideration - Therefore, failure of the plaintiff to pay
the balance consideration clearly amounted to breach since
time for such payment was the essence of the contract - The
G defendants were justified in determining the agreement of sale
- The rejection of the prayer for specific performance is
upheld - However, there was no provision in the agreement
for forfeiture of the amounts already paid, even in the event
of breach by the purchaser - On the other hand, it provided
H 874
SARADAMANI KANDAPPAN v. S. RAJALAKSHMI & 875
ORS.
that if the vendors did not satisfy the purchaser in regard to A
their title, the amounts received would be refunded - Though
the plaintiff is not entitled to the relief of specific performance,
it cannot be said that the plaintiff had filed false, frivolous and
mischievous suits - In view of that, in terms of the agreement
and in terms of its offer, the plaintiff was entitled to recover s
the amounts paid by her.
Principle " Time is not of the essence of the contracts
relating to immovable properties - Relevance of - Need for
legislation - Held: The said principle took shape in an era C
when market value of immovable properties were stable and
did not undergo any marked change even over a few years -
As. a consequence, time for performance, stipulated in the
agreement was assumed to be not material, or at all events
considered as merely indicating the reasonable period within
which contract should be performed - This principle made D
sense during the period when there was comparatively very
little inflation in India - But a drastic change occurred from
. the beginning of the last quarter of the twentieth century -
There is a galloping inflation and prices of immovable
properties are increasing steeply, by leaps and bounds - E
Market values of properties are no longer stable or steady - ·
Judicial notice is taken of the comparative purchase power
of a rupee in the year 1975 and now, as also the steep
increase in the value of the immovable properties between
then and now - Properties in cities, worth a lakh or so in or F
about 1975 to 1980, may cost a crore or more now - The
reality arising from this economic change cannot continue to
be ignored in deciding cases relating to specific performance
- The steep increase in prices is a circumstance which makes
it inequitable to grant the relief of specific performance where G
the purchaser does not take steps to complete the sale within
the agreed period, and the vendor has not been responsible
for any delay or non-performance - A purchaser can no longer
take shelter under the principle that time is not of essence in
performance of contracts relating to immovable property, to H
876 SUPREME COURT REPORTS (2011) 8 S.C.R.
A cover his delays, /aches, breaches and 'non-readiness' - The
precedents from an era, when high inflation was unknown,
holding that time is not the essence of the contract in regard
to immovable properties, may no longer apply, not because
the principle laid down therein was unsound or erroneous, but
B the circumstances that existed when the said principle was
evolved, no longer exist - Legislation - Specific relief- Equity.
s. 54 - Reciprocal promises - In the instant case,
agreement of sale of immovable property contained an
unconditional promise to pay the balance consideration in
C three instalments and the said promise by the purchaser was
not made dependent upon performance of any obligation by
vendors - The contract specifically stated that having paid the
balance price, if the purchaser is not satisfied about the title
and on being intimated about the same if the vendors fail to
D satisfy the purchaser about their title, all amounts paid
towards the price should be refunded to purchaser - This
showed that the payment of balance of sale price in terms of
the contract was not postponed nor made conditional upon
the purchaser being satisfied about the title, but that payment
E of the balance price should be made to the vendors as agreed
unconditionally - The sale deed was not required to be
executed within any specific period - The purchaser had to
fulfil her obligation in regard to payment of price and thereafter
vendors were required to perform their reciprocal promise of
F executing the sale deed, whenever required by the purchaser
- The sale deed had to be executed only after payment of
complete sale consideration within the time stipulated.
Agreement of sale - Suit by purchaser for permanent
G injunction to protect possession - Held: As per the terms of
the contract, the purchaser was only entrusted with the suit
schedule properties as a caretaker until possession is given
on receipt of the entire sale consideration - As neither the
entire sale consideration was paid nor possession delivered,
the plaintiff remained merely a caretaker and on cancellation
H
SARADAMANI KANDAPPAN v. S. RAJALAKSHMI & 877
ORS.
of the agreement of sale by the defendants, the plaintiff A
became liable to leave the suit schedule properties as the
possession continued to be with the defendants - Since
appe./lant never had 'possession' she was not entitled to seek
a permanent injunction to protect her possession.
B
Agreement of sale whether amounts to encumbrance -
Held: An 'encumbrance' is a charge or burden created by
transfer of any interest in a property - It is a liability attached
to the property that runs with the land - Mere execution of an
MOU, agreeing to enter into an agreement to sell the property, C
does not amount to encumbering a property - Receiving
advances or amounts in pursuance of an MOU would also not
amount to creating an encumbrance.
Suit: Recovery suit - Claim of plaintiff that she paid
Rs.1,~.0001- to defendant no.4 as commission - Trial court D
·----held that the said amount was not paid as commission but
was paid as consideration for the movables - Said suit
dismissed by trial court - In the High Court, the appellant did
not press for any decree in view of the finding that the amount
paid was part of the consideration for movables - No reason E
to interfere with the dismissal of the suit for recovery.
Legislation: Reasonableness of- Held: Laws, which may
be reasonable and valid when made, can, with passage of
time and consequential change in circumstances, become F
arbitrary and unreasonable - There is an urgent need to
revisit the principle that time is not of the essence in contracts
relating to immovable properties and also explain the current
position of law with regard to contracts relating to immovable
property made after 1975, in view of the changed
circumstances arising from inflation and steep increase in G
prices - Contract Act, 1872.
Specific relief: Suit for specific performance - Held:
Courts, while exercising discretion in suits for specific
performance, should bear in mind that when the parties H
878 SUPREME COURT REPORTS [2011] 8 S.C.R.
A prescribe a time/period, for taking certain steps or for
completion of the transaction, that must have some
significance and, therefore, time/period prescribed cannot be
ignored - Courts will apply greater scrutiny and strictness
when considering whether the purchaser was 'ready and willing'
B to perform his part of the contract - Every suit for specific
performance need not be decreed merely because it is filed
within the period of limitation by ignoring the time-limits
stipulated in the agreement - Courts will also 'frown' upon suits
which are not filed immediately after the breach/refusal - The
c fact that limitation is three years does not mean a purchaser
can wait for 1 or 2 years to file a suit and obtain specific
performance - The three years period is intended to assist
purchasers in special cases, as for example, where the major
part of the consideration has been paid to the vendor and
0 possession has been delivered in part performance, where
equity shifts in favour of the purchaser- Equity- Contract Act,
1872.
Pleadings: Plea of fraud - Held: Whenever a party wants
to put forth a contention of fraud, it has to be specifically
E pleaded and proved - In the instant case, plaint did not allege
any fraud by the defendants - The _contention that the vendors
deliberately or intentionally suppressed any information
regarding the pending encumbrances or the fact that the
original documents were not available and thereby committed
F fraud was neither pleaded nor proved - The appellant did not
allege in the plaint, any fraud on the part of vendors, in regard
to suppression of encumbrances over the property- From the
evidence on record as rightly held by the courts below it was
not possible to make out either any fraud or any suppression
G or failure to disclose facts on the part of the respondents.
Evidence: Defendants 1 to ;3 entered into an agreement
of sale of properties - Entire transaction done on behalf of
the defendants 1 to 3 by defendant No.4 who alone had
H complete knowledge of the entire transaction - In suits
.SARADAMANI KANDAPPAN v. S. RAJALAKSHMI & 879
ORS.
between the plaintiff and defendants, defendant no. 4 gave A
evidence on behalf of all the other defendants ~ Non-
examination of defendants 1 to 3 - Held: When one of the
defendants who was conversant with the facts has given
evidence, it was not necessary for the other defendants to be
examined as witnesses to duplicate the evidence - Where the B
entire transaction has been conducted through a particular
agent or representative, the principal has to examine that
agent to prove the transaction; and that where the principal at
no point of time had personally handled or dealt with or
participated in the transaction and has no personal knowledge c
of the transaction, and where the entire transaction has been
handled by the agent, necessarily the agent alone can give
evidence in regard to the transaction - Therefore, the
evidence of the fourth defendant was sufficient to put forth the
case of the defendants and there was no need to examine the 0
other three defendants who did not have full or complete
knowledge of the transactions.
The respondent nos. 2, 3 and 4 were respectively the
son, daughter and husband of the first respondent. They
owned the suit properties which they agreed to sell to the E
appellant for Rs.3.75 lacs on 17.1.1981. On the date of
agreement, Rs.1 lac was paid as advance to respondents.
As per the agreement, the appellant was to pay Rs.1 lac
on or before 28.2.1981, Rs.1 lac on or before 6.4.1981 and
Rs.75000 on or before 30.5.1981. Clause 6 of agreement F
stated that the payment on due dates was the essence
of the contract and in case of failure on the part of the
appellant, the respondents would cancel the agreement.
On the same day (i.e. 17 .1.1981 ), respondent no.4 in a
letter addressed to the appellant acknowledged the G
receipt of Rs.1.25 lacs paid on various dates as
commission for the said transaction relating to sale of suit
properties, By the said letter, he agreed that in case the
transaction of sale remained unconcluded or got
1
cancelled because of default on the part of the sellers or H
880 SUPREME COURT REPORTS [2011] 8. S.C.R.
A buyer or because of defective title, the entire amount of
Rs.1.25 lacs received by him as commission would be
refunded. In pursuance of the said agreement the
appellant paid further advances of Rs.1,00,000 on
28.2.1981 and of Rs.25,000 on 2.4.1981. The balance of
B 75,000 in regard to the instalment payable on 6.4.1981 and
the last instalment of Rs.75,000 payable on or before
30.5.1981 was not paid by the appellant.
Respondent nos.1 to 3 sent a notice to the appellant
C cancelling the agreement dated 17.1.1981 on the ground
of default in payment of the balance of the sale
consideration in exercise of their right to cancel the
agreement on such default under clause 6 of the
agreement. The appellant sent a reply that time was
never intended to be the essence of the agreement; that
D respondents failed to produce the original documents of
title inspite of repeated demands and, therefore, it was
agreed between the appellant's husband and the fourth
respondent during discussions held in March 1981 in the
presence of witnesses that the original documents would
E be made available as soon as possible and the appellant
would pay the balance only thereafter and that sale would
be completed within a reasonable time of handing over
the documents and, therefore, a further advance of
Rs.25000 was received on 2.4.1981. Thereafter, the
F appellant got a notice published in the newspaper
informing the public about the said sale transaction. One
'G' sent a response notice that the documents relating to
the suit properties were deposited with him and if the
appellant purchased the said lands, she would be doing
G at her own risk. A notice was also sent by the
respondents stating that the claim of the appellant that
she purchased the said land and was in possession
thereof and was cultivating them was false; the survey
numbers mentioned in the notice were erroneous; that
H after the agreement dated 17.1.1981 was cancelled, they
SARADAMANI KANDAPPAN v. S. RAJALAKSHMI & 881
ORS.
had entered into an agreement with a third party which A
fell through because of the public notice, causing loss to
them; and that the appellant was appointed only as a
caretaker of the lands under the agreement dated
17.1.1981 and the said appointment was cancelled and a
new caretaker was appointed. Respondents 1 to 3 called B
upon the appellant to hand over all movables on
19.11.1981 to the new caretaker.
The ~ppellant filed three different suits. First and
second suits were filed against respondent nos.1 to 4 for C
permanent injunction and for specific performance of
contract. The third suit was filed against respondent no.4
for return of Rs.1.25 lacs paid as commission with
interest. The Single Judge of the High Court dismissed
all the suits. A Division Bench of the High Court
dismissed the appeals affirming the judgment of the trial D
court. The Division Bench, however, directed..the
respondents to return Rs.3,50,000 (i.e. Rs.2,25,000 paid
to defendants 1 to 3 and Rs.1,25,000 paid to defendant
No. 4) with interest at 9% per annum for the period during
which the appellant was not acting as caretaker till the E
complete payment was made.
The questions which arose for consideration in the
instant appeals were:
(i) whether the time stipulated for payment of balance F
consideration was the essence of contract and
whether the defendants were justified in cancelling
the agreement, when the time schedule stipulated for
such payment was not adhered to;
G
(ii) whether the parties had agreed upon sequence
of performance, which required payment of balance
consideration by appellant, as stipulated in clause (4)
of the agreement, only after the respondents
H
882 SUPREME COURT REPORTS [2011] 8 S.C.R.
A satisfied the appellant regarding their title to the
lands; ·
(iii) whether the respondents had failed to disclose
the encumbrances over· the properties and thereby
B committed fraud, entitling the appellant for extension
of time stipulated for payment corresponding to the
delay caused by the fraud and consequently the
cancellation of the agreement by notice dated
2.8.1981 was illegal and invalid;
c (iv) whether an adverse inference ought to be drawn
on account of the non-examination of defendants 1
to 3 who were the vendors under the agreement of
sale.
D Dismissing the appeals and disposing of the
contempt petition, the Court
HELD: QUESTION (i)
1.1. Section 55 of the Contract Act 1872 deals with
E the effect of failure to perform at a fixed time, in contracts
in which time is essential. In a contract relating to sale of
immovable property if time is specified for payment of the
sale price but not in regard to the execution of the sale
deed, time will become the essence only with reference
F to payment of sale price but not in regard to execution
of the sale deed. Normally in regard to contracts relating
to sale of immovable properties, time is not considered
to be the essence of the contract unless such an
intention can be gathered either from the express terms
G of the contract or impliedly from the intention of the
parties as expressed by the terms of the contract. The
standard agreements of sale normally provide for
payment of earnest money deposit or an advance at the
time of execution of agreement and the balance of
H consideration payable at the time of execution/registration
SARADAMANI KANDAPPAN v. S. RAJALAKSHMI & 883
ORS.
of the sale deed. In the absence of contract to the A
contrary, the purchaser is bound to tender the balance
consideration only at the time and place of completing the
sale. In this case there was a conscious effort to delink
the terms relating to payment of balance price (clauses
4, 5 and 6) from the term relating to execution of sale B
deed (clause 7) and making the time essence only in
regard to the payment of the balanc.e sale consideration.
There was also a clear indication that while time would
be the essence of the contract in regard to the terms
relating to payment of balance price, time would not be c
the essence of the contract in regard to the execution of
the sale deed. The intention making time essence of the
contract for payment of balance price was clear from the
following: (a) clause 4 required the balance consideration
to be paid in thr.ee instalments; (b) Clause 5 made it clear
0
that if any of the dates of payment was subsequently
declared as a holiday, then the next immediate working
day would be the date of payment. This showed a clear
intention that payment was to be made on the stipulated
dates and even a day's delay was not acceptable unless
the due date was declared to be a holiday; (c) Clause 6 E
specifically stipulated that the payments on due dates
was the essence of the contract and in case of failure on
the part of· the purchaser the vendors would canc~I the
agreement. On the other hand, the terms relating to
performance of sale clearly indicated that time was not F
intended to be the essence, for completion of the sale.
