SMT. SWARNAM RAMACHANDRAN AND ANR.versusARAVACODE CHAKUNGAL JAYAPALAN

A             SMT. SWARNAM RAMACHANDRAN AND ANR.
                              v.
                ARAVACODECHAKUNGALJAYAPALAN

                               AUGUST 25, 2004
B
                  (ASHOK BHAN AND S.H. KAPADIA, JJ.j

         Indian Contract Act, 1872/Specific Relief Act, 1963 :

         Agreement for sale of land-Payment of consideration amount in
C instalments withinfv:ed period oftime-Delay in payment ofan instalment-
    Termination of the agreement by Vendors on ground of delay in payment
    when time was the essence-Petition filed by Vendee-Allowed by High
    Court-On appeal, Held : Onus to prove that time was essence of the
    contract lies on the party alleging it in order to provide an opportunity
D   to other side to adduce rebuttal evidence to the contrary-Real intention
    of the party has to be examined by the Courts-Vendor has no right to make
    time of the essence unless he is ready and willing to fulfil his part of the
    obligation and the vendee must be proved to be guilty ofsuch gross default
    in performing his part of obligation-No evidence adduced by the vendors
E   in support of the a/legations-However, time was extended by them-No
    unreasonable delay in payment of consideration amount by Vendee-
     Vendee was ready and willing to perform his part of the obligation-
    Hence, there was no justification to make time of the essence to rescind
    the agreement.

F      Appellant-vendors entered into an agreement for sale of a piece
  of land with a bungalow built thereon. Vendee-resondent paid certain
  amount as earnest money and had agreed to pay balance of consideration
  amount in instalments by the prescribed date subject to the provision
  of extension of time in the agreement. Respondent could not make
G payment of the instalments in time. Though respondent was called
  upon by the appellants to make the payment at the earliest yet time
  for making the consideration amount was extended by the appellants.
  Later they rescinded the contract on the ground that time was essence
  of the contract and that respondent had defaulted in making payment
H of consideration amount in time, and also forfeited the amount paid
                                        806
         SWARNAM RAMACHANDRAN v. A.C. JAYAPALAN                     807

by the respondent. Aggrieved, respondent filed a suit in the High A
Court, which was allowed by it. Hence the present appeal.

      It was contended for the appellants that parties intended to make
time as the essence of the contract since the agreement stipulated
specific dates for the payment of the purchase price; that since part B
of the purchase price was not paid on or bdore the stipulated time,
the appellants were justified in terminating the agreement; that in the
facts and circumstances of the case, any delay on the part of the
respondent disentitled him form the relief of specific performance; and
that the respondent was not ready and willing to perform his obligation. C

     Dismissing the appeal, the Court

     HELD : 1.1. Notwithstanding that a specific date was mentioned
in the agreement, one has not only to look at the letter but also at the
substance of the contract. Whether time is of essence is a question of D
fact and the real test is intention of the parties. It depends upon facts
and circumstances of !!ach case. [813-F]

      1.2. The onus to plead and prove that time was the essence of the
contract was on the person alleging it, thus giving an opportunity to E
the other side to adduce rebuttal evidence that time was not of essence.
When the plaintiff pleads that time was not of essence and the
defendant does not deny it by evidence, the Court is bound h accept
the plea of the plaintiff. In cases where notice is given making time of
the essence, it is the duty of the Court to examine the real intention F
of the party giving such notice by looking at the facts and circumstances
of each case. Vendor has no right to make time of the essence, unless
he is ready and willing to proceed to completion and secondly, when
the vendor purports to make time the essence, the purchaser be guilty
of such gross default as to entitle the vendor to rescind the contract.
In the light of these principles to the facts to the present case, there G
was no justification in claiming in the circumstances to treat time as
of the essence. [814-B-C-D]

     Indian Contract & Specific ReliefActs, (2001) by Pollock and Mulla,
12th Edition, page 1086, referred to.                                      H
    808                 SUPREME COURT REPORTS [2004] SUPP. 3 S.C.R.

