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REPORTABLE

IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL     APPEAL     NO.5787     OF     2012   

(Arising out of SLP(C)No.13490 of 2009)

Rattan Lal (since deceased) Through His Legal Representatives    … Appellant   

Vs.

S.N. Bhalla & Ors.    … Respondents

J     U     D     G     M     E     N     T   

ALTAMAS     KABIR,     J.   

1. Leave granted.

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2. The Respondents are perpetual Sub-lessees of  

Plot No.C-2/13, Vasant Vihar, New Delhi, measuring  

600 sq. yards, allotted to them through the  

Government Servants Co-operative House Building  

Society Limited. They erected a single-storeyed  

structure on the said land and vide Agreement dated  

8th September, 1978, they agreed to sell the said  

property to the Appellant together with the  

building erected thereon for a consideration of  

Rs.5,90,000/-. The Appellant paid a sum of  

Rs.50,000/- to the Respondents in advance to enable  

them to apply for necessary permission for transfer  

and to obtain Clearance Certificate from the Tax  

authorities. The Agreement stipulated that on  

receipt of the said Clearance, the Respondents were  

to inform the Appellant of its receipt, and,  

thereafter, the Appellant was required to complete  

the sale within 60 days by paying the balance  

consideration agreed to between the parties. In  

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case the Respondents failed to apply for permission  

to sell within 15 days from the date of the  

Agreement, the Appellant had the option to  

determine the Agreement whereupon the Respondents  

were required to refund the earnest money and to  

pay damages to the Appellant assessed at  

Rs.50,000/-.   

3. The provision in the Agreement which is crucial  

for a decision in this Appeal is Clause 9, which is  

extracted hereinbelow :

“9. That if the Seller applies for sale  permission within the time stipulated  in clause 8 above, but does not get it  within 6 months, the Seller may  determine this Agreement and the  Seller shall refund to the Purchaser  the earnest money received by him  without any damages or interest,  within a period of 15 days from the  date of determination of the  Agreement.”

4. Inasmuch as, the sale was not being completed  

by the Respondents, the Appellant filed Suit No.278  

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of 2003, in the Court of Additional District Judge,  

Delhi, for specific performance of the contract.

5. Clause 2 of the Agreement to Sell stipulates  

that upon execution of the Agreement, the  

Respondents would immediately apply to the Delhi  

Development Authority (DDA) and the Competent  

Authority under the Urban Land (Ceiling and  

Regulation) Act, 1976, for permission to transfer  

the said property to the Purchaser/Appellant free  

from all encumbrances, after obtaining requisite  

permissions from any other Body or Authority.  In  

Clause 3 of the Agreement, the Respondents also  

undertook to obtain the Income Tax Clearance  

Certificate immediately on obtaining the sale  

permission from the concerned authorities and to  

inform the Purchaser/Appellant by Registered Post  

with Acknowledgment Due accordingly.  As indicated  

hereinabove, Clause 4 of the Agreement stipulates  

that on being informed of the receipt of the  

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requisite permission from the Respondents, the  

Appellant would have to complete the sale within a  

period of 60 days from the date of receipt of such  

intimation and on being furnished with the copies  

of the permission and the Income Tax Clearance  

Certificate.   

6. Clause 8 of the Agreement to Sell is of special  

significance to the facts of this case and is,  

accordingly, extracted hereinbelow :      

“8. That if for any reason the Seller  fails to apply for permission to sell  the said property to the Purchaser  within a period of 15 days from the  date of signing this Agreement, the  Purchaser shall have the option to  determine this Agreement and in that  event the Seller shall refund the  earnest money of Rs.50,000/- (Rupees  Fifty Thousand only) as received by  him and pay to the Purchaser damages  which are assessed as the sum of  Rs.50,000/- (Rupees Fifty Thousand  only).”

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7. As will be evident from the aforesaid Clause,  

the Purchaser was given the option to exit from the  

Agreement in case the Seller failed to apply for  

permission for sale of the property within a period  

of 15 days from the date of signing of the  

Agreement.  Clause 9 of the Agreement which is  

crucial for a decision in this appeal, contains the  

right of the Seller to determine the Agreement and  

is extracted hereinbelow :

“9. That if the Seller applies for sale  permission within the time stipulated  in clause 8 above, but does not get it  within 6 months, the Seller may  determine this Agreement and the  Seller shall refund to the Purchaser  the earnest money received by him  without any damages or interest,  within a period of 15 days from the  date of determination of the  Agreement.”

8. In terms of Clause 9 of the Agreement extracted  

hereinabove, the Respondents submitted a request  

application in terms of Clause 2 of the said  

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Agreement dated 12th September, 1978, i.e., well-

within the period of 15 days contemplated in the  

said Clause.  In response to the said application  

made to the Delhi Development Authority (DDA) for  

grant of sale permission, a letter dated 23rd/27th  

November, 1978, was addressed by DDA to the  

Respondents asking for certain documents to be  

filed.  Interestingly, although, the said letter  

was addressed to the Respondents, it was responded  

to by the Appellant.  The said letter sent by the  

Appellant has been marked as Ex.PW-1/3.  On 7th  

March, 1979, the DDA informed the Respondents of  

the decision not to grant sale permission on the  

ground that the affidavit filed by Shri S.N.  