1Clause 3 provided that the execution of sale deed would
! depend upon the second party (purchaser) getting
i satisfied regarding the title to the lands, so also the nil
• encumbrance. The said clause did not say that payment G
. of balance consideration would depend upon the
purchaser getting satisfied regarding title or nil
encumbrances. Clause 7 provided that the sale deed
would be executed at the convenience of the purchaser,
as and when she wanted them to be executed either in H,
884 SUPREME COURT REPORTS [2011] 8 S.C.R.
A her name or in the name of her nominee or nominees.
Clause 12 provided that if the second party (purchaser)
found the ti!le of the properties to be unsatisfactory or
unacceptabJ~. the vendors would be put on notice about
her intention not to conclude the sale and in such an
B event, if the vendors failed to satisfy the purchaser
regarding their title, the vendors shall pay to the
purchaser within three months from that date, all monies
advanced by the purchaser till then. Clause 12 also
provided that the payments of balance sale price in three
c instalments on the specified .due. dates were not
dependent upon the further examination of title or the
satisfaction of the purchaser about the title which
showed that the purchaser on the basis of whatever initial
examination she had taken of the documents, had
unconditionally agreed to pay the amounts in three
0
instalments and if the purchaser was not thereafter
satisfied with the title or found the title unacceptable and
if the vendors failed to satisfy her about their title when
she notified them about her dissatisfaction, the vendors
had to refund all payments made within three months.
E Thus it was categorically made clear in the agreement that
time regarding payment of balance price was the essence
of the contract and such payment was not dependent
upon the purchaser's satisfaction regarding title. Apart
from that, the plaintiff in her evidence admitted that time
F for performance was the essence of the contract. Her
evidence also showed that she apparently did not have
the funds to pay the balance of Rs.75,000 due on 6.4.1981
and Rs.75000/- due on 30.5.1981 as was evident from the
Bank pass book. It was, therefore, possible that being not
G ready to perform the contract in terms of the agreement,
the appellant had invented a modification in the terms of
the agreement. The Single Judge and the Division Bench
recorded a concurrent finding that the time was the'
essence of the contract and that no change was agreed
H
SARADAMANI KANDAPPAN v. S. RAJALAKSHMI & 885
ORS.
In respect of the agreement terms as alleged by the A
appellant. The appellant was unable to place any material
which called for reversal of the said findings. Therefore,
time regarding payment stipulated in clauses (4), (5) and
(6) of the agreement of sale was the essence of the
contract and failure of the appellant to adhere to it, B
justified cancellation of the agreement by the
respondents. [Para 17, 20-22] [912-F-G; 913-A; 915-G-H;
916-A-H; 917-A-H; 918-A-E]
N.Srinivasa v. Kuttukaran Machine Tools Ltd. 2009 (5) c:
SCC 182:2009 (2) SCR 852; Chand Rani v. Kamal Rani
1993 (1) sec 519: 1992 (3) Suppl. scR 798;
Gomathinayagam Pillai v. Pallaniswami Nadar 1967 (1) SCR
227; Govind Prasad Chaturvedi v. Harl Dutt Shastri 1977 (2)
sec 539: 1977 (2) SCR 877 - relied on.
D
1.2. The distinction between contracts relating to
immovable properties and other contracts was not drawn
by section 55 of Contract Act (or any other provisions of
Contract Act or Specific Relief Act, 1963). Courts in India
made the said distinction, by following the English law E
evolved during the nineteenth century. This Court held
that time is not of the essence of the contracts relating
to immovable properties; and that notwithstanding
default in carrying out the contract within the specified
period, specific performance will ordinarily be granted, if F
having regard to the express stipulation of the parties,
nature of the property and surrounding circumstances,
it is not inequitable to grant such relief. The principle that
time is not of the essence of contracts relating to
immovable properties took shape in an era when market G
value of immovable properties were stable and did not
undergo any marked change even over a few years
(followed mechanically, even when value ceased to be
stable). As a consequence, time for performance,
stipulated in the agreement was assumed to be not
H
886 SUPREME COURT REPORTS [2011) 8 S.C.R.
A material, or at all events considered as merely indicating
the reasonable period within which contract should be
performed. The assumption was that grant of specific
performance would not prejudice the vendor-defendant
financially as there would not be much difference in the
B market value of the property even if the contract was
performed after a few months. This principle made sense
during the first half of the twentieth century, when there
was comparatively very little inflation, in India. The third
quarter of the twentieth century saw a very slow but
c steady increase in prices. But a drastic change occurred
from the beginning of the last quarter of the twentieth
century. There has been a. galloping inflation and prices
of immovable properties increased steeply, by leaps and
bounds. Market values of properties are no_ longer stable
0 or steady. Judicial notice is taken of the comparative
purchase power of a rupee in the year 1975 and now, as
also the steep increase in the value of the immovable
properties between then and now. It is no exaggeration
to say that properties in cities, worth a lakh or so in or
E about 1975 to 1980, may cost a crore or more now. The
reality arising from this economic change cannot
continue to be ignored in deciding cases relating to
specific performance. The steep increase in prices is a
circumstance which makes it inequitable to grant the
relief of specific performance where the purchaser does
F not take steps to complete the sale within the agreed
period, and the vendor has not been responsible for any
delay or non-performance. A purchaser can no longer
take shelter under the principle that time is not of
essence in performance of contracts relating to
G immovable property, to cover his delays, laches,
breaches and 'non-readiness'. The precedents from an
era, when high inflation was unknown, holding that time
is not of the essence of the contract in regard to
immovable properties, may no longer apply, not because
H the principle laid down therein is unsound or erroneous,
. SARADAMANI KANDAPPAN v. S. RAJALAKSHMI & 887
ORS.
but the circumstances that existed when the said A
principle was evolved, no longer exist. In these days of
galloping increases in prices of immovable properties, to
hold. that a vendor who took an earnest money of say
about 10% of the sale price and agreed for three months
or four months as the period for performance, did not B
intend that time should be the essence, will be a cruel
joke on him, and will result in injustice. Adding to the
misery is the delay in disposal of cases relating to
specific performance, as suits and appeals therefrom
routinely take two to three decades to attain finality. As a c
result, an owner agreeing to sell a property for Rs.One
lakh and received Rs.Ten Thousand as advance may be
required to execute a sale deed a quarter century later by
receiving the remaining Rs.Ninety Thousand, when the
property value has risen .to a crore of rupees. [Paras 23- .
0
25] [918-F-H; 919-A-H; 920-A-F]
Indira Kaur v. Sheo Lal Kapoor 1988 (2) $CC 188;
Jamshed Khodaram Irani v. Burjorji Dhunjibhai AIR 1915 PC
83 - relied on.
1.3. It is now well settled that laws, which may be E
reasonable and valid when made, can, with passage of
time and consequential change in circumstances,
become arbitrary and unreasonable. There is an urgent
need to revisit the principle that time is not of the essence
in contracts relating to immovable properties and also F
explain the current position of law with regard to
contracts relating to immovable property made after 1975,
in view of the changed circumstances arising from
inflation and steep increase in prices. [Paras 26-27] [920-
G; 923-0-E] G
Rattan Arya v. State of Tamil Nadu (1986) 3 SC 385;
Malpe Vishwanath Acharya v. State of Maharashtra (1998) 2
SCC 1: 1997 (6) Suppl. SCR 717; KS. Vidyanadam and
Others vs. Vairavan (1997) 3 SCC 1: 1997 (1) SCR 993 -
relied on. H
888 SUPREME COURT REPORTS (2011] 8 S.C.R.
A 1.4. Courts, while exercising discretion in suits for
specific performance, should bear in mind that when the
parties prescribe a time/period, for taking certain steps or
for completion of the transaction, that must have some
significance and, therefore, time/period prescribed
B cannot be ignored. Courts will apply greater scrutiny and
strictness when considering whether the purchaser was
'ready and willing' to perform his part of the contract.
Every suit for specific performance need not be decreed
merely because it is filed within the period of limitation
c by ignoring the time-limits stipulated in the agreement.
Courts will also 'frown' upon suits which are not filed
immediately after the breach/refusal. The fact that
limitation is three years does not mean a purchaser can
wait for 1 or 2 years to file a suit and obtain specific
0 performance. The three year period is intended to assist
purchasers in special cases, as for example, where the
major part of the consideration has been paid to the
vendor and possession has been delivered in part
performance, where equity shifts in favour of the
E purchaser. [Para 28) [923-F-H; 924-A-C)
QUESTION (ii)
2.1 Section 54 of Contract Act provides that when a
contract consists of reciprocal promises, such that one
F of them cannot be performed, or that its performance
cannot be claimed till the other has been performed, and
the promisor of the promise last mentioned fails to
perform it, such promisor cannot claim the performance
of the reciprocal promise, and must make compensation
G to the other party to the contract for any loss which such
other party may sustain by the non-performance of the
contract. There was no such express fixation of the order
in which the reciprocal promises were to be performed.
Clause (4) of the agreement did not say that the balance
H of the sale price shall be paid only after the vendors
SARADAMANI KANDAPPAN v. S. RAJALAKSHMI & 889
ORS.
satisfied the purchaser in regard to title or that the A
purchaser shall pay the balance of sale price only after·
she satisfies herself regarding title of the vendors to the
lands. Nor did clause (3) contain a provision, after stating
that execution of the sale deed shall depend upon the
purchaser getting satisfied regarding title to the land as B
also the nil encumbrance, that the payment of sale
con_sideration will also depend upon such satisfaction
regarding title and nil encumbrance. There is an
unconditional promise to pay the balance consideration
in three instalments and the said promise by the c
purchaser is not dependent upon performance of any
obligation by vendors. The contract specifically stated
that having paid the balance price, if the purchaser is not
satisfied about the title and on being intimated about the
same if the vendors fail to satisfy the purchaser about
0
their title, all amounts paid towards the price should be
refunded to purchaser. This clearly demonstrated that the
payment of balance of sale price in terms of the contract
was not postponed nor made conditional upon the
purchaser being satisfied about the title, but that payment E
of the balance price should be' made to the vendors as
agreed unconditionally. In fact if the intention of the
parties was that only after the vendors satisfying the
purchaser about their title, balance consideration had to
be paid, clause (12) would be redundant as the situation
contemplated therein would not arise. Further, if that was F
the intention, the purchaser would not have paid
Rs.1,00,000 as further advance on 28.1.1981 and
Rs.25,000 on 2.4.1981. Therefore, the contract did not
expressly (or even impliedly) specify the order of
performance of reciprocal promises, as alleged. by the G
appellant. The terms of the contract made it clear that (
payment of sale price did not depend on execution of the
sale deed. The sale deed was not required to be executed
within any specific period. The purchaser had to fulfil her
obligation in regard to pa1"\•nt of price as provided in H
890 SUPREME COURT REPORTS [2011] 8 S.C.R.
A clause 4 and thereafter vendors were required to perform .
their reciprocal promise of executing the sale deed,
whenever required by the purchaser, either in her name
or in the names of her nominees. The sale deed had to
be executed only after payment of complete sale
B consideration within the time stipulated. In these
circumstances, Section 52 of the Contract Act which talks
about the order of performance of reciprocal promises did
not help the appellant but actually supported the
vendors-respondents. [Paras 34, 36, 37) [927-F-G; 928-F-
C H; 929-A-H; 930-A-B]
QUESTION (iii)
3.1. Whenever a party wants to put forth a contention
of fraud, it has to be specifically pleaded and proved. The
D plaint did not allege any fraud by the defendants.
Evidence showed that before the agreement was entered,
the purchaser's husband and legal advisor had examined
the xerox copies of the title de'9ds and satisfied
themselves about the title of the vendors. The appellant
E in her evidence clearly admitted that xerox copies of the
title deeds were shown to her husband. The agreement
of sale provided that the sale would depend upon
purchaser getting satisfied about the title of the vendors.
The manner in which the agreement was drafted by the
F purchaser showed that the purchaser and/or her
husband were made aware of the encumbrances. Firstly
there was no provision in the agreement that the lands
were not subject to any encumbrances. Secondly, the
provision for payment of sale price within a specified time
G did not link the payment to execution of a sale deed.
Thirdly the contract provided that on execution of the
agreement the purchaser will take possession as
caretaker of the suit schedule properties and that on
complete payment of the sale price on 30.5.1981, she will
be entitled to possession in part performance and that the
H execution of the sale deed will be whenever required by
SARADAMANI KANDAPPAN v. S. RAJALAKSHMI & 891
ORS.
the purchaser, totally disconnected with either payment A
of price or delivery of possession. All. these provisions
demonstrated that the vendors were in urgent need of
money, that the purchaser was made aware of the
encumbrances, that on the purchaser paying the sale
price, the vendors had to clear the encumbrances and B
thereafter convey the property, free from encumbrances.
