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Reportable

IN THE SUPREME COURT OF INDIA CIVIL APPELALTE JURISDICTION

CIVIL APPEAL Nos. 9949-9950  OF 2014 (Arising out of SLP (C) Nos.35800-35801 of 2011)

Rathnavathi & Another                   Appellant(s)

VERSUS

Kavita Ganashamdas                 Respondent(s)

J U D G M E N T

Abhay Manohar Sapre, J.

1. Leave granted.  

2. The plaintiff filed two suits, one for specific performance  

of agreement and other for grant of permanent injunction in  

relation  to  the  suit  house.  The  trial  court  vide  common  

judgment  and  decree  dated  16.10.2001  dismissed  both  the

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suits. The first appellate court, i.e., the High Court, in appeal,  

by impugned judgment and decree dated 08.09.2011 reversed  

the judgment and decree of the trial court and decreed both  

the suits in appeal, against the defendants.  Being aggrieved  

by the judgment and decree of the High Court, Defendants 1  

and 3 have approached this Court in the instant civil appeals.  

3. The question arises for consideration in these appeals is  

whether  the  High  Court  was justified  in  allowing  the  first  

appeals preferred by the plaintiff,  resulting in decreeing the  

two civil suits against defendants in relation to suit house?

4. In order to appreciate the controversy involved in the civil  

suits, and now in these appeals, it is necessary to state the  

relevant facts.  

5. For the sake of convenience, description of parties herein  

is taken from Original Suit No.223/2000.  

6. Defendant no.2 is the original  owner of  the suit house  

and defendant no.1 is the subsequent purchaser of the suit  

house from defendant no.2.

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7. The dispute relates to a dwelling house bearing no. 351  

Block no.11, Matadahalli Extension, now known as R.T. Nagar  

Bangalore (hereinafter referred to as " the suit house “).

8. The suit house was purchased by defendant no. 2 from  

Bangalore  Development  Authority  (in  short  “BDA”)  in  a  

scheme.   On 15.02.1989,  Defendant  no.  2  entered  into  an  

agreement (Annexure-P-1) with plaintiff for sale of suit house  

at a total consideration of Rs. 3,50,000/-. In terms of clause 2  

of the agreement, the plaintiff paid a sum of Rs. 50,000/- as  

advance  towards  sale  consideration.  These  facts  are  not  in  

dispute.

9. On 07.01.2000, the plaintiff filed a civil suit being OS No.  

223/2000,  initially  against  3  defendants  for  seeking  

permanent  injunction restraining the defendants  jointly  and  

severally from interfering in plaintiff's possession over the suit  

house. In substance, case of the plaintiff was that she entered  

into  an  agreement  on  15.02.1989  with  defendant  no.  2  to  

purchase the suit house for Rs. 3,50,000/- and paid a sum of  

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Rs. 50,000/- to defendant no. 2 by way of advance towards the  

sale consideration. Later, the plaintiff further paid the balance  

consideration  of  Rs.  3  Lacs  towards  the  sale  price  and  

obtained receipts acknowledging the payment so made. It was  

alleged  that  the  plaintiff  was  accordingly  placed  in  actual  

physical possession of the suit house and since then she has  

been in possession of the suit house. It was alleged that she  

also made some improvements therein by spending money and  

is  paying  electricity  and  water  charges  etc.  It  was  further  

alleged that the plaintiff was and has always been ready and  

willing to perform her part of  the agreement to get the sale  

deed executed in her favour after having performed her part of  

the contract. However, defendant no. 2, for the reasons best  

known to her,  did not execute the sale deed despite having  

received the full sale consideration from the plaintiff.  It was  

alleged that defendant no. 1, who is a total stranger to the suit  

house and having no right, title and interest in the suit house,  

on 2.1.2000 visited the suit house along with defendant no. 2  

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and  some  other  unwanted  elements  and  threatened  the  

plaintiff  to  dispossess  her  from the  suit  house.  It  was also  

alleged that on 8.1.2000, defendant nos. 1 and 2 again visited  

and  attempted  to  assault  the  plaintiff  and  unsuccessfully  

attempted to commit trespass in the suit house.  

10. On seeing the hostile attitude of defendant nos. 1 and 2  

and  their  associates,  the  plaintiff  immediately  lodged  a  

complaint  in  the  concerned  police  station.  Since  police  

authorities did not take any action, which was required of, the  

plaintiff filed the aforesaid civil suit for permanent injunction  

restraining  the  defendants  from  interfering  in  her  peaceful  

possession  over  the  suit  house.  It  was  submitted  that  the  

plaintiff  has  a  prima  facie case,  so  also  the  balance  of  

convenience and irreparable loss in her favour, which entitles  

her to claim permanent injunction against the defendants in  

relation to the suit house. The plaintiff also averred that she  

reserved  her  right  to  file  a  suit  for  specific  performance  of  

agreement against the defendants.  

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11. The aforesaid suit was contested by defendant nos. 1 and  

2.  While admitting the ownership of defendant no. 2 over the  

suit house and the fact of entering into an agreement with the  

plaintiff for its sale to the plaintiff and further while admitting  

the  receipt  of  advance  payment  of  Rs  50,000/-  from  the  

plaintiff, the defendants denied all material allegations made  

in the plaint. It was alleged that the plaintiff did not pay the  

balance  consideration  as  alleged.  It  was  also  alleged  that  

defendant  no.  2  on  25.10.1995  cancelled  the  agreement  dt  

15.02.1989 by sending legal notice to the plaintiff  and then  

sold the suit house to defendant no. 1 on 09.02.1998 for Rs. 4  

lacs and placed her in its possession.  