A        1.4. There is nothing in the express stipulation in the agreement
   between the parties to show that the intention was to make the rights
  of the parties dependant upon the observance of the time limits. Prima
  facie, equity treats the importance of such time limits as being
  subordinate to the main purpose of the parties. The appellants orally
B agreed to extend the time for payment, at that time there was no
   agreement to make time the essence of the contract. This assertion has
   not been rebutted by them. No evidence in rebuttal has been led by the
   appellants. The conduct of the respondent was not a gross conduct so
   as to justify giving of notice making time the essence of the contract.
C On the contrary, time was extended by the appellants in furtherance
   of clause (8) of the agreement. In the circumstances, the Courts below
   rightly held that time was not of the essence. (814-E-F-G-H; 815-A]

         Jamshed Khodaram Irani v. Burjorji Dhunjibhai, AIR (1915) PC 83,
D   relied on.

         V Pechimuthu v. Gowrammal, [2001] 7 SCC 617 and K.S.
    Vidyanadam & Ors. v. Vairavan, (1997] 3 SCC 1, distinguished.

E       1.5. The Courts below have examined the evidence on record and
  have recorded a finding of fact that the respondent was in a position
  to raise the wherewithal for implementing the contract. However, on
  facts, it is clear that time to complete the sale was extended up to
  31.12.1981. That notice terminating the contract was given by the
F appellants on 3.10.1981 and the respondent had instituted the suit on
  2.12.1981 which indicates that respondent was eager to fulfil his part
  of the contract. There was no unreasonable delay in payment of
  consideration and, therefore, it cannot be said that the respondent was
  not ready and willing to perform his part of the contract. The Courts
G below were right in their conclusion that the respondent was always
  ready and willing to comply with his obligation under the contract, and
  have rightly decreed the suit for specific performance. [816-B-C-D-E]

          Nannapaneni Subayya Chowdary & Anr. v. Garikapati Veeraya &
H Anr., AIR (1957) AP 307, approved.
     SWARNAM RAMACHANDRAN v. A.C. JAYAPALAN [KAPADIA, J.)               809

     CIVIL APPELLATE JURISDICTION : Civil Appeal No. 4527 of A
2000.

     From the Judgment and Order dated 17.6.2000 of the Bombay High
Court in Appeal No. 813 of 1994 in Suit No. 1985 of 1981.
                                                                              B
    T.L. Viswanatha Iyer, P. Krishnamoorthy and K. R. Nambiar for the
Appellants.

     Dushyant A. Dave, P. Venugopal and P.S. Sudheer for the Respondent.

     The Judgment of the Court was delivered by
                                                                              c
      KAPADIA, J.: Being aggrieved by the suit for specific performance
being decreed, the defendants-vendors have filed this appeal by special
leave against judgment and order passed by the Division Bench of the D
Bombay High Court dated 17.6.2000 in Appeal No. 813of1994 confirming
the judgment of the learned Single Judge dated 3.10.1994.

     The facts giving rise to this civil appeal, briefly, are as follows:

      By an agreement for sale dated 18.2. 1981 entered into between E
appellants as vendors and respondent as purchaser, the appellants agreed
to sell all that piece or parcel of land admeasuring 481.25 square metres
bearing plot no. 423-C out of the larger piece of land bearing City Survey
No. 1285 (Part) of Suburban Scheme-III of Chembur with bungalow
bearing Municipal No. 113 7(2) standing thereon. (hereinafter for the sake F
of brevity referred to as "the suit property") for lump sum consideration
of Rs. 10,00,000. Prior to the execution of the agreement, the respondent
paid Rs. 1,00,000 as earnest money. Under clause (1) of the said agreement,
a sum of Rs. 1,25,000 was to be paid by the respondent within two months
from the date of the agreement i.e. by 18.4.1981 and the balance of Rs. G
7,75,000 was payable by him on completion of the sale i.e. by 31.8.1981.
Under clause (8) of the agreement, the sale was to be completed on or
before 31.8.1981. However, there was a proviso to clause (8) under which
an option was given to the appellants to extend the date of sale up to
31.12.198!.                                                                 H
    810                   SUPREME COURT REPORTS [2004] SUPP. 3 S.C.R.