The contention that the vendors deliberately or
intentionally suppressed any information regarding the
pending encumbrances or the fact that the original
documents were not available and thereby committed c
fraud was neither pleaded nor proved. The appellant did
not allege in the plaint, any fraud on the part of vendors,
in regard to suppression of encumbrances over the
property. The entire plaint tried to justify that the plaintiff
did not commit breach of contract by not paying the 0
balance instalments on 6.4.1981 and 30.5.1981, except for
a stray sentence that the plaintiff will be entitled to
proceed against the third defendants 1 to 3 for damages,
for not performing their part of the contract and not
disclosing several prior encumbrances over the property. E
In the written statement, the defendants submitted that
the encumbrance certificate upto the year 1980 had been
given to appellant's husband, which showed the
encumbrance in favour of State Bank of Mysore, that
plaintiff and her husband both knew before entering into
the agreement of sale that original documents were with F
the said bank and that therefore the allegation that the
encumbrance was not disclosed was false. It was also
disclosed in the written statement, that a document was
surreptitiously detained by one 'G'. It was stated that the
defendants intended to utilise the last two instalments for G
securing back the original documents by discharging the
loans. It was not disputed that the amount due to 'G' was
around Rs.40,000 and the amount due to State Bank of
Mysore was around Rs.39,000 and any of the last two
instalments would have been sufficient to discharge the H
892 SUPREME COURT REPORTS (2011) 8 S.C.R.
A said liabilities. The appellant having committed default in
paying the last two instalments which would have
enabled discharging the debts, cannot find fault with the
vendors by contending that they did not secure the
original title deeds. If the mortgage/encumbrance was
B made known to appellant's husband and if it had been
understood that the same would be cleared from the last
of the instalments paid by the appellant, the absence of
original title deeds could not be made a ground for not
paying the last two instalments. The claim of the
c appellant that the vendors should have cleared all the
encumbrances before payment of the last two
instalments is not borne out by any evidence. Even in law,
the obligation of the vendors is to convey an
encumbrance free, good and marketable title subject to
0 contract to the contrary. The stage of execution of sale
deed had not arrived as the appellants did not pay the
amount due in terms of the contract. The appellant
contended that the debt due to the Bank of India had
been fraudulently suppressed by the vendors. There was
E no reference to such a mortgage either in the plaint or the
evidence of the plaintiff. No one was examined from the
bank nor any document produced to prove the existence
of such mortgage. Appellant attempted to produce some
documents relating to the said mortgage with an
application under Order 41 Rule 27 CPC which was 1
F rejected by the High Court. What is significant and
relevant is the fact that as on the date of the agreement
of sale (17.1.1981) the first defendant was not a debtor of
Bank of India but on the other hand the bank itself was a
debtor to the extent of more than Rs.33,00,000 with
G interest. Therefore the contention of the appellant that an
encumbrance in favour of Bank of India was in existence
and that was not disclosed and the said liability was not
disclosed, was wholly untenable. From the evidence on
record as rightly held by the courts below it was not
H possible to make out either any fraud or any suppression
SARADAMANI KANDAPPAN v. S. RAJALAKSHMI & 893
ORS.
or failure to disclose facts on the part of the respondents. A
[Para 40, 42] [932-D-H; 933-A-B; 934-D-H; 935-A-B]
Bank of India v. Vijay Transport 2000 (8) SCC 512: 2000
(3) Suppl. SCR 685 - relied on.
3.2. The failure of the appellant to pay the balance of 8
Rs.75,000 on 6.4.1981 and failure to pay the last
ins.talment of Rs.75,000 on or before 30.5.1981 clearly
amounted to breach since time for such payment was the
essence of the contract, the respondents were justified
in determining the agreement of sale. Therefore rejection C
of the prayer for specific performance is upheld. The
appellant was not put in possession of the suit properties
in part-performance of the agreement of sale. Under
clause 15 of the agreement of sale, she was only
entrusted with the suit schedule properties as a caretaker D
until possession is given on receipt of the entire sale
consideration. As neither the entire sale consideration
was paid nor possession delivered, the plaintiff remained
merely a caretaker and on cancellation of the agreement
of sale by the respondents, the plaintiff became liable to E
leave the suit schedule properties as the possession
continued to be with the defendants. As appellant never
had 'possession' she was not entitled to seek a
permanent injunction to protect her possession. There
was also no reason to interfere with the dismissal of the F
suit for recovery of Rs.1,25,000 from the fourth
respondent. The trial court held that the said amount was
not paid as commission but was paid as consideration
for the movables. The said suit was dismissed by the trial
court. In the High Court, the appellant did not press for G
any decree against the fourth respondent in view of the
finding that the amount paid was part of the
consideration for movables. Therefore the dismissal of
suit for Rs.1,25,000 is also upheld. [Paras 43 to 45] [935-
C-H; 936-A-C}
H
894 SUPREME COURT REPORTS [2011) 8 S.C.R.
A 3.3. The Division Bench to do broad justice and work
out the equities, took note of the offer of the defendants
in their written statement to refund the amount paid as
advance and directed the defendants to refund the~sum
of Rs.2,25,000 paid to defendants 1 to 3 under the
B agreement and Rs.1,25,000 paid to the fourth respondent,
in all, Rs.3,50,000 with interest at 9% per annum for the
period when the appellant was not acting as a care taker
till date of payment. There is no reason to interfere with
the direction to refund Rs.3,50,000 with interest. However,
c a modification is required to be made as to the rate of
interest and the period for which interest is payable. The
High Court had awarded interest on the sum of
Rs.3,50,000 at 9% per annum for the period in which the
appellant had not acted as caretaker till the date of
payment. The agreement of sale did not provide for
0
forfeiture of the amounts paid as advance under any
circumstances and on the other hand, specifically
provided that if the plaintiff was not satisfied with the title
of the defendants, the amounts received as advance
E would be refunded. In fact, the respondents, in their
written statement, offered to refund the amount.
Therefore, the High Court ought to have granted interest
from the date of cancellation of the agreement (2.8.1981)
to the date of payment. The High Court was not justified
in restricting the interest to only for the period during
F which the appellant had not acted as caretaker. The
liability to refund the advance has nothing to do with the
appointment of the plaintiff as caretaker or the obligation
of the plaintiff to return the property on cancellation of the
agreement. Having regard to the facts and
G circumstances. The rate of interest shall be increased to
12% per annum instead of 9% per annum. [Para 46) [936-
D-H; 937-A-B]
QUESTION (iv)
H 4.1. There were four defendants in the suit.
SARADAMANI KANDAPPAN v. S. RAJALAKSHMI & 895
ORS.
Defendants-respondents 1, 2 and 3, who were the A ·
owners of the lands were respectively the wife, son and
daughter of the fourth defendant. It was an admitted
position that the entire transaction was done on behalf
of the defendants 1,2 and 3 by defendant No.4 who alone
had complete knowledge of the entire transaction. Fourth B
defendant had given evidence on behalf of all the other
defendants. When one of the defendants who was
conversant with the facts has given evidence, it was not
necessary for the other defendants to be examined as
witnesses to duplicate the evidence. Where the entire c
transaction has been conducted through a particular
agent or representative, the principal has to examine that
agent to prove the transaction; and that where the
principal at no point of time had personally handled or
dealt with or participated in the transaction and has no 0
personal knowledge of the transaction, and where the
entire transaction has been handled by the agent,
necessarily the agent alone can give evidence in regard
to the transaction. Where all the affairs of a party are
completely managed, transacted and looked after by an · E
attorney (who may happen to be a close family member),
it may be possible to accept the evidence of such
attorney even with reference to bona tides or 'readiness
and willingness'. Therefore, the evidence of the fourth
defendant (examined as DW2) was sufficient to put forth
the case of the defendants and there was no need to F
examine the other ttiree defendants who did not have full
or complete knowledge of the transaction's. In the
circumstances, there was no merit in the contention that
the suits ought to have been decreed, as defendants 1,
2 and 3 did not step into the witness box. [Para 47] [937- G
D-H; 938-A-D]
Vidhyadhar v. Mankikrao & Anr. (1999) 3 SCC 573: 1999
(1) SCR 1168; Balasaheb Dayandeo Naik (Dead) through
LRs. and Ors. v. Appasaheb Dattatraya Pawar (2008) 4 SCC H
896 SUPREME COURT REPORTS [2011] 8 S.C.R.
A 464: 2008 (1) SCR 1169; Man Kaur (dead) by LRS. v. Hartar
Singh Sangha (2010) 10 SCC 512: 2010 (12) SCR 515 -
relied on.
4.2. The appellant alleged that one 'J' filed three suits
8 against respondents 1 to 3 in the years 2007 and 2008
for injunctions and other reliefs, alleging that he had
entered into three Memorandum of Understanding (MOU
for short) dated 5.7.2002 with them, under which they had
agreed to enter into agreements of sale in regard to the
C suit schedule properties; that he had paid advances to
each of them on 5.7.2002, and that he had further paid to
respondents 1 to 3 in the years 2004 and 2005, a sum of
Rs.1,50,00,000. The appellants contended that the alleged
act of receiving Rs.1,50,00,000 in the years 2004 and 2005
by respondents 1 to 3 from 'J' amounted to creating an
D encumbrance over the suit property and thereby
respondents 1 to 3 had committed contempt of the order
dated 11.11.2002 of this Court. No material was produced
by the appellant to establish the said allegation. An
'encumbrance' is a charge or burden created by transfer
E of any interest in a property. It is a liability attached to the
property that runs with the land. Mere execution of an
MOU, agreeing to enter into an agreement to sell the
property, does not amount to encumbering a property.
Receiving advances or amounts in pursuance of an MOU
F would not also amount to creating an encumbrance. The
MOUs said to have been executed by respondents 1 to
3 provided that agreements of sale with mutually agreed
terms and conditions will be entered between the parties
after clearance of all pending or future litigations.
G Therefore the MOUs are not even agreements of sale. In
these circumstances, it is not possible to hold that the
respondents have created any encumbrances or violated
the order dated 11.11.2002. Hence, these contempt
petitions are liable to be rejected. [Paras 49, 50] [938-H;
H 939-A-H; 940-A]
SARADAMANI KANDAPPAN v. S. RAJALAKSHMI & 897
ORS.
National Textile Corporation vs. State of Maharashtra AIR A
1977 SC 1566: 1977 (3) SCR 525 and State of H.P. vs.
Tarsem Singh 2001 (8) SCC 104: 2001 (2) Suppl. SCR 545
- relied on.
5. The fact that defendants 1 to 3 received B
Rs.2,25,000 out of the sale price of Rs.3,75,000 was not
in dispute. Similarly, there was no dispute that the fourth
defendant had received a sum of Rs.1,25,000 from the
plaintiff and agreed to refund the said amount if the sale
remained unconcluded or if the agreement of sale was
cancelled. The Division Bench of the High Court found C
fit to award the said amount, after affirming the decision
rejecting the prayer for specific performance, in view of
the offer made by defendants 1 to 3 in their written
statement to repay the amounts received towards the
sale consideration. The time stipulated for payment of the D
balance price by the plaintiff was the essence of the
contract and when the same was not paid, defendants 1
to 3 were justified in cancelling the sale agreement. But,
there was no provision in the agreement for forfeiture of
the amounts already paid, even in the event of breach by E
the purchaser. On the other hand, it provided that if the
vendors did not satisfy the purchaser in regard to their
title, the amounts received would be refunded. The
consistent case of the plaintiff.was that the defendants 1
to 3 failed to satisfy her about their title. Further, F
defendants 1 to 3 in their written statement filed in the
specific performance suit had agreed to refund all
amounts received by them from the plaintiff. It is true that
the offer was conditional upon the plaintiff not creating
any hindrance in the way of the defendants by filing false, G
frivolous and mischievous suits. Though the decision of
the Single Judge and the Division Bench that the plaintiff
is not entitled to the relief of specific performance is
affirmed, it cannot be said that the plaintiff had filed false,
frivolous and mischievous suits. In view of that, in terms H
898 SUPREME COURT REPORTS (2011) 8 S.C.R.
A of the agreement and in terms of Its offer, the plaintiff was
entitled to recover the amounts paid by her. A sum of
Rs.2,25,000 was paid under the agreement of sale to
defendants 1 to 3. The finding of the Single Judge that
the sum of Rs.1,25,000 paid by the plaintiff to the fourth
B defendant was also the consideration for the movables
in addition to the consideration of Rs.3,75,000 under the
agreement of sale, was not been challenged by the
defendants. In the circumstances, the Division Bench
was justified in granting a decree in favour of the plaintiff
c for Rs.3,50,000 with interest. [Para 53, 54] [941-B-H; 942-
A-B]
Case Law Reference:
2009 (2) SCR 852 relied on Para 18
D 1992 (3) Suppl. SCR 79~ relied on Para 19
1967 (1) SCR 227 relied on . Para 19
1977 (2) SCR 877 relied on Para 19
E 1988 (2) sec 188 relied on Para 23
AIR 1915 PC 83 relied on Para 23
(1986) 3 SC 385 relied on Para 26.1
1997 (6) Suppl. SCR 717 relied on Para 26.2
F
1997 (1) SCR 993 relied on Para 27, 28
1999 (1) SCR 1168 relied on Para 42
2008 (1) SCR 1169 relied on Para 47
G
2010 (12) SCR 515 relied on Para 47
1977 (3) SCR 525 relied on Para 50
2001 (2) Suppl. SCR 545 relied on Para 50
'H 2000 (3) Suppl. SCR 685 relied on Para 50
SARADAMANI KANDAPPAN v. S. RAJALAKSHMI & 899
ORS.
CIVIL APPELLATE JURISDICTION : Civil Appeal No. A
7254-7256 of 2002 ..
From the Judgment & Order dated 19.06.2002 of the High
Court of Judicature at Madras in O.S.A. Nos. 12 of 1992, 32
of 1995 and 148 of 1999.
B
WITH
Contempt. Pet. (C) No. 28-30 of 2009 and
Civil Appeal Nos. 4641-4642 of 2003.
Nalini Chidambram, Abdul Hamid, Bhargava V. Desai,
c
Rahul Gupta, Nikhil Sharma for the Appellant.
L. Nageswara Rao, T.L.Y. Iyer, K. Ramammurthy, N.V.
Nagasubramaniam, V. Ramasubramaniam, Vikas, David Rao,
Khwairakpam Nobin Singh for the Respondents. O
The Judgment of the Court was delivered by
R. V. RAVEENDRAN J.1. These appeals by special leave
(CA Nos.7254 to 7256 of 2002) are directed against the
common judgment and decree dated 19.6.2002 passed by the E
Madras High Court in O.S.A. Nos.12of1992, 32of1995 and
148 of 1999 filed by the appellant herein against the common
judgment dated 29.11.1991 passed by a learned Single Judge
of that court in Civil Suit Nos. 95/1984, 302/1989 and 170/1984
and filed by the respondents herein. The appellants and F
respondents herein who were the plaintiffs and defendants
respectively in the three suits, will be referred, for the purpose
of convenience, by their ranks in the suit also.
2. Respondent Nos.2, 3 and 4 are respectively the son,
· daughter and husband of first respondent. The first respondent G
is the owner of Survey Nos. 13, 14 and 15, the second
respondent is the owner of lands bearing Survey Nos. 16 and
18 and the third respondent is the owner of Survey Nos. 19 and
20, all situated in Chettiaragaram Village, Saidapet Taluk,
H
900 SUPREME COURT REPORTS [2011] 8 S.C.R.
A Chingleput District in all measuring 24 acres 95 cents. The said
lands along with the trees, wells, pump-houses, farm godowns,
perimeter fence and some furniture, are together referred to as
the 'schedule properties'. Respondents 1 to 4 entered into
agreement of sale dated 17.1.1~81 with the appellant herein
B for sale of the schedule properties, at a price of Rs.15,000 per
acre (in all Rs.3,74,250 rounded off to Rs.3,75,000). On the
date of the agreement, Rs.1,00,000 was paid as advance to
respondents, which was duly acknowledged in the agreement.