12. On 31.03.2000, the plaintiff filed another civil suit being  

OS  No.  2334  of  2000  in  the  Court  of  City  Civil  Judge  

Bangalore against the defendants for specific performance of  

agreement dated 15.02.1989 in relation to the suit house.  

13. After pleading the same facts, which are set out above,  

the plaintiff further alleged that she has performed her part of  

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the  agreement  by  paying  entire  sale  consideration  of  Rs.  

3,50,000/- and has been in possession of the suit house. It  

was alleged that  on the one hand, defendant no.  2, despite  

having  received full  sale  consideration,  did not  perform her  

part of the agreement by not getting the suit house transferred  

in plaintiff's favour as per clause 3 of the agreement and by  

doing  the  acts  which  she  was  expected  to  do  in  terms  of  

agreement,  and  on  the  other  hand,  tried  to  interfere  in  

plaintiff's lawful possession over the suit house.

14. This led the plaintiff to serve upon defendant no.2 a legal  

notice dated 6.3.2000 thereby calling upon defendant no.2 to  

execute the sale deed in relation to suit property in plaintiff's  

favour. Since despite service of legal notice, defendant no. 2  

failed to execute the same, suit for specific performance was  

also filed. The plaintiff then by way of amendment also sought  

to add one prayer for cancellation of sale deed alleged to have  

been executed by defendant no. 2 in favour of defendant no. 1.  

This amendment was allowed.  

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15. The defendants contested the civil suit. While admitting  

the execution of agreement dated 15.02.1989 with the plaintiff  

for sale of suit house for Rs. 3,50,000/- and also admitting  

payment of Rs. 50,000/- by the plaintiff to defendant no. 2,  

the defendants denied all other material allegations and inter  

alia alleged that since the plaintiff  failed to pay the balance  

sale consideration of Rs. 3 lacs to defendant no. 2 in terms of  

the  agreement,  defendant  no.  2  on 25.10.1995 sent  a legal  

notice  to  the  plaintiff  cancelling  the  agreement  dated  

15.2.1989  and  sold  the  suit  house  to  defendant  no.  1  on  

09.02.1998 for consideration and placed her in possession of  

the suit house. The defendants also alleged that defendant no.  

1 was the  bona fide purchaser for value and hence her title  

cannot be questioned in the suit.  

16. The  defendants  also  contested  the  suit  on  two  legal  

grounds.  Firstly,  it  was  contended  that  the  suit  was  not  

maintainable, as the bar contained in Order II Rule 2 of Code  

of Civil Procedure, 1908 (hereinafter referred to as 'CPC') did  

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not permit the plaintiff to file the suit for specific performance  

of agreement in question against the defendants. It was alleged  

that  relief  to  claim  specific  performance  of  agreement  was  

available to the plaintiff when she filed the first suit (OS No.  

223/2000) for permanent injunction against the defendants.  

Yet,  the  plaintiff  failed  to  claim  the  relief  in  the  first  suit,  

consequently,  the  second  suit  filed  to  claim  specific  

performance of agreement in question is hit by rigor contained  

in Order II Rule 2 of CPC. It is now barred and hence liable to  

be dismissed as not maintainable. Secondly, it was contended  

that the suit is otherwise barred by limitation having been filed  

beyond the period of three years from the date of accrual of  

cause of action as provided in Article 54 of the Limitation Act,  

1963. It was, therefore, contended that the suit is liable to be  

dismissed as being barred by limitation, as well.

17. The  trial  court  consolidated  both  the  suits  for  trial.  

Issues were framed. Parties adduced evidence. The trial court  

vide judgment/decree dated 25.8.2009 though answered some  

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issues in plaintiff's favour but eventually dismissed the civil  

suits. It was held that the agreement dated 15.02.1989 was  

executed between the plaintiff and defendant no. 2 for sale of  

suit house; that the plaintiff was not placed in possession of  

suit  house  pursuant  to  agreement  in  question;  that  the  

plaintiff was not ready and willing to perform her part of the  

agreement; that suit is barred by limitation; that the plaintiff  

was not entitled to claim the relief for specific performance of  

agreement; that the plaintiff was not entitled to claim the relief  

for grant of permanent injunction; that defendant no. 1 is a  

bona  fide purchaser  of  the  suit  house  for  value;   that  the  

plaintiff  was  not  entitled  to  challenge  the  sale  deed  dt.  

9.2.1998, that the suit was hit by the bar contained in Order II  

Rule 2 of CPC because the plaintiff did not obtain leave to file  

second suit for specific performance while filing the first suit  

for grant of permanent injunction against the defendants in  

relation to the suit house.  

18. Feeling  aggrieved,  the  plaintiff  filed  two  regular  first  

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appeals  being  R.F.A.  Nos.  1092 of  2009 and 1094 of  2009  

before  the  High  Court.  By  common  impugned  

judgment/decree,  the  High Court  allowed both the  appeals,  

reversed the judgment/decree of the trial court and decreed  

both  the  civil  suits  by  passing  a  decree  for  specific  

performance of agreement against the defendants in relation to  

suit house and also issued permanent injunction as claimed  

by  the  plaintiff.  The  High  Court  answered  all  the  

aforementioned  issues  in  plaintiff's  favour  and  against  the  

defendants.  