A        On 31.3.1981, the respondent herein paid Rs. 50,000 by cheque to
  the appellants. By letter dated 3.9.1981, addressed by the appellants, it was
  alleged that Rs. 1,25,000 was payable by the respondent on or before
  18.4.1981; that the full amount was not paid; that the respondent was,
  therefore, called upon to make the balance payment of Rs. 75,000 within
B three days from the date of receipt of the said letter. However, by the said
  letter, time to complete the sale was extended by the appellants under
  clause (8) up to 31.12.1981. In reply, the respondent stated that out of
  Rs. 1,25,000, a sum of Rs. 50,000 had been paid on 31.3.1981, when it
  was agreed by and between the parties that the balance amount of Rs.
C 75,000 would be paid by 30.9.1981. By letter dated 12.9.1981, the
  appellants denied having agreed to receive the balance amount of Rs.
  75,000 , payable. on or before 18.4.1981, by 30.9.1981. At the same time,
  by the same letter dated 12.9.1981, the appellants agreed to accept the
  amount of Rs.75,000 on or before 30.9.1981 and purported to make time
  the essence for such payment. On 30.9.1981, the respondent's advocate
D forwarded .two cheques to the appellants i.e. cheque dated 29.9.1981 for
  Rs. 30,000 and another cheque dated 15.10.1981 for Rs. 45,000 (post-dated
  cheque). In the said letter, it was pointed out that the cheque for Rs. 45,000
  was post-dated as the respondent would be realizing the effects of certain
  cheques deposited by him in his account. By letter dated 3.10.1981, the
E appellants alleged that time to pay balance amount of Rs. 75,000 by
  30.9.1981 was made the essence of the contract; that since the respondent
   had failed to pay the said amount, the agreement for sale stood terminated.
   Consequently, the appellants forfeited the amounts paid .by the respondent
   under the agreement. By letter dated 17.10.1981, respondent herein
F contended that time was not the essence of the agreement; that the
   agreement had been terminated with malajide intentions; that the respondent
   had complied with all his obligations and that he was ready and willing
   to perfonn his obligations under the said agreement.

          In the circumstances, on 2.12.1981, the respondent herein instituted
G   suit no. 1985 of 1981 on the original side of the Bombay High Court. In
    the suit, the respondent alleged that sometime in the last week of March,
    1981, he was informed that the appellants desired to extend the date of
    completion of sale till 31.12.1981, to which he agreed; that on that occasion
    he paid Rs. 50,000 ; that it was agreed that in view of the postponement
H   of the ~ale, the part payment of Rs. 75,000 be made by 30.9.1981. That,
     SWARNAMRAMACHANDRAN v. A.C. JAYAPALAN [KAPADIA, J.] 811

in terms of the said arrangement, on 30.9.1981, the respondent forwarded A
his two cheques for Rs. 30,000 and Rs. 45,000 ; that cheque for Rs. 45,000
was. post dated as respondent would be realizing the effects of certain
cheques deposited by him by 15.10.1981. That contrary to the said
arrangement, the appellants vide notice dated 3.10.1981 illegally terminated
the agreement alleging that time to pay the balance amount by 30.9.1981 B
was the essence of the contract as indicated by the letter dated 12.9.1981;
that respondent was always ready and willing to perform his part of the
contract and in the circumstances, he was entitled to the decree for specific
performance.

      In the written statement, the appellants pleaded that there was delay C
in payment of Rs. 1,25,000 on or before 18.4.1981; that although time
was the essence of the contract and the same was communicated to the
respondent, he committed default and, therefore, the appellants were
entitled to terminate the agreement for sale and that the respondent was
neither entitled to the specific performance of the contract nor damages, D
as prayed for.