Clauses 3, 4, 5, 6, 7, 12 and 15 of the agreement which are
C relevant for our purposes are extracted below :-
"3. The execution of the sale deeds shall depend upon the
party of the second part getting satisfied regarding the title
to the land, so also the nil encumbrance.
0 4. The mode of payment of the balance of Rs.2,75,000/-
(Rupees Two lakhs and seventy five thousand only) shall
be as under:
(a) Rs.1,00,000/- (one lakh) on or before 28.2.1981
E (b) Rs.1,00,000/- (one lakh) on or before 6.4.1981
(c) Rs.75,000/- (seventy five thousand) on or before
30.5.1981
5. If however any of the above mentioned dates are
F subsequently declared as holidays then the next immediate
working day shall be the day of the payment.
6. The payments on due dates is the essence of this
contract and in case of failure on the part of the party of
the second part, the party of the first part shall cancel this
G
agreement.
7. The sale deed shall be executed at the convenience of
the party of the second part as and when she wants them
to be executed either in her name or in the name of her
H nominee or nominees.
SARADAMANI KANDAPPAN v. S. RAJALAKSHMI & 901
ORS. [R.V. RAVEENDRAN, J.]
12. If the party of the second part finds the titles of the A
properties herein above mentioned to be unsatisfactory or
unacceptable, the party of the first part shall be put on
notice revealing her intention not to conclude the sale and
in such event if the party of the first part, fails to satisfy the
party of the second part regarding the title the party of the B
first part shall pay to the party of the second part within
three months the date there of all the monies advanced by
the party of the second part till then.
15. The party of the first part has a caretaker at present. C
From the day of this agreement the party of the second
part shall act as a caretaker for the entire properties and
be in trust of all the properties till the party of the first part
given the possession of the entire properties to the party
of the second part on payment of the sale amount i.e. after
the entire sale amount is paid. D
(emphasis supplied)
3. On "the same day (17.1.1981) the fourth respondent, in
a letter addressed to the appellant, acknowledged the receipt E
of Rs.1,25,000 paid on various dates as commission for the
said transaction relating to sale of the said 24.95 acres of land.
By the said letter, he agreed that in case the transaction of sale
remained unconcluded or got cancelled because of the default
on the part of the sellers or buyers under the agreement dated
17.1.1981 or because of defective title, the entire amount of F
Rs.1,25,000 received by him as commission would be
refunded within three months thereof.
4. In pursuance of the said agreement the appellant paid
further advances of Rs.1,00,000 on 28.2.1981 and of G
Rs.25,000 on 2.4.1981. The balance of 75,000 in regard to the
instalment payable on 6.4.1981 and the last instalment of
Rs.75,000 payable on or before 30.5.1981 was not paid by the
appellant.
H
902 SUPREME COURT REPORTS [2011) 8 S.C.R.
A 5. Respondents 1 to 3 caused a notice dated 2.8.1981 to
be issued through their counsel to appellant, cancelling the
agreement dated 17.1.1981, on the ground of default in paying
the balance of the sale cllnsideration, in exercise of their right
to cancel the agreement on such default, under clause 6 of the
B agreement. The relevant portion of the cancellation notice is
extracted below:
"My clients state that even at the time of entering into the
said agreement of sale, you looked into the documents of
title and satisfied yourself about the title of my clients to
c the said property. My clients were always ready and wiling
to conclude the sale and expected you to pay the balance
of sale consideration of Rs.2,75,000/- in accordance with
clause 4 of the said agreement. Now that you have
committed defaults in the payment of the balance of
D consideration. Not withstanding the fact that you have not
even sent any communication whatsoever to my clients as
to whether you were ready and willing to pay the balance
of consideration under the said agreement, my clients
waited for a long time and in the circumstances my clients
E have no other alternative except to invoke clause 6 of the
said agreement. Accordingly, my clients hereby cancel the
said agreement dated 17th January 1981 entered into
between yourself and my clients in view of your failure to
have paid the balance of sale consideration according to
F clause 4 of the said agreement, as the payment of the
instalment on due dates was agreed to be the essence of
the contract.
Please take notice that the said agreement dated
17 .1.1981 has been cancelled and my clients will be
G refunding the sum of Rs. 2,25,000/- only so far received
· by them as aforesaid on their concluding the sale with any
third party and ascertaining the deficit, if any, in the sale
price for deducting the same from the amounts refundable
to you in receipt of which you may expect a communication
H from my clients on their concluding the sale with third party".
SARADAMANI KANDAPPAN v. S. RAJALAKSHMI & 903
ORS. [R.V. RAVEENDRAN, J.]
6. The appellant sent a reply dated 7.8.1981 through A ·
counsel contending that time was never intended to be the
essence of the agreement though it was formally mentioned in
the agreement that time was of the essence; that respondents
had failed to produce the original documents of title in spite of
repeated demands and therefore it was agreed between the B
appellant's husband and the fourth respondent during
discussions held in March 1981 in the presence of witnesses,
that the original documents would be made available as soon
as possible and the appellant should pay the balance only
thereafter, and that sale should be completed within a c
reasonable time of handing over the documents; and that as a
token of such understanding, a further advance of Rs.25,000
was received on 2.4.1981. The appellant also denied the claim
of the respondents that the appellant had got examined the
documents of title and satisfied herself about that title at the
0
time of entering into. the agreement of sale. The appellant
asserted that there was no default on her part and contended
as follows :-
"The allegation that your client was always ready and willing
to conclude the sale and expected my client to pay the E
balance of the sale consideration of Rs. 2. 75 lakhs in
accordance with clause 4 of the said agreement etc. is not
· correct. The very attitude your client is not giving the
documents of title for scrutiny from January 1981 for the
past 6 months will prove the hollowness of the claim. The F
further allegation that my client has committed default in
payment etc. is also not true, because my client has
already paid Rs. 2,25,000/-and on 2.4.1981 when the sum
of Rs. 25,000/- was paid it was specifically understood that
the balance of money will be paid and the sale will be G
completed within a reasonable time as soon as the·
documents of title were handed over to her. Therefore, the
question of default in payment of the instalment does riot
arise. Moreover, it is very unreasonable on the part of your
H
904 SUPREME COURT REPORTS (2011) 8 S.C.R.
A client to allege that default has been committed when the
truth is otherwise.
My client is ready and willing to pay the balance of sale
consideration and have the sale completed provided the
B documents are handed over to her immediately for scrutiny
and approval. Once again in the circumstances set out
above, there is no default on the part of my client and she
is always ready and willing to perform her part of the
agreement provided your client hands over the documents
for scrutiny and the title is found good to the satisfaction
c of my client's legal advisers.
My client therefore stated that the purported cancellation
. of. the agreement by the said notice is not legal and valid
and your client is called upon to perform her part of the
D obligation, viz., the hancling over of the original documents
forthwith and without any undue delay, so that the
transaction may be completed~ I hope that your client will
see the reasonableness in the offer and will not precipitate ·
the matter any further. My client expects an early reply in
E this regard."
7. This brought forth a rejoinder dated 26.8.1981 from
respondents 1 to 3 through their counsel. They denied the claim
of the appellant that there was a variation in the term regarding
F payment of balance consideration in specified instalments.
They also denied that such a variation was agreed at a meeting
held in March 1981. They reiterated that the time was the
essence of the contract and that the agreement was executed
only after the appellant had satisfied herself about their title and
the respondent's husband had in fact taken true copies of all
G the documents together with the encumbrance certificate upto
1980, and in those circumstances, the question of appellant
again seeking any document of title did not arise. They
contended that they were not bound to deliver the original
documents before payment of the entire price. It was pointed
H out that payment of instalments relating to sale consideration
SARADAMANI KANDAPPAN v. S. RAJALAKSHMI & 905
ORS~ [R.V. RAVEENDRAN, J.] ·
stipulated in the agreement did not depend upon the appellant A
satisfying herself about the title after scrutinising the documents
· of title and that the appellant had unconditionally agreed to pay
the entire consideration on the due dates mentioned in clause
(4) of the agreement. It was further pointed out that as appellant
was already in possession of xerox copies of the documents B
of title, if she wanted inspection of the originals, she could have
addressed a letter seeking inspection.
8. This brought forth a second reply dated 4.9.1981 from
the appellant, reiterating the averments in the reply notice dated
7.8.1981. Thereafter the appellant got a public notice published C
in the newspaper 'Hindu' dated 11.11.1981 through her
counsel, informing the public that she had purchased the
schedule properties (as also Sy. Nos.20/1, 21 and 24) from
.. respondents 1 to 3 through the fourth respondent and that she
was in possession thereof and was cultivating them. The notice D
further stated that pending completion of documentation, she
had leamtthat respondents were trying to resell the properties
and issued a warning that if any third party enters into any
agreement with the owners, they will be doing so at their own
risk, and the same will not bind her. This public notice brought E
forth two responses. The first was a notice dated 14.11.1981
from one Gulecha stating that the documents relating to Sy. Nos.
16 and 18 were deposited with him by the second respondent
as security for a loan taken from him and that if appellant
purchased the said lands, she will be doing so at her risk. The F
second was a notice dated 14.11.1981 from respondent Nos.
1 to 3 through their counsel stating that the claim of the appellant
that she had purchased the lands bearing Nos.8, 10, 12, 13,
14, 15, 16, 17, 18, 19, 20, 20/1, 21 and 24 and was in
possession thereof was false; the survey numbers mentioned G
were erroneous; that after the agreement dated 17.1.1981 was
cancelled, they had entered into an agreement with a third party
which fell through because of the public notice, causing loss to
· them; that the appellant had been appointed orily as a caretaker
of the lands under the agreement dated 17.1.1981 and the said H
906 SUPREME COURT REPORTS [2011) 8 S.C.R.
A appointment was cancelled and a new caretaker had been
appointed. Respondents 1 to 3 called upon the appellant to
hand over all movables on 19.11.1981 to the new cMetaker.
9. In this factual background the appellant filed the following
8 three suits:-
{i) O.S. No. 1709/1981 on the file of the District Munsif,
Poonamallee against respondents 1 to 4 for a permanent
injunction restraining the respondents, their men and
agents from in any way interfering with her peaceful
c possession and enjoyment of the suit properties. {This suit
was subsequently transferred to Madras High Court and
renumbered as C.S. No.302 of 1989).
{ii) C.S. No. 95/1984 on the file of Madras High Court, filed
D on 19.6.1982, against respondents 1 to 4 seeking a .
decree for specific performance of the agreement of sale
dated 17.1.1981 and a direction to respondents 1 to 3 to
execute a sale deed after receivir. g the balance.
{iii) C.S. No. 170 of 1984 on the file of the Madras High
E Court, filed on 12.1.1984 against the fourth respondent for
return of Rs.1,25,000/- paid as commission along with the
interest at market rate from 17.1.1981 to date of payment.
10. The first two suits were resisted by the defendants
F contending that time was of the essence of the term regarding
payment of sale price and that the agreement was cancelled
as a consequence of default committed by appellant in paying
the balance sale price in terms of the agreement. It was alleged
that appellant's husband knew even before the agreement was
G signed that the original documents were with State Bank of
Mysore and Gulecha and that the release of the documents
could be obtained only on payment of amounts due and that
could have been done only if the appellant had paid the
instalments in terms of the agreement.
H
SARADAMANI KANDAPPAN v. S. RAJALAKSHMI & 907
ORS. [R.V. RAVEENDRAN, J.)
11. The four respondents contested the third suit {C.S. A
No.170 of 1984) filed against him by denying that he had
received a commission of Rs.1.25 lakhs and contending that
it was received as security for due performance of the contract
in terms of the agreement dated 17.1.1981.
B
12. The following issues were framed in the injunction suit:
{i) Whether the plaintiff is entitled to the permanent
injunction as prayed for against the defendants?
{ii) To what reliefs, the plaintiff is entitled to? c
The following issues were framed in the specific
performance suit :
(1) Whether the plaintiff has committed breach of the
contract by way of default in payment and thus was D
lacking in readiness and willingness to perform his
part of the contract?
(2) Is the time essence of the contract?
(3) If so, whether the termination of the contract by the E
defendant is valid?
(4) Is not the plaintiff entitled to specific performance?
(5) To what relief is the parties entitled? F
,
Addi. Issue (1) :Whether the fourth defendant is a
necessary and proper party to the suit?
Addi. Issue (2) :Whether by reason of filing of C.S. No.
170 of 1984, is the plaintiff entitled to specific G
performance?
In the suit for refund of Rs.1,25,000/-, the following issues
were framed:
H
908 SUPREME COURT REPORTS [2011] 8 S.C.R.
A (1) Whether the payment of Rs. 1,25,000/- made by
the plaintiff to the defendant on 17.1.1981 was
towards the commission charges as per the letter
given by the defendant or towards part of
consideration for the sale in question?
B
(2) Whether the plaintiff is entitled to return of the said
amount of Rs.1,25,000/-.
(3) To what other relief, if any, the plaintiff is entitled?
c 13. Common evidence was recorded in the three suits. On
behalf of the plaintiff, three witnesses were examined, that is
plaintiff as PW1 and one Babu as PW-2 and one Balaraman
as PW-3. Ex P-1 to P-20 were marked on behalf of the plaintiff.
On behalf of the defendants, two witnesses were examined,
D that is one Rajendran as DW·1 and fourth defendant as DW-
2. Ex.D-1 to D-6 were marked on behalf of the defendants.· After
considering the oral and documentary evidence, a learned
Single Judge of the High Court, by his common judgment dated
29.11.1991, dismissed all the three suits.
E . 14. Aggrieved by the said judgment, the appellant filed
three original side appeals. A Division Bench of the Madras
High Court dismissed the said appeals by common judgment
dated 19.6.2002, affirming the judgment of the trial court. The
Division Bench however directed the respondents to repay
F Rs.3,50,000 (i.e. Rs.2,25,000 paid to defendants 1 to 3 and
Rs.1,25,000 paid to defendant No. 4) with interest at 9% per
annum for the period during which the appellant was not acting
as caretaker till the complete payment was made. While
disposing of ,the said three appeals, the Division Bench also
G dismissed three applications. The first (CMP No.2888/1996)
was an application filed for appointment of an Advocate
Commissioner to note the existing condition and physical
features of the suit property. The second (CMP.No.17401/1997)
was an application filed by the appellant's son to implead him
H as a party alleging that the substantial part of the amounts paid
SARADAMANI KANDAPPAN v. S. RAJALAKSHMI & 909
ORS. [R.V. RAVEENDRAN, J.]
to defendant came from him. The third (CMP No.7471/1002) A
was an application by the appellant to receive by way of
additional evidence, a judgment rendered by this Court in suo
moto contempt proceedings, as also a letter from the
appellant's counsel to the Bank of India, Mylapore Branch and
a reply thereto. B
15. The learned Single Judge and the Division Bench,
after exhaustive consideration of the evidence, have recorded
the following findings of fact :
(a} Respondents 1 to 3 entered into an agreement dated C
17 .1.1981 agreeing to sell 24 acres 95 cents of land to
the plaintiff for a consideration of Rs.3,75,000/- and
received in all, Rs.2,25,000 as advance.