19. The High Court in its judgment held that the plaintiff was  

in possession of suit house; that the plaintiff  performed her  

part of  the agreement; that the plaintiff  paid the entire sale  

consideration of Rs. 3,50,000/- to defendant no. 2; that the  

plaintiff  was  ready  and  willing  to  perform  her  part  of  

agreement; that defendant no. 2 failed to perform her part of  

the agreement thereby rendering her liable to perform her part  

of  agreement;  and  that  subsequent  sale  even  if  made  by  

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defendant no. 2 in favour of defendant no. 1 was not binding  

on the plaintiff because it was not bona fide.

20. The  High  Court,  however,  after  deciding  the  issues  in  

favour  of  the  plaintiff,  directed  that  in  order  to  weigh  the  

equities  between  the  parties  and  keeping  in  view  the  price  

escalation, which is unavoidable in present days, the plaintiff  

will pay an additional sum of Rs. 4 lacs over and above Rs.  

3,50,000/- to defendant no. 2 for obtaining sale deed in her  

favour.  

21. It is against this judgment/decree of the High Court, the  

defendants have filed the present appeals by way of  special  

leave petitions.  

22. Mrs.  Nalini  Chidambaram,  learned  Senior  Counsel  

appearing for the appellants (defendants) while assailing the  

legality  and  correctness  of  the  impugned  judgment  urged  

various submissions.  Firstly, she argued that the High Court  

erred in allowing plaintiff's first appeals, as according to her,  

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both the appeals were liable to be dismissed by upholding the  

judgment  /decree  of  the  trial  court  which  had  rightly  

dismissed the  suits.  Secondly,  she  argued that  second  suit  

filed  for  claiming  specific  performance  of  the  agreement  for  

sale of suit house to the plaintiff was hit by bar contained in  

Order II Rule 2 of CPC for the reason that the plaintiff failed to  

secure leave in her first suit and hence the second suit filed by  

the  plaintiff  for  grant  of  specific  performance  was  not  

maintainable.  Thirdly,  she argued that assuming the second  

suit  was  held  maintainable,  even  then  it  was  barred  by  

limitation prescribed in Article 54 of the Limitation Act. It was  

pointed  out  that  cause  of  action  to  file  suit  for  specific  

performance of contract against the defendants arose in the  

year 1989 itself  no sooner  60 days period expired from the  

date of agreement as provided in clause 2 of the agreement,  

whereas, the suit in question seeking specific performance was  

filed in year 2000 and hence, it was hopelessly barred applying  

the limitation prescribed in Article 54. Fourthly, it was argued  

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that in any case, there was no case made out on evidence by  

the  plaintiff  for  reversal  of  the  findings  relating  to  grant  of  

specific  performance of  agreement because the  plaintiff  was  

neither ready nor willing to perform her part of the agreement  

and nor there was any evidence to hold in her favour on this  

material issue. Fifthly, she argued that there was no evidence  

to hold that the plaintiff was in possession of the suit house;  

rather there was enough evidence to hold that after sale of suit  

house by defendant no.2 to defendant no.1, it was defendant  

no.1, who was in possession. Therefore, it should have been  

held that the plaintiff was not in possession of the suit house,  

as was rightly held by the trial court. And,  lastly she argued  

that it  should have been held with the aid of  evidence that  

defendant no. 1 was bona fide purchaser of the suit house for  

value, as she purchased it after the owner i.e. defendant no. 2  

cancelled the agreement dt 15.2.1989 and then sold the suit  

house to defendant no. 1.  

23. After arguing at length with reference to documents on  

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record,  learned  counsel  for  the  appellants  contended  that  

impugned judgment /decree deserves to be set aside and that  

of the trial court be restored by dismissing both the suits filed  

by  the  plaintiff.  Learned  counsel  also  relied  upon  certain  

decisions, which we shall refer later.

24. Mr.  P.  Vishwanatha  Shetty,  learned  senior  counsel  for  

the  respondent  (plaintiff)  supported  the  impugned  

judgment /decree and contended that it does not call for any  

interference.  According  to  learned  senior  counsel,  all  the  

findings  recorded  by  the  High  Court,  though  of  reversal,  

deserve to be upheld because the High Court, in exercise of its  

first  appellate  powers  under  Section  96  of  CPC,  rightly  

appreciated  the  evidence  and  came  to  its  independent  

conclusion which it could legally do and which it rightly did  

while allowing the two first appeals.  Learned senior counsel  

urged that this Court while hearing these appeals cannot and  

rather should not undertake the exercise of appreciating the  

whole evidence again like that of the first appeal except to find  

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out whether there is any apparent legal error in the impugned  

judgment  so  as  to  call  for  any  interference  by  this  Court.  

Learned senior counsel submitted that no such error exists in  

the impugned judgment and hence these appeals are liable to  

be dismissed.  

25. Having  heard  the  learned  counsel  for  the  parties  at  

length and upon perusal of the record of the case, we find no  

merit  in  these  appeals  as  in  our  considered  opinion,  the  

submissions  urged  by  the  learned  senior  counsel  for  the  

appellants, though argued ably, have no force.