      On examination of the evidence on record, both documentary and
oral, the High Court found that on the plain reading of the agreement, the
same did not provide for time to be the essence; that circumstances did not E
exist enabling the appellants herein to make time the essence of the
contract. That there was no ground, whatsoever, made out in the
correspondence or in the written statement to suggest that the behaviour
of the respondent was such as to prompt the appellants to make time the
essence of the contract. That if causing delay was the grievance, how could F
the appellants justify their behaviour of extending the time for completion
of the sale till 31.12.1981 vide clause (8) of the agreement. That the very
letter dated 12.9.1981, which made time the essence for payment.of Rs.
75,000 by 30.9.1981, extended time for completion to 31.12.1981. That
the appellants had failed to prove that the respondent was guilty of such
grave defaults entitling the appellants to make time of the essence. That G
although several suggestions were made to the respondent, during his
cross-examination, as to the oral agreement between the parties, about time
being made the essence of the contract, no evidence was led by the
appellants. The appellants failed to rebut the assertion of the respondent
of the circumstances under which Rs. 50,000 was paid and the oral H
    812                  SUPREME COURT REPORTS (2004] SUPP. 3 S.C.R.

A arrangement to extend the time for payment of Rs. 75,000 up to 30.9.1981.
    In the circumstances, it was held that time was not made the essence of
    the contract; that the appellants were not justified in making time of the
    essence in the matter of payment of Rs. 75,000 .

B       Before the learned Single Judge, it was argued that the respondent
  has failed to prove, though he has so pleaded, that he was ready and willing
  to perform his part of the contract. In this connection, it was urged that
  the respondent .had sent a post dated cheque for Rs. 45,000 dated
  15.10.1981 which indicated that he had no funds on the due date i.e. on
  30.9.1981 and, therefore, he had failed to prove that he was ready and
C willing to perform his part of the contract. This plea of the appellants was
  rejected as the High Court found on evidence that time to pay Rs. 1,25,000
  was extended to 30.9.1981; that it cannot be argued that there was non-
  compliance on the part of the respondent when the appellants themselves
  extended the completion date to 31.12.1981. The learned Single Judge
D found that taking into account the overall conduct of the respondent, it can
  be said that the respondent was ready and willing to perform his part of
  the contract; that th!! agreement was wrongly terminated on 3. I 0 .1981 and
  the present suit was filed on 2.12.1981, which indicates that the respondent
  was eager to complete the transaction. In the above circumstances, the suit
E was decreed.

        Aggrieved, the appellants herein instituted LPA No. 813 of 1994,
    which was dismissed by the impugned judgment. Hence, this civil appeal.

          Mr. T.L. Viswanatha Iyer, learned senior counsel for the appellants
F contended that parties intended to make time the essence of the contract,
    since the agreement stipulated specific dates for the payment of the
    purchase price. That the appellants had vrlidly made time the essence of
    the contract on 12.9.1981 and since part of the purchase price was not paid
    on or before 30.9.1981, the appellants were justified in terminating the
G   agreement dated 18.2.1981. That the property in question consisted of a
    house in an urban area whose price rose continuously, which fact was
    relevant and which has not been taken into account by the High Court. It
    was urged that in the aforestated circumstances, any delay on the part of
    the respondent disentitled him from the relief of specific performance. In
H   this connection, reliance was placed on the judgment of this Court in the
     SWARNAM RAMACHANDRAN v. A.C. JAY AP ALAN [KAPADIA, J.]           813