(b) Plaintiff had paid an additional consideration of o
Rs.1,25,000 for the movables and taken a letter from the
fourth respondent describing it as 'commission', by way
. of security, with the understanding that if the sale did not
take place, the amount should be refunded.
(c) The time for payment of the balance sale price E
stipulated in Clause (4) of the agreement of sale was the
essence of the contract.
(d} Plaintiff's claim that in March, 1981, clause (4)
regarding payment schedule was modified by oral F
agreement under which it was agreed that the instalments
due on 6.4.1981 and 30.5.1981 could be paid after the
defendants satisfied the plaintiff about their title to the
property agreed to be sold, was not established by plaintiff.
The terms of the agreement remained unaltered. G
(e} Plaintiff committed breach by failing to pay the sum of
Rs.1,00,000 due on 6.4.1981 (except Rs.25,000 paid on
2.4.1981) and the sum of Rs.75,000 due on 30.5.1981 and
the defendants were therefore justified in cancelling the
agreement on 2.8.1981. H
910 SUPREME COURT REPORTS [2011) 8 S.C.R.
A (f) The defendants did not deliver possession of the
properties agreed to be sold, to the plaintiff in part
performance of the agreement of sale dated 17.1.1981.
The defendants delivered the property to the plaintiff in trust
to hold the same as caretaker, until the vendors received
B the entire sale price and delivered possession. Therefore
when the agreement was cancelled and consequently the
appointment as caretaker came to an end, the plaintiff
became liable to return the suit schedule properties to the
defendants.
c (g) The plaintiff and her husband had knowledge of the
existence of mortgage, before entering into the agreement
of sale on 17 .1.1981; and the case put forth by the
defendants that as per the understanding between the
parties, the defendants had to discharge the mortgage
D debts and secure the original title deeds after receiving the
entire consideration, merited acceptance. As per the term
of the agreement, the defendants had n9 obligation to
produce the original title deeds or proof of clearance of
l9ans, before plaintiff paid the entire sale consideration.
E
(h) The plaintiff failed to establish her readiness and
willingness to complete the sale in terms of the agreement
and she was not entitled to the relief of specific
performance.
F 16. Feeling aggrieved by the judgment of the division
bench, the appellant has filed these appeals (CA Nos. 7254
to 7256 of 2002), challenging the findings of fact arrived at by
the High Court and also raising some legal contentions. Where
findings of fact recorded by the learned single Judge (trial court)
G are affirmed by the appellate bench of the High Court in appeal,
this court will be reluctant to interfere with such findings in
exercise of jurisdiction under Article 136 of the Constitution,
unless there are very strong reasons to do so. On the
contentions urged, the following questions arise for our
H consideration:
SARADAMANI KANDAPPAN v. S. RAJALAKSHMI & 911
ORS. [R.V. RAVEENDRAN, J.)
(i) Whether the time stipulated for payment of balance A
consideration was the essence of contract and whether the
defendants were justified in cancelling the agreement,
when the time schedule stipulated for such payment was
not adhered to?
B
· (ii) Whether the parties had agreed upon sequence of
performance, which required payment of balance
consideration by appellant, as stipulated in clause (4) of
the agreement, only after the respondents satisfied the
appellant regarding their title to the lands?
c
(iii) Whether the respondents had failed to disclose the
encumbrances over the properties and thereby committed
fraud, entitling the appellant for extension of time stipulated
for payment corresponding to the delay caused by the fraud
and consequently the cancellation of the agreement by D
notice dated 2.8.1981 is illegal and invalid?
(iv) Whether an adverse inference ought to be drawn on
account of the non-examination of defendants 1 to 3 who
were the vendors under the agreement of sale?
E
Re: Question (i)
17. The appellant contends that time is not the essence
of the agreement of sale dated 17.1.1981. She contends that
where the vendors fail to give the documents of title to satisfy F
the purchaser about their title, and the purchaser is ready and
willing to perform the contract, the termination of the agreement
of sale by the vendors is illegal and amounts to breach of
contract. They submit that High Court had failed to apply section
55 of the Contract Act, 1872. Section 55 of Contract Act deals G
with the effect of failure to perform at a fixed time, in contract
in which time is essential. Said Section is extracted below :
"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 H
912 SUPREME COURT REPORTS [2011] 8 S.C.R.
A specified time, or certain things at or before a specified
time, and fails to do such thing at or before a 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
B should be of essence of the contract.
Effect of such failure when time is not essential: If it was
not the intention of the parties that time should be of the
essence of the contract, the contract does not become
voidable by the failure to do such thing at or before the
c specified time; but the promisee is entitled to
compensation from the promisor for any loss occasioned
to him by such failure.
Effect of acceptance of performance at time other than
D agreed upon: If, in case of a contract voidable on account
of the promisor's failure to perform his· promise at the time
agreed, the promisee accepts performance of such .
promise at any time other than agreed, the· promisee
cannot claim compensation of any loss occasioned by the
E non-performance of the promise at the time agreed,
unless, at the time of acceptance, he give notice to the
promisor of his intention to do so."
The above section deals with the effect of failure to perform
at a fixed time, in contracts in which time is essential. The
F question whether time is the essence of the contract, with
reference to the performance of a contract, what generally may
arise for consideration either with reference to the contract as
a whole or with reference to a particular term or condition of
the contract which is breached. In a contract relating to sale of
G immovable property if time is specified for payment of the sale
price but not in regard to the execution of the sale deed, time
will become the essence only with reference to payment of sale
price but not in regard to execution of the sale deed. Normally
in regard to contracts relating to sale of immovable properties,
H time is not considered to be the essence of the contract unless
SARADAMANI KANDAPPAN v. S. RAJALAKSHMI & 913
ORS. [R.V. RAVEENDRAN, J.]
such an intention can be gathered either from the express terms A·
of the contract or impliedly from the intention of the parties as
expressed by the terms of the contract.
18. Relying upon the observation of this court in
N.Srinivasa v. Kuttukaran Machine Tools Ltd. [2009 (5) SCC B
1.82) that "in the contract relating to immovable property, time
cannot be the essence of the contract", the appellant put forth
the contention that in all contracts relating to sale of immovable
property, time stipulated for performance, even if expressed to
be the essence, has to be read as not being the essence of
the contract and consequently the contract does not become C
voidable by the failure to perform before the specified time. A
careful reading of the said decision would show that the
sentence relied on (occurring in para 31) apparently was not
· the statsmenf of legal position, but a conclusion on facts
regarding the contract that was being considered by the court D
in that case, with reference to its terms: In fact the legal position
is differently stated in para 27 of the said decision, thus:
"27. In a contract for sale of immoveable property, normally
it is presumed that time is not the essence of the contract. E
Even if there is an express stipulation to that effect, the
said presumption can be rebutted. It is well settled that to
find out whether time was the essence of the contract. It is
better to refer to the terms and conditions of the contract
itself."
F
19. The legal position is clear from the decision of a
Constitution Bench of this court in Chand Rani v. Kamal Rani
[1993 (1) sec 519], wherein this court outlined the principle
thus:
G
"It is a well-accepted principle that in the case of sale of
immovable property, time is never regarded as the
e.ssence of the contract. In fact, there is a presumption
against time being the essence of the contract. This
principle js not in any way different from that obtainable in H
914 SUPREME COURT REPORTS (2011] 8 S.C.R.
A England. Under the law of equity which governs the rights
of the parties in the case of specific performance of
contract to sell real estate, law looks not at the letter but
at the substance of the agreement. It has to be ascertained
whether under the terms of the contract the parties named
B a specific time within which completion was to take place,
really and in substance it was intended that it should be
completed within a reasonable time. An intention to make
time the essence of the contract must be expressed in
unequivocal language."
c Relying upon the earlier decisions of this court in
Gomathinayagam Pillai v. Pallaniswami Nadar [1967 (1) SCR
227] and Govind Prasad Chaturvedi v. Hari Dutt Shastri (1977
(2) SCC 539], this Court further held that fixation of the period
within which the contract has to be performed does not make
D the stipulation as to time the essence of the contract. Where
the contract relates to sale of immovable property, it will normally
be presumed that the time is not the essence of the contract.
Thereafter this court held that even if time is not the essence
of the contract, the Court may infer that it is to be performed in
E a reasonable time : (i) from the express terms of the contract;
(ii) from the nature of the property and (iii) from the surrounding
circumstances as for example, the object of making the contract.
The intention to treat time as the essence of the contract may
however be evidenced by circumstances which are sufficiently
F strong to displace the normal presumption that time is not the
essence in contract for sale of land. In Chand Rani, clause (1)
of the agreement of sale required the balance consideration
to be paid as under: "Rs.98,000/- will be paid by the second
party to the first party within a period of ten days only and the
G balance Rs.50,000 at the time of registration of the sale
deed ... .". This court held that time regarding payment of
Rs.98,000 was the essence, on the following reasoning:
"The analysis of evidence would also point out that the
plaintiff was not willing to pay this amount unless vacant
H
SARADAMANI KANDAPPAN v. S. RAJALAKSHMI & 915
ORS. [R.V. RAVEENDRAN, J.]
delivery of possession of one room on the ground floor was A
given. In cross-examination it was deposed that since
income-tax clearance certificate had not been obtained the
sum of Rs. 98,000 was not paid. Unless the property was
redeemed the payment would not be made. If this was the
attitude it is clear that the plaintiff was insisting upon delivery B
of possession as a condition precedent for making this
payment. The income-tax certificate was necessary only
for completion of sale. We are unable to see how these
obligations on the part of the defendant could be insisted
upon for payment of Rs. 98,000. Therefore, we conclude c
that though as a general proposition of law time is not the
essence of the contract in the case of a sale of immovable
property yet the parties intended to make time as the
essence under Clause (1) of the suit agreement."
The intention to make time stipulated for payment of D
balance consideration will be considered to be essence of the
contract where such intention is evident from the express terms
or the circumstances necessitating the sale, set out in the
agreement. If for example, the vendor discloses in the
agreement of sale, the reason for the sale and the reason for E
stipulating that time prescribed for payment to be the essence
of the contract, that is, say, need to repay a particular loan
before a particular date, or to meet an urgent time bound need
(say medical or educational expenses of a family member) time
stipulated for payment will be considered to be the essence. F
Even if the urgent need for the money within the specified time
is not set out, if the words used clearly show an intention of the
parties to make time the essence of the contract, with reference
to payment, time will be held to be the essence of the contract.
G
20. Let us consider the terms of the agreement of sale in
this case to. find out whether time was the essence. The
standard agreements of sale normally provide for payment of
earnest money deposit or an advance at the time of execution
of agreement and the balance of consideration payable at the H
916 SUPREME COURT REPORTS [2011] 8 S.C.R.
A time of execution/registration of the sale deed. In the absence .
of contract to the contrary, the purchaser is bound to tender the
balance consideration only at the time and place of completing
the sale [see clause (b) of section 55(5) of Transfer of Property
Act, 1882 'TP Act' for short]. In this case we find that there is a
B conscious effort to delink the terms relating to payment of
balance price (clauses 4, 5 and 6) from the term relating to
execution of sale deed (clause 7) and making the time essence
only in regard to the payment of the balance sale consideration.
There is also a clear indication that while time would be the
c essence of the contract in regard to the terms relating to
payment of balance price, time would not be the essence of
the contract in regard to the execution of the sale deed. The
intention making time essence· of the contract for payment of
balance price is clear from the following : (a) clause 4 requires ,
the balance consideration to be paid in three instalments that
0
·is Rs.1,00,000 on or before 28.2.1981; Rs.1,00,000 on or
before 6.4.1981; and Rs.75,000 on or before 30.5.1981; (b)
Clause 5 makes it clear that if any of the abovementioned dates
of payment is subsequently declared as a holiday, then the next
E immediate working day shall be the date of payment. This
shows a clear intention that payment should be made on the
stipulated dates and even a day's delay was not acceptable
unless the due date was declared to be a holiday; (c) Clause
6 specifically stipulates that the payments :m due dates is the
essence of the contract and in case of failure on the part of the
F purchaser the vendors shall cancel the agreement.
21. On the other hand, if we look at the terms relating to
performance of sale, there is a clear indication that time was
not intended to be the essence, for completion of the sale.
G Clause 3 provides tl'!at the execution of sale deed shall depend
upon the second party (purchaser) getting satisfied regarding
the title to the lands, so also the nil encumbrance. It is significant·
that the said clause does not say that payment of balance
consideration shall depend upon the purchaser getting satisfied
H regarding title or nil encumbrances. Clause 7 provides that the
SARADAMANI KANDAPPAN v. S. RAJALAKSHMI & 917
ORS. [R.V. RAVEENDRAN, J.]
sale deed shall be executed at the convenience of the A
purchaser, as and when she wants them to be executed either
in her name or in the name of her nominee or nominees. Clause
12 provides that if the second party (purchaser) finds the title
of the properties to be unsatisfactory or unacceptable, the
vendors shall be put on notice about her intention not to B
conclude the sale and in such an event, if the vendors fail to
satisfy the purchaser regarding their title, the vendors shall pay
to the purchaser within three months from that date, all monies
advanced by the purchaser till then. It is thus evident from clause
12 also that the payments of balance sale price in three c
instalments on the specified due dates were not dependent
upon the further examination of title or the satisfaction of the
- pur~haser about the title. It is clear that the purchaser on the
basis of whatever initial examination she had taken of the
documents, had unconditionally agreed to pay the amounts in b
three instalments of Rs.1,00,000 on or before 28.2.1981;
Rs.1,00,000 on or before 6.4.1981 and Rs.75,000 on or before
30.5.1981; and if the purchaser was not thereafter satisfied with
the title or found the title unacceptable arid if the vendors failed
to satisfy her about their title when she notified them about her E
dissatisfaction, the vendors had to refund all payments made
within three months. Thus it is categorically made clear in the
agreement that time regarding payment of balance price was
the essence of the contract and such payment was not
dependent upon the purchaser's satisfaction regarding title.