26. Coming  first  to  the  legal  question  as  to  whether  bar  

contained in Order II Rule 2 of CPC is attracted so as to non-  

suit the plaintiff from filing the suit for specific performance of  

the  agreement,  in  our  considered  opinion,  the  bar  is  not  

attracted   

27. At the outset, we consider it apposite to take note of law  

laid down by the Constitution bench of this Court in Gurbux  

Singh v.  Bhooralal,  AIR 1964 SC 1810, wherein this Court  

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while explaining the true scope of Order II Rule 2 of CPC laid  

down the parameters as to how and in what circumstances, a  

plea should be invoked against the plaintiff.  Justice Ayyangar  

speaking for the Bench held as under:

“In order that a plea of a bar under Order 2 Rule 2(3)  of  the  Civil  Procedure  Code  should  succeed  the  defendant who raises the plea must make out (1) that  the second suit was in respect of the same cause of  action as that on which the previous suit was based;  (2) that in respect of that cause of action the plaintiff  was entitled to more than one relief; (3)that being thus  entitled to more than one relief  the plaintiff,  without  leave obtained from the Court omitted to sue for the  relief for which the second suit had been filed.  From  this  analysis  it  would  be  seen  that  the  defendant  would have to establish primarily and to start with, the  precise cause of action upon which the previous suit  was  filed,  for  unless  there  is  identity  between  the  cause of action on which the earlier suit was filed and  that on which the claim in the later suit is based there  would be no scope for the application of the bar…..”

     (Emphasis supplied)

28. This  Court  has  consistently  followed  the  aforesaid  

enunciation of law in later years and reference to only one of  

such recent decisions in  Virgo Industries (Eng.) P. Ltd. Vs  

Venturetech  Solutions  P.  Ltd.,  (2013)  1  SCC  625,  would  

suffice,  wherein this Court reiterated the principle of law in  

following words:

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“The  cardinal  requirement  for  application  of  the  provisions  contained  in  Order  II  Rules  2(2)  and  (3),  therefore, is that the cause of action in the later suit  must be the same as in the first suit. It will be wholly  unnecessary to enter into any discourse on the true  meaning of  the said expression, i.e.  cause of action,  particularly,  in  view  of  the  clear  enunciation  in  a  recent judgment of this Court in the Church of Christ  Charitable Trust and Educational Charitable Society,  represented  by  its  Chairman  v.  Ponniamman  Educational  Trust  represented  by  its  Chairperson/Managing  Trustee  JT 2012 (6)  SC 149.  The huge number of opinions rendered on the issue  including the judicial pronouncements available does  not  fundamentally  detract  from  what  is  stated  in  Halsbury's  Laws  of  England,  (4th  Edition).  The  following  reference  from  the  above  work  would,  therefore, be apt for being extracted herein below:

“ ‘Cause of Action’ has been defined as meaning simply  a  factual  situation  existence  of  which  entitles  one  person  to  obtain  from  the  Court  a  remedy  against  another person.  The phrase has been held from the  earliest time to include every fact which is material to  be proved to entitle the Plaintiff to succeed, and every  fact which a Defendant would have a right to traverse.  'Cause of  action’  has also  been  taken  to  mean that  particular action on the part of the Defendant which  gives  the  Plaintiff  his  cause  of  complaint,  or  the  subject-matter  of  grievance  founding  the  action,  not  merely the technical cause of action.”

29. In the instant case when we apply the aforementioned  

principle, we find that bar contained in Order II Rule 2 is not  

attracted because of the distinction in the cause of action for  

filing the two suits. So far as the suit for permanent injunction  

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is concerned, it was based on a threat given to the plaintiff by  

the  defendants  to  dispossess  her  from  the  suit  house  on  

2.1.2000 and 9.1.2000. This would be clear from reading Para  

17  of  the  plaint.  So  far  as  cause  of  action  to  file  suit  for  

specific performance of agreement is concerned, the same was  

based on non performance of agreement dated 15.2.1989 by  

defendant no. 2 in plaintiff's favour despite giving legal notice  

dated 6.3.2000 to defendant no. 2 to perform her part.  

30. In our considered opinion, both the suits were, therefore,  

founded on different causes of action and hence could be filed  

simultaneously. Indeed even the ingredients to file the suit for  

permanent  injunction are different  than that  of  the suit  for  

specific performance of agreement   

31. In case of former, plaintiff  is required to make out the  

existence  of  prima  facie case,  balance  of  convenience  and  

irreparable loss likely to be suffered by the plaintiff on facts  

with reference to the suit property as provided in Section 38 of  

the  Specific  Relief  Act,  1963  (in  short  “the  Act”)  read  with  

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Order 39 Rule 1 & 2 of CPC. Whereas, in case of the later,  

plaintiff  is  required  to  plead  and  prove  her  continuous  

readiness and willingness to  perform her  part  of  agreement  

and to further prove that defendant failed to perform her part  

of the agreement as contained in Section 16 of The Act.

32. One of the basic requirements for successfully invoking  

the plea of Order II Rule 2 of CPC is that the defendant of the  

second suit must be able to show that the second suit was  

also in respect of the same cause of action as that on which  

the previous suit was based.  

33. As  mentioned  supra,  since  in  the  case  on  hand,  this  

basic requirement in relation to cause of action is not made  

out, the defendants (appellants herein) are not entitled to raise  

a  plea  of  bar  contained  in  Order  II  Rule  2  of  CPC  to  

successfully non suit the plaintiff from prosecuting her suit for  

specific performance of the agreement against the defendants.

34. Indeed when the cause of action to claim the respective  

reliefs were different so also the ingredients for claiming the  

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reliefs, we fail to appreciate as to how a plea of Order II Rule 2  

could be allowed to be raised by the defendants and how it  

was sustainable on such facts.