case of K. s. Vidyanadam & Others v. Vairavan reported in [1997] 3 sec A
I]. It was urged that the appellants had made time essence of the payment
of Rs. 75,000 on or before 30.9.1981 of which the respondent was made
aware and, therefore, on failure to pay the said amount on due date, the
respondent herein had committed breach for which the appellants were
entitled to terminate the agreement. Learned counsel further submitted that B
the respondent, on his own evidence, was aware that he had to pay
Rs. 75,000 on or before 30.9.1981 and yet on that day, the respondent
forwards two cheques for Rs. 30,000 dated 29.9.1981 and the other for Rs.
45,000 dated 15.10.1981 which showed that respondent agreed to the term
of payment of Rs. 75,000 on or before 30.9.1981 and at the same time,
he was not ready and willing to perform his obligation. It was further urged C
that in his evidence, the respondent herein had conceded that he did not
have funds to pay Rs. 75,000 on 30.9.1981 which indicated that he was
not continuous ready and willing to fulfil his obligations. It was further
urged that under the agreement, an amount of Rs. 1,25,000 had to be paid
by 18.4.1981; that the said amount was not paid and that this lapse was D
sufficient ground for the appellants to make the time the essence of the
contract. In the circumstances, it was urged that the High Court had erred
in decreeing the suit for specific performance.

      The key issue which is to be decided in this civil appeal is : whether E
time was the essence for payment of Rs. 75,000 on or before 30.9.1981
and whether the said term was breached. This question does not depend
only upon express stipulation made by the parties, but it also depends upon
the intention of the parties. Notwithstanding that a specific date was
mentioned in the agreement, one has not only to look at the letter but also F
at the substance of the contract. Whether time is of essence is a question
of fact and the real test is intention of the parties. It depends upon facts
and circumstances of each case.

      According to Pollock & Mu/la's Indian Contract & Specific Relief
Acts, (2001) 12th Edition page 1086 the intention can be ascertained from: G

         i)    the express words used in the contract;

         ii)   the nature of the property which forms the subject matter of
               the contract;                                                H
    814                    SUPREME COURT REPORTS [2004] SUPP. 3 S.C.R.

A            iii)   the nature of the contract; and

             iv)    the surrounding circumstances.

        That time is presumed not to be of essence of the contract relating
B to immovable property, but it is of essence in contracts of reconveyance
  or renewal of lease. The onus to plead and prove that time was the essence
  of the contract was on the person alleging it, thus giving an opportunity
  to the other side to adduce rebutta I evidence that time was not of essence.
  That when the plaintiff pleads that time was not of essence and the
  defendant does not deny it by evidence, the Court is bound to accept the
C plea of the plaintiff. In cases where notice is given making time of the
  essence, it is duty of the Comt to examine the real intention of the party
  giving such notice by looking at the facts and circumstances of each case.
  That a vendor has no right to make time of the essence, unless he is ready
  and willing to proceed to completion and secondly, when the vendor
D purports to make time of the essence, the purchaser must be guilty of such
  gross default as to entitle the vendor to rescind the contract.

          Applying the above principles to the facts of the present case, we find
    that there was no justification in claiming, in the circumstances, to treat
E   time as of the essence. At the outset, referring to the original agreement
    dated 18.2.1981, there is nothing in the express stipuiation between the
    parties to show that the intention was to make the rights of the parties
    dependant upon the observance of the time limits. Primafacie, equity treats
    the importance of such time limits as being subordinate to the main purpose
F   of the parties. [See: Jamshed Khodaram Irani v. Burjorji Dhunjibhai
    reported in AIR (1915) PC 83].

          In the present case, it was submitted on behalf of the appellants that
    time to pay Rs. 75,000 on or before 30.9.1981 was made the essence of
    the contract by notice dated 12.9 .1981 as the respondent was a chronic
G   defaulter. We do not find any merit in this argument. In his evidence, the
    respondent asserted that when he paid Rs. 50,000 on 31.3.1981, the
    appellants orally agreed to extend the time for payment of Rs. 75,000 from
     18.4.1981 to 30.9.1981; that at that time there was no agreement to make
    time the essence of the contract. This assertion has not been rebutted by
H   the appellants. No evidence in rebuttal has been led by the appellants.
•(