F
22. Apart from the above, the plaintiff in her evidence
admitted that time for performance ·was the essence of the
contract vide the following questions and answers :
Q : The payment of the due date and in case of failure on G
the part of the party of second part, the party of the first
part shall cancel the agreement. Is this in the agreement
or not?
Ans. Yes. The dates and the title are important.
H
+
918 SUPREME COURT REPORTS [2011] 8 S.C.R.
A Q : Do you know that everywhere in this agreement one
thing is made clear that time is the essence of the
agreement?
Ans. Yes. Time is the essence of the contract and also the
title must be proved in the agreement.
B
Her evidence also shows that she apparently did not have
the funds to pay the balance of Rs.75,000 due on 6.4.1981
and Rs.75000/- due on 30.5.1981 as was evident from the
Bank pass book. It was therefore possible that being not
c ready to perform the contract in terms of the agreement,
the appellant had invented a modification in the terms of
the agreemen•. The learned Single Judge and the Division
Bench have recorded a concurrent finding that the time
was the essence of the contract and that no change was
D agreed in respect of the agreement terms as alleged by
the appellant. The appellant is unable to place any material
which calls for reversal of the said findings. Therefore it has
to be held that time regarding payment stipulated in
clauses (4), (5) and (6) of the agreement of sale was the
E essence of the contract and failure of the appellant to
adhere to it, justified cancellation of the agreement by the
respondents.
An aside regarding the principle "time is not of the
essence" for future consideration
F
23. It is of some interest to note that the distinction between
contracts relating to immovable properties and other contracts
was not drawn by section 55 of Contract Act (or any other
provisions of Contract Act or Specific Relief Act, 1963). Courts
G in India made the said distinction, by following the English law
evolved during the nineteenth century. This Court held that time
is not of the essence of the contracts relating to immovable
properties; and that notwithstanding default in carrying out the
contract within the specified period, specific performance will
H ordinarily be granted, if having regard to the express stipulation
. '
SARADAMANI KANDAPPAN v. S. RAJALAKSHMI & 919
ORS. [R.V. RAVEENDRAN, J.]
of the parties, nature of the property and surrounding A
circumstances, it is not inequitable to grant such relief. [vide
Gomathinayagam Pillai (supra), Govind Prasad Chaturvedi
(supra) and Indira Kaur v. Sheo Lal Kapoor- 1988 (2) SCC
188 and Chand Rani (supra) following the decision of Privy
Council in Jamshed Khodaram Irani v. Burjorji Dhunjibhai -AIR B
1915 PC 83 and other cases]. Of course, the Constitution
Bench in Chand Rani made a slight departure from the said
view.
24. The principle that time is not of the essence of C
contracts relating to immovable properties took shape in an era
when market value of immovable properties were stable and
did not undergo any marked change even over a few years
(followed mechanically, even when value ceased to be stable) .
. As a consequence, time for performance, stipulated in the
agreement was assumed to be not material, or at all events D
considered as merely indicating the reasonable period within
which contract should be performed. The assumption was that
grant of specific performance would not prejudice the vendor-
defendant financially as there would not be much difference in
the market value of the property even if the contract was E
performed after a few months. This principle made sense
during the first half of the twentieth century, when there was
comparatively very little inflation, iA India. The third quarter of
the twentieth century saw a very slow but steady increase in
prices. But a drastic change occurred from the beginning of the F
last quarter of the twentieth century. There has been a galloping
inflation and prices of immovable properties have increased
steeply, by leaps and bounds. Market values of properties are
no longer stable or steady. We can take judicial notice of the
comparative purchase power of a rupee in the year 1975 and G
now, as also the steep increase in the value of the immovable
properties between then and now. It is no exaggeration to say
that properties in cities, worth a lakh or so in or about1975 to
1980, may cost a crore or more now.
H
920 SUPREME COURT REPORTS [2011] 8 S.C.R.
A 25. The reality arising from this economic change cannot
continue to be ignored in deciding cases relating to specific
performance. The steep increase in prices is a circumstance
which makes it inequitable to grant the relief of specific
performance where the purchaser does not take steps to
B complete the sale within the agreed period, and the vendor has
not been responsible for any delay or non-performance. A
·purchaser can no longer take shelter under the principle that
time is not of essence in performance of contracts relating to
immovable property, to cover his delays, laches, breaches and
c 'lion-readiness'. The precedents from an era, when high
inflation was unknown, holding that time is not of the essence
of the contract in regard to immovable properties, may no longer
apply, not because the principle laid down therein is unsound
or erroneous, but the circumstances that existed when the said
principle was evolved, no longer exist. In these days of galloping
0
increases in prices of immovable properties, to hold that a
vendor who took an earnest money of say about 10% of the
sale price and agreed for three months or four months as the
period for performance, did not intend that time should be the
essence, will be a cruel joke on him, and will result in injustice.
E . Adding to the misery is the delay in disposal of cases relating
to specific performance, as suits and appeals therefrom
routinely take two to three decades to attain finality. As a result,
an owner agreeing to sell a property for Rs.One lakh and
received Rs.Ten Thousand as advance may be required to
F execute a sale deed a quarter century later by receiving the
remaining Rs.Ninety Thousand, when the property value has
risen to a crore of rupees.
26. It is now well settled that laws, which may be
G reasonable and valid when made, can, with passage of time
and consequential change in circumstances, become arbitrary
and unreasonable.
26.1) In Rattan AfYa v. State of Tamil Nadu - (1986) 3
SC 385, this Court held:
1H
SARADAMANI KANDAPPAN v. S. RAJALAKSHMI & 921
ORS. [R.V. RAVEENDRAN, J.]
"We must also observe here that whatever justification A
there may have been in 1973 when Section 30(ii) was
amended by imposing a ceiling of Rs. 400 on rent payable
by tenants of residential buildings to entitle them to seek
the protection of the Act, the passage of time has made
the ceiling utterly unreal. We are entitled to .take judicial B
notice of the enormous multifold increase of rents
throughout the country, particularly in urban areas. It is
common knowledge today that the accommodation which
one could have possible got for Rs. 400 per month in 1973
will today cost at least five times more. In these days of c
universal day to day escalation of rentals any ceiling such
as that imposed by Section 30(ii) in 1973 can only be
considered to be totally artificial and irrelevant today. As
held by this court in Motor General Traders v. State of A.P.
(1984) 1 sec 222, a provision which was perfectly valid D
at the commencement of the Act could be challenged later
on the ground of unconstitutionality and struck down on that
basis. What was once a perfectly valid legislation, may in
course of time, become discriminatory and liable to
challenge on the ground of its being violative of Article 14." E
(emphasis supplied)
26.2) In Ma/pe Vishwanath Acharya v. State of
Maharashtra - (1998) 2 SCC 1 a three Judge bench of this
court considered the validity of determination of standard rent F
by freezing or pegging down the rent as on 1.9 .1940 or as on
the date of first letting, under sections 5(10)(8), 7, 9(2)(b) and
12(3) of the Bombay Rents, Hotel and Lodging House Rates
Control Ac, 1947. This court held that the said process of
determination under the Act, which was reasonable when the G
lew was made, became arbitrary and unreasonable in view of
constant escalation of prices due to inflation and corresponding
rise in money value with the passage of time. This Court held: - ··
"In so far as soGial legislation, like the Rent Control Act is
concerned, the law must strike a balance between rival H
922 SUPREME COURT REPORTS (2011] 8 S.C.R.
A interests and it should try to be just to all. The law ought
not to be unjust to one and give a disproportionate benefit ·
or protection to another section of the society. When there
is shortage of accommodation it is desirable, nay,
necessary that some protection should be given to the
B tenants in order to ensure that they are not exploited. At
the same time such a law to be revised periodically so as
to ensure that a disproportionately larger benefit than the
one which was intended is not given to the tenants ......
Taking all the facts and circumstances into consideration,
c we have no doubt that the existing provisions of the
Bombay Rent Act relating to the determination and fixation
of the 13tandard rent can no longer be considered to be
reasonable ..... ."
D The principle underlying the said decisions with reference
to statutes, would on the same logic, apply to decisions of
courts
... also .
. 27. A correct perspective relating to the question whether
E time is not of the essence of the contract in contracts relating
to immovable property, is given by this court in K.S.
Vidyanadam and Others vs. Vairavan - (1997) 3 SCC 1 (by
Jeevan Reddy J. who incidentally was a member of the
Constitution Bench in Chand Rani). This Court_ observed:
F "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.
G
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. .. ....... We cannot be·
oblivious. to the reality and the reality is constant and
continuous rise in the values of urban properties - fuelled
H
SARADAMANI KANDAPPAN v. S. RAJALAKSHMI & 923
ORS. [R.V. RAVEENDRAN, J.]
by large scale migration of people from rural areas to A
urban centres and by inflation.
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
8
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."
(emphasis supplied) C
Therefore there is an urgent need to revisit the principle
that time is not of the essence in contracts relating to immovable
properties and also explain the current position of law with
regard to contracts relating to immovable property made after o
, 1975, in view of the changed circumstances arising from
inflation and steep increase in prices. We do not propose to
undertake that exercise in this case, nor referring the matter to
larger bench as we have held on facts in this case that time is
the essence of the contract, even with reference to the principles E
in Chand Rani and other cases. Be that as it may.
28. Till the issue is considered in an appropriate case, we
can only reiterate what has been suggested in K. S.
Vidyanadam (supra) :
F
(i) Courts, while exercising discretion in suits for
specific performance, should bear in mind that when
the parties prescribe a time/period, for taking
certain steps or for completion of the transaction,
that must have some significance and therefore G
time/period prescribed cannot be ignored.
(ii) Courts will apply greater scrutiny and strictness
when considering whether the purchaser was 'ready
and willing' to perform his.part of the contract.
H
924 SUPREME COURT REPORTS [2011] 8 S.C.R.
A (iii) Every suit for specific performance need not be
decreed merely because it is filed within the period
of limitation by ignoring the time-limits stipulated in
the agreement. Courts will also 'frown' upon suits
which are not filed immediately after the breach/
B refusal. The fact that limitation is three years does
not mean a purchaser can wait for 1 or 2 years to
file a suit and obtain specific performance. The
three year period is intended to assist purchasers
in special cases, as for example, where the major
c part of the consideration has been paid to the
vendor and possession has been delivered in part
performance, where equity shifts in favour of the
purchaser.
Re: Question (ii)
D
29. Before the learned Single Judge, the appellant had
concentrated on the contention that time for payment was not
the essence of the contract and therefore the failure to pay the
second instalment on or before 6.4.1981 and the final instalment
E on or before 30.5.1981 did not entitle the vendors to cancel/
terminate the agreement. As that contention was rightly rejected
by the learned Single Judge, the emphasis before the Division
Bench was on the contention that the term regarding payment
was altered by an oral understanding. It was contended that
F though time was the essence of the contract in regard to
payments, it was equally necessary for the defendants to
produce original title deeds to show that there were no
encumbrances over the suit properties; that after paying the first
instalment of Rs.1,00,000 on 28.2.1981, the plaintiff and her
G husband got doubts about the original title deeds as they learnt
that the properties had been mortgaged; that therefore the
· plaintiffs husband alorig with his friends Babu (PW2) and
Balaraman (PW3) went to defendants' house in March, 1981
and made inquiries and then the defendants requested for
some more time promising that they would get original title
H
SARADAMANI KANDAPPAN v. S. RAJALAKSHMI & 925
ORS. [R.V. RAVEENDRAN, J.]
·deeds for verification and therefore on 2.4.1981 only Rs.25000 A
was paid towards the second instalment of Rs.1,00,000 due
on 6.4.1981 with the understanding that the balance of
Rs. 75,000 towards the second instalment as also the third
instalment would be paid only after the production of original
title deeds. Therefore the contention was that though time B
regarding payment was essence of the contract and the
balance consideration of Rs.2,75,000 had to be paid in three
instalments of Rs.1,00,000, Rs.1,00,000 and Rs. 75000 on
28.2.1981, 6.4.1981 and 30.5.1981 respectively, there was an
alteration in those terms, as per an oral understanding in March, c
1981 to postpone payment of the second and third instalments,
till the original documents of title were produced by the
defendants. In short the emphasis of the plaintiff was on an oral
agreement altering the time schedule and the terms which
made time for payment the essence of the contract. Neitherthe D
Single Judge nor the Division Bench accepted the claim of
· appellant that there were any such discussions or oral
understanding in March 1981 leading to variation in terms or
that the time for payment was postponed.
30. Before this court there was again a significant shift in E
the stand of the appellant. Faced with the finding that time for
payment was the essence and that there was no change in the
terms relating to payment, the emphasis is on a different
contention based on section 52 of the Contract Act. The
appellant contende~ that the agreement of sale laid down the F
order in which the reciprocal promises were to be performed;
that it first required respondents 1 to 3 as vendors, to furnish
the original title deeds and a nil encumbrance certificate to
satisfy the appellant about their title; that the appellant had to
pay the balance of the sale price only after the vendors G
discharged their said obligation; that the appellant was entitled
to withhold the balance sale price till the vendors discharged
their liabilities, secured the original title deed and delivered
them to her and satisfied her about their title; and that without
performing their obligation by producing the original title deeds, H
926 SUPREME COURT REPORTS (2011] 8 S.C.R.
t
A the vendors cannot expect performance by the purchaser, to
pay the balance price. The appellant contended that courts
below failed to appreciate the scope of section 51 to 54 of
Contract Act. To appreciate the said contention it is necessary
to refer to sections 51 to 53 of the Contract Act. ·
B
31. Section 51 provides that when a contract consists of
reciprocal promises to be simultaneously perfermed, no
promisor need perform his promise, unless the promisee is
ready and willing to perform his reciprocal promise. For
example, if the contract provides that the balance of sale
C consideration stulll be paid by the purchaser to the vendor
against execution of sale deed within a period of three mortths,
the purchaser need not pay the balance sale consideration if
the vendor was not willing to execute the sale deed. Similarly
the vendor need not execute the sale deed unless the purchaser
D is ready to pay the balance sale consideration.
32. Section 52 relates to the order of performance of
reciprocal promises. It provides that where the order in which
.. E
reciprocal promises are to be performed is expressly fixed by
the contract, they shall be performed in that order; and where
the order is not expressly fixed by the contract, they shall be
performed in that order which the nature of the transaction
requires. Let us illustrate with reference to an agreement of sale
which provides that the vendor shall make out to the satisfaction
F of the purchaser a good, marketable and subsisting title and
provide all documents as required by the purchaser to satisfy
him about the title of the vendor, that the vendor shall obtain a
certificate of clearance from a specified authority for the sale,
that the sale shall be completed within a period of four months
of receipt of the clearance certificate and the purchaser shall
G pay the balance sale price at the time of registration of the sale.