35. We  cannot  accept  the  submission  of  learned  senior  

counsel for the appellants when she contended that since both  

the suits were based on identical pleadings and when cause of  

action to sue for relief  of  specific  performance of agreement  

was available to the plaintiff prior to filing of the first suit, the  

second suit was hit by bar contained in Order II Rule 2 of CPC.

36. The  submission  has  a  fallacy  for  two  basic  reasons.  

Firstly,  as  held  above,  cause  of  action  in  two  suits  being  

different, a suit for specific performance could not have been  

instituted  on  the  basis  of  cause  of  action  of  the  first  suit.  

Secondly, merely because pleadings of both suits were similar  

to some extent did not give any right to the defendants to raise  

the plea of bar contained in Order II Rule 2 of CPC. It is the  

cause of action which is material to determine the applicability  

of bar under Order II Rule 2 and not merely the pleadings. For  

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these reasons, it was not necessary for plaintiff to obtain any  

leave from the court as provided in Order II Rule 2 of CPC for  

filing the second suit.

37. Since the plea of  Order II  Rule 2, if  upheld, results in  

depriving the plaintiff to file the second suit, it is necessary for  

the court to carefully examine the entire factual matrix of both  

the suits, the cause of action on which the suits are founded,  

reliefs claimed in both the suits and lastly the legal provisions  

applicable for grant of reliefs in both the suits.  

38. In the light of foregoing discussion, we have no hesitation  

in upholding the finding of the High Court on this issue. We,  

therefore, hold that second suit (OS No. 2334 of 2000) filed by  

the  plaintiff  for  specific  performance  of  agreement  was  not  

barred by virtue of bar contained in Order II Rule 2 CPC.

39. This takes us to the next question as to whether suit for  

specific  performance  was  barred  by  limitation  prescribed  

under Article 54 of the Limitation Act?

40. In order to examine this question, it is necessary to first  

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see the law on the issue as to whether time can be the essence  

for  performance  of  an  agreement  to  sell  the  immovable  

property and if so whether plaintiff in this case performed her  

part within the time so stipulated in the agreement?

41. The learned Judge J.C. Shah (as His Lordship then was),  

speaking  for  the  Bench  examined  this  issue  in  

Gomathinayagam Pillai and Ors. Vs. Pallaniswami Nadar,  

AIR  1967  SC  868,  in  the  light  of  English  authorities  and  

Section 55 of the Contract Act and held as under:

“It is not merely because of specification of time at or  before which the thing to be done under the contract is  promised  to  be  done  and  default  in  compliance  therewith, that the other party may avoid the contract.  Such  an  option  arises  only  if  it  is  intended  by  the  parties  that  time  is  of  the  essence  of  the  contract.  Intention to make time of the essence, if expressed in  writing, must be in language which is unmistakable :  it may also be inferred from the nature of the property  agreed  to  be  sold,  conduct  of  the  parties  and  the  surrounding circumstances at or before the contract.  Specific  performance  of  a  contract  will  ordinarily  be  granted,  notwithstanding  default  in carrying out  the  contract within the specified period, if having regard to  the express stipulations of the parties, nature of the  property and the surrounding circumstances, it is not  inequitable to grant the relief. If the contract relates to  sale  of  immovable  property,  it  would  normally  be  presumed  that  time  was  not  of  the  essence  of  the  contract. Mere incorporation in the written agreement  

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of a clause imposing penalty in case of default does not  by  itself  evidence  an  intention  to  make  time  of  the  essence.  In  Jamshed  Khodaram  Irani  v.  Burjorji  Dhunjibhai I.L.R. 40 Bom. 289 the Judicial Committee  of  the  Privy  Council  observed  that  the  principle  underlying S. 55 of the Contract Act did not differ from  those  which  obtained  under  the  law  of  England  as  regards  contracts  for  sale  of  land.  The  Judicial  Committee observed :

"Under that law equity, which governs the rights of the  parties in cases of specific performance of contracts to  sell  real  estate,  looks  not  at  the  letter  but  at  the  substance  of  the  agreement  in  order  to  ascertain  whether the parties, notwithstanding that they named  a specific  time within which completion was to take  place, really and in substance intended more than that  it should take place within a reasonable time.... Their  Lordships are of opinion that this is the doctrine which  the section of the Indian Statute adopts and embodies  in reference to sales of land. It may be stated concisely  in  the  language  used  by  Lord  Cairns  in  Tilley  v.  Thomas I.L.R. (1867) Ch. 61 :-

‘The construction is, and must be, in equity the same  as  in  a  Court  of  law.  A Court  of  equity  will  indeed  relieve  against,  and  enforce,  specific  performance,  notwithstanding a failure to keep the dates assigned  by the contract, either for completion, or for the steps  towards completion,  if  it  can do justice  between the  parties, and if (as Lord Justice Turner said in Roberts  v. Berry (1853) 3 De G.M. G. 284, there is nothing in  the  'express  stipulations  between  the  parties,  the  nature  of  the  property,  or  the  surrounding  circumstances,'  which  would  make  it  inequitable  to  interfere with and modify the legal right. This is what  is meant, and all that is meant, when it is said that in  equity time is not of the essence of the contract. Of the  three  grounds...  mentioned  by  Lord  Justice  Turner  'express  stipulations'  requires  no  comment.  The  'nature of  the  property'  is  illustrated by the case  of  

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reversions,  mines,  or  trades.  The  'surrounding  circumstances'  must  depend  on  the  facts  of  each  particular case."