          SWARNAM RAMACHANDRAN v. A.C. JAYAPALAN [KAPADIA, J.]            815

     Furthir, as rightly held by the Courts below, the conduct of the respondent A
     was not a gross conduct so as to justify giving of notice making time of
     the essence of the contract. That on the contrary, time was extended by
     the appellants in furtherance of clause (8) of the agreement up to
     31.12.1981. In the circumstances, we are in agreement with the conclusion
     that time was not of the essence.
                                                                                B
           Mr. Iyer, learned counsel for the appellants placed reliance on the
     judgment of this Court in V. Pechimuthu v. Gowrammal reported in [2001]
     7 sec 617 in support of his above contention that time was the essence
     of the contract. We do not find merit in this argument. Firstly, as stated C
     above, whether time is the essence of the contract would depend upon facts
     and circumstances of each case. It would depend on intention of the parties.
     Secondly, the facts of the above judgment show that the matter dealt with
     an agreement for reconveyance, which as stated above, presumes that time
     is of essence. We have referred to Contract Law by Mulla hereinabove,
     which states that in cases of reconveyance or renewal of lease, time is of D
     essence as a matter of presumption which is rebutable. Lastly, in the case
     of V. Pechimuthu (supra), it has been held that rise ia price of land agreed
     to be conveyed may be a relevant factor in denying relief of specific
     performance when Court is considering whether to grant decree_ for the first
     time. That it is not a relevant factor, however, before the Supreme Court E
     of India at SLP stage where all the Courts below have granted decree. It
      was, therefore, held that judgment of this Court in K. S. Vidyanadam
     (supra) was inapplicable. In the present case, the appellants, in any event,
      have not stepped into the witness box nor have they led evidence on any
     of their allegations. In the circumstances, we do not wish to burden this F
     judgment by citing various authorities.

          Mr. Iyer, learned counsel for the appellants next contended that the
     respondent has failed to prove that he was always and that he continued
     to be ready and willing to fulfil his obligations under the agreement as
     required by section 16 of the Specific Relief Act. It was urged that on G
     30.9.1981, the respondent herein offered two cheques to the appellants for
     Rs. 30,000 dated 29.9.1981 and a post dated cheque for Rs. 45,000 dated
     15.10.1981. That in his evidence, the respondent had conceded that he had
     no funds on 30.9.1981. That under section 16, the burden is on the
     respondent to show that he was always ready and willing to comply with H
    816                   SUPREME COURT REPORTS [2004] SUPP. 3 S.C.R.

A his obligations. Hence, it was urged that the Courts below erred in granting
    specific performance to the respondent.

       We do not find any merit in the above arguments. The Courts below
  have examined the evidence on record and have recorded a finding of fact
B that the respondent was in a position to raise the wherewithal for
  implementing the contract. However, on facts, it is clear that time to
  complete the sale was extended up to 31.12.1981. That notice terminating
  the contract was given by the appellants on 3.10.1981 and the respondent
  had instituted the suit on 2.12.1981 which indicates that respondent was
C eager to fulfil his part of the contract. That it is nobody's case that post
  dated cheque had bounced. That there was no unreasonable delay in
  payment of consideration and, therefore, it cannot be said that the
  respondent was not ready and willing to perform his part of the contract.

          In the case of Nannapaneni Subayya Chowdary & Another v.                   I
D   Garikapati Veeraya & Another reported in AIR (1957) AP 307 it has been
    held, after examining various authorities, that in the suit for specific
    performance, all that is necessary for the purchaser to show is that he was
    ready and willing to fulfil the terms of the agreement; that he had not
    abandoned the contract; that he had kept the contract subsisting. Applying
E   the above tests to the facts of the present case, we are of the view that the
    Courts below were right in their conclusion; that the respondent was always
    ready and willing to comply with his obligations under the contract. In the
    circumstances, the Courts below were right in decreeing the suit for
    specific performance.

F         Before concluding, it may be pointed out that under the impugned
    judgment, the respondent was ordered to deposit Rs. 75,000 payable under
    the second installment within eight weeks from 17.6.2000. Ifthe aforestated
    amount has been so deposited, the appellants herein would be entitled to
    withdraw the sarr..e with inte1est, if any.
G
         For the aforesaid reasons, we do not find any merit in this civil appeal,
    which is, accordingly, dismissed, with no order as to costs.

    S.K.S.                                                     Appeal dismissed