It is evident that the vendor will have first to make out a title by
producing the documents required by the purchaser and also
obtain the clearance certificate. Only thereafter the sale deed
shall have to be executed and payment of the sale
H
SARADAMANI KANDAPPAN v. S. RAJALAKSHMI & 927
ORS. [R.V. RAVEENDRAN, J.]
consideration will have to be made at the time of registration A
of the sale deed. The vendor cannot seek payment of the
balance sale price without performing his obligations as per the
agreement.
33. Section 53 provides that when a contract contains
8
reciprocal promises, and one party to the contract prevents the
other from performing his promise, the contract becomes
voidable at the option of the party so prevented; and he is
entitled to compensation from the other party for any loss which
he may sustain in consequence of the non-performance of the
contract. Let us take by way of illustration an agreement which C
provides that out of the sale price Rs.10,00,000, Rs.1,00,000
was paid as advance, Rs.4,00,000 was to be paid within one
month to enable the vendor to purchase an alternative property
and shift his residence from the property agreed to be sold,
and the sale deed has to be executed within three months from D
the date of agreement of sale and vacant possession of the
premises should be given, against payment of balance price.
If the purchaser failed to pay Rs.4,00,000 within one month and
thereby prevented the vendor from purchasing another property
and shifting to such premises, the vendor will not be able to E
perform his obligation to deliver vacant possession. Thus the
· contract becomes voidable at the option of the vendor.
34. Section 54 of Contract Act provides that when a
contract consists of reciprocal promises, such that one of them F
cannot be performed, or that its performance cannot be claimed
till the other has been performed, and the promisor of the
promise last mentioned fails to perform it, such promisor cannot
claim the performance of the reciprocal promise, and must
make compensation to the other party to the contract for any G
loss which i;uch other party may sustain by the non-
performance of the contract. The agreement in this case
provides a good illustration for this section. The purchaser
cannot claim that the vendors should produce the original title
deeds and satisfy her regarding their title, or claim execution
H
928 SUPREME COURT REPORTS [2011) 8 S.C.R.
A of the sale deed, unless and until she paid the entire
1
consideration within the time stipulated in clause (4) of the
agreement, which would enable the vendors to repay the loans
and obtain release of the original title deeds.
35. The appellant contends that clause (3) of the
8
agreement provides that execution of the sale deed shall
depend upon the purchaser getting satisfied regarding
(vendors') title to the lands and that the property is not subject
to any encumbrance; that the said clause precedes clause (4)
requiring payment of balance consideration of Rs.2, 75,000 in
1C three instalments; and that shows thatthe intention of parties
was that the satisfaction of the purchaser in regard to the
vendors' title to the land and· encumbrance, was a condition
precedent for payment of the balance consideration. In other
1
words, it is contended that the contract provides the order in
D which reciprocal promises are to be performed, by placing
clause (3) before clause (4), that is the vendors should first
satisfy the purchaser regardir.J title of the vendors and only
when that promise is performed by the vendors, the question
of purchaser performing her promise to pay the balance
E consideration would arise.
36. The order of performance of reciprocal promises does
not depend upon the order in which the terms of the agreement
are reduced into writing. The order of performance should be
F expressly stated or provided, that is, the agreement should say
only after performance of obligations of vendors under clause
(3), the purchaser will have to perform her obligations under
clause (4). As there is no such express fixation of the order in
which the reciprocal promises are to be performed, the
G appellant's contention is liable to be rejected. We have already
noticed that the contract contains two different streams of
provisions for performance. One relates to payment of the
balance consideration by the purchaser in the manner provided,
which is not dependent upon any performance of obligation by
the vendors. It is significant that clause (4) of the agreement
H
SARADAMANI KANDAPPAN v. S. RAJALAKSHMI & 929
ORS. [R.V. RAVEENDRAN, J.]
did not say that the balance of the sale price shall be paid only A
after the vendors satisfied the purchaser in regard to title or that
the purchaser shall pay the balance of sale price only after she
satisfies herself regarding title of the vendors to the lands. Nor
does clause (3) contain a provision, after stating that execution
of the sale deed shall depend upon the purchaser getting B
satisfied regarding title to the land as also the nil encumbrance,
that the payment of sale consideration will also depend upon
such satisfaction regarding title and nil encumbrance. As
noticed above there is an unconditional promise to pay the
balance consideration in three instalments and the said c
promise by the purchaser is not dependent upon performance
of any obligation by vendors. The contract specifically states
that having paid the balance price, if the purchaser is not
satisfied about the title and on being intimated about the same
if the vendors fail to satisfy the purchaser about their title, all D
amounts paid towards the price should be refunded to
purchaser. This clearly demonstrates that the payment of
balance of sale price in terms of the contract was not
postponed nor made conditional upon the purchaser being
satisfied about the title, but that payment of the balance price E
should be made to the vendors as agreed unconditionally. In
fact if the intention of the parties was that only after the vendors
satisfying the purchaser about their title, balance consideration
had to be paid, clause (12) would be redundant as the situation
contemplated therein would not arise. Further, if that was the
intention, the purchaser would not have paid Rs.1,00,000 as F
further advance on 28.1.1981 and Rs.25,000 on 2.4.1981. It is
therefore clear that the contract does not expressly (or even
impliedly) specify the order of performance of reciprocal
promises, as alleged by the appellant.
G
37. The terms of the contract makes it clear that payment
of sale price did not depend on execution of the sale deed. The
sale deed was not required to be executed within any specific
period. The purchaser had to fulfil her obligation in regard to
payment of price as provided in clause 4 and thereafter vendors H
930 SUPREME COURT REPORTS [2011] 8 S.C.R.
A were required to perform their reciprocal promise of executing
the sale deed, whenever required by the purchaser, either in
her name or in the names of her nominees. The sale deed had
to be executed only after payment of complete sale
consideration within the time stipulated. In these circumstances,
B section 52 of the Contract Act does not help the appellant but
actually supports the vendors-respondents.
Re: Question (iii)
38. Learned counsel for the appellant next submitted that
C the lands belonging to the first respondent were mortgaged to
Bank of India, the lands belonging to the second defendant were
mortgaged to one Gulecha, the lands belonging to third
respondent were mortgaged to State Bank of Mysore and
therefore none of the original title deeds were in the custody of
D vendors; that having regard to section 55 (1) of Transfer of
Propercy Act, 1882 ('TP Act' for short) the vendors were bound
to disclose to the purchaser, any mat~iial defect in their title to
the property; that the failure of vendors to disclose the existence
of the mortgages/encumbrances amounted to fraudulent
E conduct within the meaning of section 55 of TP Act. It was
submitted that the vendors had deliberately failed to disclose
the existence of the said encumbrances to the purchaser and
thereby committed a fraud which made the purchaser to enter
into an agreement of sale and part with a potion of the sale
F consideration in advance; that when the purchaser got doubts
and insisted on production of the original title deeds, the fourth
respondent took time to get the original title deeds and agreed
that the balance of sale price due may be paid after production
of sale deeds. It was submitted that having regard to section
G 55 of the TP Act, failure to disclose the encumbrances
amounted to fraud; and in view of such fraud by the
respondents, the appellant was prevented from performing her
part of the contract by paying the balance piice before the
agreJd dates and therefore the appellant was entitled to
extension of further time for performing her promise to pay the
H
SARADAMANI KANDAPPAN v. S. RAJALAKSHMI & 931
ORS. [RV. RAVEENDRAN, J.]
balance price, corresponding to the delay caused by such fraud, A
having regard to the provisions of section 34 of the TP Act.
39. Section 55 of TP Act lists the rights and liabilities of
the buyer and the seller in the absence of a contract to the
contrary. The relevant portion of section 55 reads thus:
B
"55. Rights and liabilities of buyer and seller -- In the
absence of a contract to the contrary, the buyer and the
seller of immovable property respectively are subject to the
liabilities, and have the rights, mentioned in the rules next
· following or such of them as are applicable to the property C
sold:
(1) The seller is bound-
(a) to disclose to the buyer any material defect in the
property or in the seller's title thereto of which the seller is, D
and the buyer is not, aware, and which the buyer could not
with ordinary care discover;
(b) to produce to the buyer on his request for examination,
all documents of title relating to the property which are in E
the seller's possession or power;
(c} to answer to the best of his information all relevant
questions put to him by the buyer in respect to the property
or the title thereto; x x x x x
F
Section 34 of the TP Act relied upon by appellant, is
extracted below:
"34. Transfer conditional on performance of act, time being
specified G
Where an act is to be performed by a person either as a
· condition to be fulfilled before an interest created on a
transfer of property is enjoyed by him, or as a condition
on the non-fulfilment of which the interest is to pass from
H
932 SUPREME COURT REPORTS [2011] 8 S.C.R.
A him to another person, and a time is specified for the
performance of the act, if such performance within the
specified time is prevented by the fraud of a person who
would be directly benefited by non-fulfilment of the
condition, such further time shall as against him be allowed
B for performing the act as shall be requisite to make up for
the delay caused by such :raud. But if no time is specified
for the performance of the act, then, if its performance is
by the fraud of a person interested in the non-fulfilment of
the condition rendered impossible or indefinitely
c postponed, the con~~on shall as against him be deemed
to have been fulfilled."
40. Whenever a party wants to put forth a contention of
fraud, it has to be specifically pleaded and proved. It is
significant that the plaint does not allege any fraud by the
D defendants. Evidence shows that before the agreement was
entered, the purchaser's husband and legal advisor had
examined the xerox copies of the title· deeds and satisfied
themselves about the title of the vendors. The appellant in her
evidence clearly admits that xerox copies of the title deeds were
E shown to her husband. The agreement of sale provided that the
sale would depend upon purchaser getting satisfied about the
title of the vendors. The manner in which the agreement was
drafted by the purchaser shows that the purchaser and/or her
husband were made aware of the encumbrances. Firstly there
F is no provision in the agreement that the lands were not subject
to any encumbrances. Secondly, the provision for payment of
sale price within a specified time does not link the payment to
execution of a sale deed. Thirdly the contract provided that on
execution of the agreement the purchaser will take possession
G as care taker of the suit schedule properties and that on
complete payment of the sale price on 30.5.1981, she will be
entitled to possession in part performance and that the
execution of the sale deed will be whenever required by the
purchaser, totally disconnected with either payment of price or
H delivery of possession. All these provisions demonstrate that
SARADArvjANI Kf'.NDAPPAN v. S. RAJALAKSHMI & 933
-ORS. [R.V. RAVEENDRAN, J.]
the vendors were In urgent need of money, that the purch;;iser A
was made aware of the encumbrances, that on the purchaser
paying the sale price, the vendors had to clear the
encumbrances and thereafter convey the property, free from
encumbrances. The contention that the vendors deliberately or
intentionally suppressed any information regarding the pending B
encumbrances or the fact that the original documents were not
available and thereby committed fraud is neither pleaded nor
proved. ·
41. The appellant did not allege in the plaint, any fraud on
the part of vendors, in regard to suppression of encumbrances C
over the property. The entire plaint tried to justify that the plaintiff
did not commit breach of contract by not paying the balance
instalm_ents ori 6.4.1981 and 30.5.1981, except for a stray
sentence that the plaintiff will be entitled to proceed against the
third· defendants 1 to 3 for damages, for not performing their D
part of the contract and not disclosing several prior
encumbrances over the property. In the written statement the
defendants submitted that the encumbrance certificate upto the
year 1980 had been given to appellant's husband, which
showed the encumbrance in favour of State Bank of Mysore, E
that plaintiff and her husband both knew before entering into
the agreement of sale that original documents were with the
said bank and that therefore the allegation that the encumbrance
was not disclosed was false. It was also disclosed in the written
statement, that a document was surreptitiously detained by one F
Gulecha. It was stated that the defendants intended to utilise
the last two instalments for securing back the original
documents by discharging the loans. It is not disputed that the
amount due to Gulecha was around Rs.40,000 and the amount
due to State Bank of Mysore was around Rs.39,000 and any G
of the last two instalments would have been sufficient to
discharge the said liabilities. The appellant having committed
· default in paying the last two instalments which would have
enabled discharging the debts, can not find fault with the
vendors by conteoding that they did not secure the original title H
934 SUPREME COURT REPORTS [2011] 8 S.C.R.
A deeds. If the mortgage/encumbrance was made known to.
appellant's husband and if it had been understood that the same
would be cleared from the last of the instalments paid by the
appellant, the absence of original title deeds could not be made
a ground for not paying the last two instalments. The claim of
. B the appellant that the vendors should have cleared all the
encumbrances before payment of the last two instalments is not
borne out by any evidence. Even in law, the obligation of the
vendors is to convey an encumbrance free, good and
marketable title subject to contract to the contrary. The stage
c of execution of sale deed had not arrived as the appellants did
not paid the amount due in terms of the contract.
42. The appellant contended that the debt due to the Bank
of India had been fraudulently suppressed by the vendors.
There is no reference to such a mortgage either in the plaint
D or the evidence of the plaintiff. No one has been examined from
the bank nor any document produced to prove the existence
of such mortgage. Appellant attempted to produce some
documents relating to the said mortgage with an application
under Order 41 Rule 27 CPC which was rejected by the High
E Court. Before us, the appellants relied upon the decision in
Bank of India v. Vijay Transport [2000 (8) SCC 512] which
related to the bank's suit against Vijay Transport of which the
first respondent was stated to be a partner. The said decision
of this court discloses that proceedings were commenced in
F the year 1975 against the firm in which the first respondent was
a partner, for recovery of Rs.18, 14,817.91 in the Court of Sub-
Judge, Eluru; that the partnership firm raised a counter claim
of Rs. 34,48,799 against the Bank; and that on 6.7.1976 the
Bank's suit was decreed only for Rs.1,00,418/55 whereas the
G counter claim of the first respondent was decreed for
Rs.34,48,799 with costs. The bank filed an appeal before the
High Court which was allowed on 20.9.1983 and the Bank's
·suit was decreed for Rs.18,49,209. 70 with interest and the
firm's counter claim was dismissed. But what is significant and
H relevant is the fact that as on the date of the agreement of sale
SARADAMANI KANDAPPAN v. S. RAJALAKSHMI & 935
OR$. [R.V. RAVEENDRAN, J.]