42. In  Govind  Prasad  Chaturvedi  Vs.  Hari  Dutt  Shastri  

and Anr., (1977) 2 SCC 539, this Court placing reliance on the  

law laid down in  Gomathinayagam Pillai  (supra), reiterated  

the aforesaid principle and held as under:

“…….It may also be mentioned that the language used  in  the  agreement  is  not  such  as  to  indicate  in  unmistakable terms that the time is of the essence of  the contract. The intention to treat time as the essence  of  the  contract  may  be  evidenced  by  circumstances  which  are  sufficiently  strong  to  displace  the  normal  presumption  that  in  a  contract  of  sale  of  land  stipulation  as  to  time  is  not  the  essence  of  the  contract. Apart from the normal presumption that in the case of  an agreement of sale of immovable properly time is not  the essence of the contract and the fact that the terms  of the agreement do not unmistakably state that the  time was understood to be the essence of the contract  neither  in  the  pleadings  nor  during  the  trial  the  respondents contended that time was of the essence of  the contract.”

43. Again in the case reported in Smt. Chand Rani vs. Smt.  

Kamal Rani, (1993) 1 SCC 519, this Court placing reliance on  

law  laid  down  in  aforementioned  two  cases  took  the  same  

view.  Similar  view was  taken with  more  elaboration  on the  

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issue in K.S.  Vidyanadam and Ors.  v.  Vairavan,  (1997)  3  

SCC 1, wherein it was held as under:

“It has been consistently held by the courts in India,  following certain early English decisions,  that  in the  case  of  agreement  of  sale  relating  to  immovable  property,  time is  not  of  the  essence  of  the  contract  unless specifically provided to that effect. The period of  limitation prescribed by the Limitation Act for filing a  suit is three years. From these two circumstances, it  does  not  follow that  any  and every  suit  for  specific  performance of the agreement (which does not provide  specifically that time is of the essence of the contract)  should be decreed provided it is filed within the period  of limitation notwithstanding the time-limits stipulated  in the agreement for doing one or the other thing by  one or the other party. That would amount to saying  that  the time-limits prescribed by the parties  in the  agreement have no significance or value and that they  mean  nothing.  Would  it  be  reasonable  to  say  that  because time is not made the essence of the contract,  the time-limit (s) specified in the agreement have no  relevance and can be ignored with impunity? It would  also mean denying the discretion vested in the court  by both Sections 10 and 20.  As held by a Constitution  Bench of this Court in  Chand Rani vs. Kamal Rani  (1993) 1 SCC 519:   “....it  is  clear  that  in  the  case  of  sale  of  immovable  property there is no presumption as to time being the  essence of the contract. Even if it is not of the essence  of  the contract, the Court may infer  that it  is to be  performed in a reasonable time if  the conditions are  (evident?) : (1) from the express terms of the contract;  (2) from the nature of the property; and (3) from the  surrounding circumstances, for example, the object of  making the contract.”

In  other  words,  the  court  should  look  at  all  the  relevant  circumstances  including  the  time-limit(s)  

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specified in the agreement and determine whether its  discretion  to  grant  specific  performance  should  be  exercised. Now in the case of urban properties in India,  it is well-known that their prices have been going up  sharply over the last few decades - particularly after  1973.

“……Indeed, we are inclined to think that the rigor of  the  rule  evolved  by  courts  that  time  is  not  of  the  essence  of  the  contract  in  the  case  of  immovable  properties - evolved in times when prices and values  were stable and inflation was unknown - requires to be  relaxed,  if  not  modified,  particularly  in  the  case  of  urban immovable  properties.  It  is  high  time,  we  do  so…...”

The aforesaid  view was upheld  in  K. Narendra vs.  Riviera  

Apartments (P) Ltd. (1999) 5 SCC 77.

44. Applying the aforesaid principle of law laid down by this  

Court to the facts of the case at hand, we have no hesitation in  

holding that the time was not the essence of agreement for its  

performance and the parties too did not intend that it should  

be so.

45. Clauses 2 and 3 of the agreement (Annexure P-1), which  

are relevant to decide this question reads as under:

“2.  The  purchaser  shall  pay  a  sum  of  Rs.50,000/-  (Rupees Fifty Thousand only) as advance to the seller  at the time of  signing this agreement,  the receipt  of  which the seller hereby acknowledges and the balance  

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sale  consideration  amount  shall  be  paid  within  60  days from the date of expiry of lease period.

3. The Seller covenants with the Purchaser that efforts  will  be  made  with  the  Bangalore  Development  Authority for the transfer of the schedule property in  favour of the Purchaser after paying penalty.  In case it  is not possible then the time stipulated herein for the  balance  payment  and  completion  of  the  sale  transaction  will  be  agreed  mutually  between  the  parties.”

46. Reading both the clauses together, it is clear that time to  

perform the agreement was not made an essence of contract  

by  the  parties  because  even after  making balance  payment  

after the expiry of lease period, which was to expire in 1995,  

defendant no. 2 as owner had to make efforts to transfer the  

land in the name of plaintiff. That apart, we do not find any  

specific  clause  in  the  agreement,  which  provided  for  

completion of its execution on or before any specific date.