(17.1.1981) the first defendant was not a debtor of Bank of India A
but on the other hand the bank itself was a debtor to the extent
of more than Rs.33,00,000 with interest. Therefore the
contention of the appellant that an encumbrance in favour of
Bank of India was in existence and that was not disclosed and
the said liability was not disclosed, is wholly untenable. From B
the evidence on record as rightly held by the courts below it is
not possible to make out either any fraud or any suppression
or failure to disclose facts on the part of the respondents.
43. We are therefore of the view that the failure of the
appellant to pay the balance of Rs. 75,000 on 6.4.1981 and C
failure to pay the last instalment of Rs.75,000 on or before
30.5.1981 clearly amounted to breach and time for such
payment was the essence of the contract, the respondents were
justified in determining the agreement of sale which they did
by notice dated 2.8.1981 (Ex. P5). Therefore rejection of the D
prayer for specific performance is upheld. ·
44. We may next briefly deal with the correctness of the
dismissal of the suit for injunction. The appellant was not put in
possession of the suit properties in part-performance of the E
agreement of sale. Under clause 15 of the agreement of sale,
she was only entrusted with the suit schedule properties as a
caretaker until possession is given on receipt of the entire sale
consideration. As neither the entire sale consideration was paid
nor possession delivered, the plaintiff remained merely a F
caretaker and on cancellation of the agreement of sale by the
respondents, the plaintiff became liable to leave the suit
schedule properties as the possession continued to be with the
defendants. As appellant never had 'possession' she was not
entitled to seek a permanent injunction to protect her G
possession. We have held that the cancellation of agreement
was justified and upheld the rejection of the suit for specific.
performance. In the circumstances, the dismissal of the suit for
1
injunction by the learned Single Judge, affirmed by the Division
Bench, is also not open to challenge.
H
936 SUPREME COURT REPORTS [2011] 8 S.C.R.
A 45. We also find no reason to interfere with the dismissal
of the suit for recovery of Rs.1,25,000 from the fourth
respondent. The trial court held that the said amount was not
paid as commission but was paid as consideration for the
movables. The said suit was dismissed by the trial court. In the
B High Court the learned counsel for the appellant during
arguments clearly stated that the appellant was not pressing for
any decree against the fourth respondent in view of the finding
that the amount paid was part of the consideration for
movables. Therefore the dismissal of suit for Rs.1,25,000 is
c also upheld.
46. The division bench to do broad justice and work out
the equities, took note of the offer of the defendants in their
written statement to refund the amount paid as advance and
directed the defendants to refund the sum of Rs.2,25,000 paid
D to defendants 1 to 3 under the agreement and Rs.1,25,000 paid
to the fourth respondent, in all, Rs.3,50,000 with interest at 9%
per annum for the period when the appellant was not acting as
a care taker till date of payment. We find no reason to interfere
with the direction to refund Rs.3,50,000 with interest. We
E however propose to make a modification in regard to the rate
of interest and the period for which interest is payable. The High
Court has awarded interest on the sum of Rs.3,50,000 at 9%
per annum for the period in which the appellant had not acted
as caretaker till the date of payment. As noticed above, the
F agreement of sale does not provide for forfeiture of the
amounts paid as advance under any circumstances and on the
other hand, specifically provides that if the plaintiff was not
satisfied with the title of the defendants, the amounts received
as advance would be refunded. In fact, the respondents, in their
G written statement, offered to refund the amount. Therefore, the
High Court ought to have granted interest from the date of
cancellation of the-agreement (2.8.1981) to date of payment.
The High Court was not justified in restricting the interest to only
for the period during which the appellant had not acted as
IH caretaker. The liabi~ity to refund the advance has nothing to do
SARADAMANI KANDAPPAN v. S. RAJALAKSHMI & 937
ORS. [R.V. RAVEENDRAN, J.]
with the appointment of the plaintiff as caretaker or the A
obligation of the plaintiff to return the property on cancellation
of the agreement. Having regard to the facts and
circumstances, we are of the view that the rate of interest shall
be increased to 12% per annum instead of 9% per annum.
B
Re : Question No. (iv)
47. The appellant contended that none of the three
vendors (defendants 1, 2 and 3) stepped into the witness box
to give evidence and therefore an adverse inference should be
drawn against them that the case put forth by them is incorrect. C
Reliance was also placed on the decisions of this court in
Vidhyadhar v. Mankikrao & Anr. (1999) 3 SCC 573 and
Balasaheb Dayandeo ·Naik (Dead) through LRs. and Ors. v.
Appasaheb Dattatraya Pawar (2008 ) 4 SCC 464 in that
behalf. There were four defendants in the suit. Defendants 1,2 D
and 3, who were the owners of the lands were respectively the
wife, son and daughter of the fourth defendant. It is an admitted
position that the entire transaction )Vas done on behalf of the
defendants 1,2 and 3 by defen-dant No.4 who alone had
complete knowledge of the entire transaction. Fourth defendant E
has given evidence on behalf of all the other defendants. When
one of the defendants who is conversant with the facts has given
evidence, it is not necessary for the· other defendants to be
examined as witnesses to duplicate the evidence. The legal
position as to who should give evidence in regard to the matters. F
involving personal knowledge have been laid down by this court
in Man Kaur (dead) by LRS. v. Hartar Singh Sangha (2010)
10 SCC 512. This court has held that where the entire
transaction has been conducted through a particular agent or
representative, the Rrincipal has to examine that agent to prove G
the transaction; and that where the principal at no point of time
had personally handled or dealt with or participated in the
transaction and has no personal knowledge of the transaction,
and where the entire transaction has been handled by the agent, ·
necessarily the agent alone can give evidence in regard to the H
938 SUPREME COURT REPORTS [2011] 8 S.C.R.
A transaction. This court further observed:
"Where all the affairs of a party are completely managed,
transacted and looked after by an attorney (who may
happen to be a close family member), it may be possible
to accept the evidence of such attorney even with
B
reference to bona fides or 'readiness and willingness'.
Examples of such attorney holders are a husband/wife
exclusively managing the affairs of his/her spouse, a son/
daughter exclusively managing the affairs of an old and
infirm parent, a father/mother exclusively managing the
c affairs of a son/daughter living abroad."
Therefore the evidence of the fourth defendant (examined as
DW2) was sufficient to put forth the case of the defendants and
there was no need to examine the other three defendants who
D did not have full or complete knowledge of the transactions. In
the circumstances we find no merit in the contention that the
suits ought to have been decreed, as defendants 1,2 and 3 did
not step into the witness box.
E Re : Contempt Petition (C) Nos.28-29/2009 :
48. The appellant has filed these contempt petitions
praying that respondents 1 to 4 be punished for committing
contempt of the order dated 11.11.2002 made in C.A.
Nos.7254-7256/2002. The appellant filed the said appeals
F aggrieved by the common judgment dated 19.6.2002 passed
by the Division Bench of the High Court, affirming the dismissal
of the three suits of appellant for injunction, for specific
performance and for refund of Rs.1,25,000/-. This Court on
11.11.2002 while granting leave in the special leave petitions,
G made an interim order that the respondent shall not encumber
the property in any manner.
49. The appellant alleges that one Jeevanandam filed
three suits against respondents 1 to 3 in the years 2007 and
H 2008 for injunctions and other reliefs, alleging that he had
SARADAMANI KANDAPPAN v. S. RAJALAKSHMI & 939
ORS. [R.V. RAVEENDRAN, J.]
A
entered into three Memorandum of Understanding (MOU for
short) dated 5.7.2002 with them, under which they had agreed
to enter into agreements of sale in regard to the suit schedule
properties; that he had paid advances to each of them on
5.7.2002, and that he had further paid to respondents 1 to 3 in
the years 2004 and 2005, a sum of Rs.1,50,00,000. The 8
appellants contend that the alleged act of receiving
Rs.1,50,00,000 in the years 2004 and 2005 by respondents 1
to 3 from Jeevanandam, amounted to creating an encumbrance
over the suit property and thereby respondents 1 to 3 have
committed contempt of the order dated 11.11.2002 of this C
Court. The appellant also wants this court to hold an enquiry
and hold that the MOUs were actually entered subsequent to
the interim order dated 11.11.2002, but deliberately anti-dated
to get over the interim order and therefore the execution of the
said MOUs also amounts to creating an encumbrance. It is not D
Recessary for us to examine the question whether the MOUs
were anti-dated as the said question is not relevant as will
presently be seen, apart from the fact that no material has been
produced by the appellant to establish the said allegation.
E
50. An 'encumbrance' is a charge or burden created by
transfer of any interest in a property. It is a liability attached to
the property that runs with the land. [See National Textile
Corporation vs. State of Maharashtra - AIR 1977 SC 1566 and
State of H.P. vs. Tarsem Singh - 2001 (8) SCC 104). Mere
execution of an MOU, agreeing to enter into an agreement to F
sell the property, does not amount to encumbering a property.
Receiving advances or amounts in pursuance of an MOU would
not also amount to creating an encumbrance. The MOUs said
to have been executed by respondents 1 to 3 provide that
agreements of sale with mutually agreed terms and conditions G
will be entered between the parties after clearance of all
pending or future litigations. Therefore the MOUs are not oven
agreements of sale. In these circumstances, it is not possible
to hold that the respondents have created any encumbrances
or violated the order dated 11.11.2002. Hence, these contempt H
940 SUPREME COURT REPORTS (2011] 8 S.C.R.
A petitions are liable to be rejected.
51. We make it clear that nothing stated in this order on
the contempt petitions will be construed as an expression of
al)y opinion on the merits of the dispute between Jeevanandam
and respondents 1 to 3, and necessarily any pending litigation
8
between them will have to be decided on the merits of the
respective cases.
CIVIL APPEAL NOS. 7254-7256 OF 2002
c 52. These appeals are filed by the vendors - defendants
1 to 3 (who are respondents 1 to 3 in C.A. Nos.7254-7256/
2002). They are aggrieved by the judgment and decree of the
Division Bench in O.S.A. No.12/1992 (arising from the specific
performance suit) and O.S.A.No. 148/1999 (arising out of the
D money suit) whereby the Division Bench directed defendants
1 to 3 to jointly repay Rs.3,50,000 with interest at 9% per annum
during the period the plaintiff was not acting as a caretaker till
the date of payment. Defendants 1 to 3 urge the following
contentions :
E (a) In their written statement (filed in the specific
performance suit), their offer was to repay the amount
advanced was a conditional offer subject to the plaintiff not
obstructing the defendants from interfering with the property
or filing any frivolous, mischievous or vexatious suit and
F voluntarily handing over the possession of the property.
They had not unconditionally agreed to repay the sum of
Rs.3,50,000. As the plaintiff failed to hand over the
possession and obstructed the defendants from selling the
property, the offer to return the advance had stood
G withdrawn.
(b) During the pendency of the Original Side Appeals, the
plaintiff was permitting to continue in possession as
Receiver of the suit properties and she had reaped a huge
benefit of more than Rs.37,00,000 due to continuing in
H
SARADAMANI KANDAPPAN v. S. RAJALAKSHMI & 941
ORS. [R.V. RAVEENDRAN, J.]
possession for about 15 years. As the plaintiff was A
permitted to retain the said benefit, no further benefit ought
to have been given by directing refund of the sum of
Rs.3,50,000 with interest.
53. The fact that defendants 1 to 3 received Rs.2,25,000
8
out of the sale price of Rs.3,75,000 is not in dispute. Similarly,
there is no dispute that the fourth defendant had received a sum
of Rs.1,25,000 from the plaintiff and agreed to refund the said
amount if the sale remained unconcluded or if the agreement
of sale was cancelled. The division bench of the High Court
found fit to award the said amount, after affirming the decision C
rejecting the prayer for specific performance, in view of the offer
made by defendants 1 to 3 in their written statement to repay
the amounts received towards the sale consideration. We have
held that the time stipulated for payment of the balance price
by the plaintiff was the essence of the contract and when the D
same was not paid, defendants 1 to 3 were justified in
cancelling the sale agreement. But, we also found that there was
no provision in the agreement for forfeiture of the amounts
already paid, even in the event of breach by the purchaser. On
the other hand it provides that if the vendors did not satisfy the E
purchaser in regard to their title, the amounts received would
be refunded. The consistent case of the plaintiff was that the
defendants 1 to 3 failed to satisfy her about their title.
54. Further, defendants 1 to 3 in their written statement filed F
in the specific performance suit had agreed to refund all
amounts received by them from the plaintiff. It is true that the
offer was conditional upon the plaintiff not creating any
hindrance in the way of the defendants by filing false, frivolous
and mischievous suits. Though we have affirmed the decision G
of the learned Single Judge and the Division Bench that the
plaintiff is not entitled to the relief of specific performance, it
cannot be said that the plaintiff had filed false, frivolous and
mischievous suits. In view of the above, in terms of the
agreement and in terms of its offer, the plaintiff was entitled to 1
H
942 SUPREME COURT REPORTS (2011] 8 S.C.R.
A recover the amounts paid by her. A sum of Rs.2,25,000 was
paid under the agreement of sale to defendants 1 to 3. The
finding of the learned Single Judge that the sum of Rs.1,25,000
paid by the plaintiff to the fourth defendant was also the
consideration for the movables in addition to the consideration
B of Rs.3,75,000 under the agreement of sale, was not been
challenged by the defendants. In the circumstances, the Division
Bench was justified in granting a decree in favour of the plaintiff
for Rs.3,50,000 with interest. These appeals are therefore liable
to be dismissed.
C Conclusion :
55. In view of the foregoing the appeals and contempt
petitions are disposed of as follows:
D (i) C.A. Nos.7254-7256/2002 are allowed in part only
in regard to the rate of interest and period for which interest
is payable, with respect to the decretal amount of
Rs.3,50,000/-. We direct that respondents 1 to 3 shall
refund the sum of Rs.3,50,000/- to appellant as directed
by High Court, with interest at 12% per annum from
E
2.8.1981 to the date of payment. Subject to the aforesaid
modification in regard to the period for which interest is
payable and rate of interest, the judgment of the Division
Bench of the Madras High Court is upheld in its entirety.
F (ii) Contempt Petition Nos.28-29/2009 are dismissed.
(iii) C.A. Nos.4641-4642/2003 are dismissed.
(iv) Parties are directed to bear their respective costs.
G As a consequence, CS No. 170/1984 and CS No. 302/
1989 stand dismissed. CS No. 95/1984 is decreed in part in
favour of the appellant for Rs.3,50,000 with interest at 12% per
annum from 2.8.1981 to date of payment.
H D.G . Matters disposed of.
•
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