47. Since it was the case of the plaintiff  that she paid the  

entire  sale  consideration  to  defendant  no.  2  and  was  

accordingly placed in possession of the suit house, the threat  

of her dispossession in 2000 from the suit house coupled with  

the fact that she having come to know that defendant no. 2  

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was  trying  to  alienate  the  suit  house,  gave  her  a  cause  of  

action to serve legal  notice  to  defendant  no.  2 on 6.3.2000  

calling upon defendant no. 2 to perform her part and convey  

the title in the suit house by executing the sale deed in her  

favour.  Since defendant no.  2 failed to convey the title,  the  

plaintiff filed a suit on 31.3.2000 for specific performance of  

the agreement.

48. Article  54  of  the  Limitation  Act  which  prescribes  the  

period  of  limitation  for  filing  suit  for  specific  performance  

reads as under:  

54. For specific  performance of a  contract.

Three  years

The date of fixed for the  performance, or, if no such date is  fixed, when the plaintiff has notice  that performance is refused.

49. Mere reading of  Article  54 of  the Limitation Act  would  

show that if the date is fixed for performance of the agreement,  

then non-compliance of the agreement on the date would give  

a cause of action to file suit for specific performance within  

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three years from the date so fixed.  However,  when no such  

date is fixed, limitation of three years to file a suit for specific  

performance would begin when the plaintiff has noticed that  

the defendant has refused the performance of the agreement.  

50. The  case  at  hand  admittedly  does  not  fall  in  the  first  

category  of  Article  54  of  the  Limitation  Act  because  as  

observed  supra,  no  date  was fixed  in  the  agreement  for  its  

performance. The case would thus be governed by the second  

category viz.,  when plaintiff has a  notice that performance is   

refused.  

51. As mentioned above, it was the case of the plaintiff that  

she came to know on  02.01.2000 and 09.01.2000 that the  

owner  of  the  suit  house  along  with  the  so-called  intending  

purchaser are trying to dispossess her from the suit house on  

the strength of their ownership over the suit house. This event  

was,  therefore,  rightly  taken  as  starting  point  of  refusal  to  

perform the agreement by defendant no.2, resulting in giving  

notice to defendant no.2 by the plaintiff on 6.3.2000 and then  

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filing of suit on 31.3.2000.   

52. In the light of  the foregoing discussion,  we uphold the  

findings of the High Court and accordingly hold that the suit  

filed by the plaintiff for specific performance of the agreement  

was  within  limitation  prescribed  under  Article  54  of  the  

Limitation Act.

53. This takes us to the last question as to whether the High  

Court  was  justified  in  granting  specific  performance  of  

agreement  in  plaintiff's  favour  by  reversing  the  

judgment/decree of  the trial  court which had dismissed the  

suit.  

54. We may observe that notice of SLP was issued essentially  

to  examine  the  two  legal  issues  arising  in  the  case  as  

discussed above. These two issues have been dealt with and  

answered  against  the  appellants.  However,  since  learned  

senior counsel for the appellants also questioned the legality  

and correctness of the finding of the High Court on all other  

factual issues, we have, therefore, examined the other issues  

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as well.  

55. Learned senior counsel for the appellants contended that  

the High Court was not justified in holding that defendant no.  

1 was not a  bona fide purchaser of the suit house for value.  

Another submission was that the plaintiff was not ready and  

willing to perform her part of the agreement; and lastly her  

submission  was  that  the  plaintiff  was  never  in  actual  

possession of the suit house despite execution of agreement  

and making part payment of Rs. 50,000/- to defendant no. 2.  

Learned senior counsel for the appellants urged these factual  

submissions with equal force like the two legal  issues dealt  

with supra.

56. In our considered opinion, the High Court being the last  

Court of appeal on facts /law while hearing first appeal under  

Section 96 of CPC was well within its powers to appreciate the  

evidence and came to its own conclusion independent to that  

of  the  trial  court's  decision.  One  can  not  dispute  the  legal  

proposition that the grant/refusal of specific performance is a  

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discretionary relief,  and, therefore, once it is granted by the  

appellate court on appreciation of evidence, keeping in view  

the  legal  principle  applicable  for  the  grant  then  further  

appellate  court  should  be  slow to  interfere  in  such finding,  

unless  the  finding  is  found to  be  either  against  the  settled  

principle of law, or is arbitrary or perverse.

57. This Court while hearing appeal under Article 136 is not  

inclined  to  again  appreciate  the  entire  ocular/documentary  

evidence  like  that  of  first  appellate  court  unless  the  

parameters  noticed  above  are  successfully  made  out  in  the  

case. Such does not appear to be a case of this nature.  

58. The  High  Court,  in  our  considered  opinion,  properly  

appreciated  the  evidence  for  recording  findings  in  plaintiff's  

favour that she was ready and willing to perform her part of  

the  agreement  and  in  fact  did  perform her  part,  firstly,  by  

paying Rs. 50,000/- as advance and then paid balance of Rs.  

3,00,000/- towards sale consideration to defendant no.2; that  

plaintiff  was  placed  in  possession  of  the  suit  house  by  

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defendant no. 2 pursuant to agreement; and, lastly defendant  

no. 2 did not perform her part of the agreement.

59. It is pertinent to mention that despite holding that the  

plaintiff paid the entire sale consideration of Rs. 3,50,000/- to  

defendant no 2, the High Court directed the plaintiff to pay an  

additional sum of Rs 4 lacs over and above Rs. 3,50,000/- to  

defendant  no.  2  towards  sale  consideration.  Though  no  

reasons were assigned by the High Court while rendering this  

finding, but it seems that it must have been done either to  

balance the equities between the parties and/or to compensate  

defendant no. 2 the loss caused to her due to escalation in  

prices of immoveable properties.

60. Be that as it may, since the plaintiff has not challenged  

this  finding by filing any appeal  or  cross objection in these  

appeals, this Court refrains from going into its correctness in  

these appeals filed by the defendants.

61. In the light of the foregoing discussion, we do not find  

any  merit  in  the  submissions  urged  by  the  learned  senior  

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counsel  for  the  appellants  and  accordingly  we  uphold  the  

findings of the High Court on the issues relating to merits.

62. Before concluding we consider apposite to take note of  

two  more  issues.  The  High  Court  while  passing  the  decree  

directed  both  the  defendants  i.e.  owner  of  the  suit  house  

(vendor) defendant no.2 and subsequent purchaser (defendant  

no.  1)  to  execute  the  sale  deed of  the  suit  house jointly  in  

favour  of  the  plaintiff'  to  avoid  any  legal  complications,  

provided  the  plaintiff  pays  Rs.  4  lacs  over  and  above  Rs.  

3,50,000/- to the owner of suit house (defendant no. 2).

63. A direction of this nature is permissible. It was so held by  

this Court way back in the year 1954 in  Lala Durga Prasad  

and Anr. Vs. Lala Deep Chand and Ors., AIR 1954 SC 75,  

wherein the learned Judge Vivian Bose J. known for his subtle  

power  of  expression  and  distinctive  style  of  writing  while  

speaking for the bench held as under:

 “In our opinion, the proper form of decree is to direct  specific  performance  of  the  contract  between  the  vendor  and  the  plaintiff  and  direct  the  subsequent  

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transferee to join in the conveyance so as to pass on  the title which resides in him to the plaintiff. He does  not  join in any special  covenants made between the  plaintiff and his vendor; all he does is to pass on his  title to the plaintiff.  This was the course followed by  the Calcutta  High Court  in Kafiladdin  v. Samiraddin  AIR1931Cal67 and appears to be the English practice.  See Fry on Specific Performance, 6th edition, page 90,  paragraph 207; also Potter v. Sanders 67 E.R. 1057.  We direct accordingly.”

64. We respectfully follow these observations and accordingly  

uphold the direction issued by the High Court for execution of  

the sale deed.

65. There  is,  however,  one  more  aspect  of  the  case  which  

needs to be taken note of  and has arisen in the case as a  

result of passing of the impugned decree in plaintiff's favour by  

the High Court and upheld by this Court.

66. The effect of execution of sale deed in plaintiff's favour by  

the defendants in terms of decree would obviously result in  

cancellation of contract of sale of the suit house between the  

owner (defendant no. 2) and subsequent purchaser (defendant  

no. 1).  The reason is not far to seek.  

67. In  a  contract  for  sale  of  immovable  property  for  

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consideration,  if  a  seller  fails  to  transfer  the  title  to  the  

purchaser, for any reason, on receipt of consideration towards  

the  sale  price  then a  seller  has  no  right  to  retain the  sale  

consideration to himself and he has to refund the same to the  

purchaser. When the contract fails then parties to the contract  

must  be  restored to  their  respective  original  position  which  

existed  prior  to  execution  of  contract  as  far  as  possible  

provided  there  is  no  specific  term  in  the  contract  to  the  

contrary.

68. The  contract  between  defendant  no.2  and  defendant  

no.1, i.e., owner and subsequent purchaser, stands frustrated  

due  to  impugned  judgment/decree  because  now  defendant  

no.2  would  not  be  in  a  position  to  sell  the  suit  house  to  

defendant  no.1  though  she  has  received  Rs.4  lacs  from  

defendant no.1 for such sale of suit house in her favour.  It is  

for this reason, defendant no.2 is liable to refund Rs.4 lacs to  

defendant no.1.  

69. Though this litigation is not between inter se owner and  

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subsequent  purchaser  of  the  suit  house  yet  in  order  to  do  

substantial justice between the parties and to see the end of  

this long litigation and to prevent a fresh suit being instituted  

by defendant no.1 against defendant no.2 for refund of sale  

consideration which will again take years to decide and lastly  

when neither it involve any intricate adjudication of facts, nor  

it is going to cause any prejudice to the parties, we consider it  

just and proper to invoke our power under Article 142 of the  

Constitution of India in the peculiar facts and circumstances  

of the case as narrated above and accordingly direct defendant  

no.  2  (owner  of  the  suit  house)  to  refund  Rs.  4  lacs  to  

defendant no. 1 within three months after execution of sale  

deed by them in favour of plaintiff pursuant to the impugned  

judgment/decree.

70. We also direct that failure to refund the amount within  

three months, would carry interest at the rate of 9% payable  

on the unpaid amount from the date of this order till recovery  

and  defendant  no.  1,  in  the  event  of  non-payment  by  

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defendant no. 2, would be entitled to levy execution against  

defendant  no.  2  for  realization  of  outstanding  money  along  

with interest as awarded treating this order to be a decree in  

appropriate executing court in accordance with law.

71. We,  however,  make  it  clear  that  we  have  given  this  

direction because this  Court  alone has power to  pass such  

directions in an appropriate case and in our view, this is a  

case  wherein  we  consider  it  appropriate  to  do  so,  to  do  

substantial justice to all parties.

72. For the foregoing reasons and directions, these appeals  

are accordingly disposed of.  No costs.

                              ……………………………………………………J. [FAKKIR MOHAMED IBRAHIM KALIFULLA]

                   .….…...............................J. [ABHAY MANOHAR SAPRE]

New Delhi; October 29, 2014.

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