Bhalla, one of the two vendors was defective.  On  

receiving the said intimation from the DDA, the  

Respondents sent a telegram to the Appellant on 8th  

March, 1979, determining the Agreement to Sell in  

terms of Clause 9 of the Agreement, on the expiry  

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of the 6 months’ period for completion of the sale  

on 7th March, 1979.  The Appellant was also informed  

that the earnest money paid by him would be  

refunded within 15 days.  Pursuant to such  

intimation, on 12th March, 1979, the Respondents  

sent a Bank Draft of Rs.50,000/- to the Appellant,  

being the earnest money received in terms of Clause  

9 of the Agreement to Sell dated 8th September,  

1978.   

9. Coincidentally, on 8th March, 1979 itself, the  

Appellant also addressed a letter to the  

Respondents stating that the Lieutenant Governor,  

Delhi, had granted permission for sale of House  

No.C-2/13, Vasant Vihar, New Delhi (the property in  

question), in favour of the Appellant.  However,  

the same could not be communicated since the  

affidavit filed by Shri S.N. Bhalla, the Respondent  

No.1 herein, was found to be defective and such  

permission could be conveyed only on production of  

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the correct affidavit as required by the DDA.  The  

Respondents were, accordingly requested by the  

Appellant to file a proper affidavit in the  

Department and to file all the necessary documents  

with the DDA to enable them to convey the required  

sale permission.  It was also mentioned that the  

failure to do so would make the Respondents  

responsible for all costs and consequences thereof.  

The original letter No. F.H.(199)78-CS/DDA dated 7th  

March, 1979, was attached with the notice sent on  

behalf of the Appellant.  The said letter was  

followed up by a telegram sent by the Appellant  

indicating that time was not the essence of the  

Agreement and that he was prepared to purchase the  

house of the Respondents even beyond the period of  

6 months since, although, DDA was ready to give  

permission, the Respondents had defaulted in filing  

the correct affidavit to enable DDA to grant  

permission.   

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10. Inasmuch as, no positive response was received  

by the Appellant from the Respondents to his  

communications, he sent a legal notice to the  

Respondents informing them that he was ready and  

willing to complete the transaction and to have the  

Sale Deed executed in his favour for the property  

in question by paying the balance price. The  

Respondents were asked to inform the Appellant as  

to how the transaction could be completed so that  

he could tender the sale consideration by Bank  

Draft.  It was also indicated in the notice that  

the Bank Draft sent by the Respondents refunding  

the earnest money, had been encashed under protest,  

but it did not mean that the contract was  

repudiated.  The contract continued to subsist and  

the Appellant was always ready and willing to  

perform his part of the contract.

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11. In the absence of a positive response to the  

said notice, the Appellant filed Suit No.278 of  

2003, on 8th March, 1982, for specific performance  

of the Agreement to Sell dated 8th September, 1978.  

On the pleadings of the parties, the following  

issues were settled by orders dated 1st November,  

1983 and 19th February, 1991 :

“1) Whether the Plaintiff has been ready  and willing to perform his part of  agreement dated 08.09.1978?

2) Whether the Defendant has committed  breach of the said Agreement?

3) Whether the agreement dated 08.09.1978  stands terminated or frustrated as  alleged by the defendant and there is  no subsisting agreement to sell?

4) Whether the plaintiff is to be granted  relief of specific performance in the  facts and circumstances of the present  case?

5) Whether the agreement dated 08.09.1978  is void for uncertainty?

6) Whether the time was the essence of  the contract and whether the agreement  

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dated 08.09.1978 was rightly  terminated?”

The last issue was an additional issue settled  

vide order dated 19th February, 1991.   

12. Considering Clauses 2, 8 and 9 of the Agreement  

to Sell dated 8th September, 1978, the Trial Court  

dismissed the suit, inter alia, upon holding that  

the Appellant had intentionally and without demur  

accepted refund of the earnest money sent to him by  

Bank Draft and, thereafter, he sent the lawyer’s  

notice on 26th April, 1979, stating that the said  

Draft was encashed without prejudice to his rights  

and contentions in the Suit.  The learned Trial  

Court held that encashing the Bank Draft amounted  

to acceptance of the contract being determined.  

The learned Trial Court also was of the view that  

in view of his conduct it would be clear that the  

Appellant had abandoned his claim under the  

contract and he was no longer ready and willing to  

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pursue his remedies under the contract.  The Trial  

Court also took note of the fact that although the  

Agreement contemplated that the Respondents would  

take steps to obtain the necessary sale permission  

and the Income Tax Clearance Certificate, the same  

was pursued by the Appellant and that it was the  

Appellant who was in default in complying with the  

requests made by DDA, which had resulted in the  

sale permission not being granted. The Trial Court  

categorically held that there was deficiency in  

respect of the documents to be filed. Even on the  

question of the Suit being filed on the last date  

of limitation, the same was construed to mean that  

the Appellant was not ready and willing to complete  

the sale transaction.   

13. Aggrieved by the judgment and decree passed by  

the learned Additional District Judge on 10th  

February, 2004, the Appellant filed a Regular First  

Appeal before the Delhi High Court, being RFA  

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No.272 of 2004, which was dismissed by the impugned  

judgment.   

14. The Division Bench of the Delhi High Court in  

effect, accepted the reasoning of the Trial Court  

and indicated further that a contract, which is by  

its nature determinable, is incapable of being  

specifically enforced under Section 14(1)(c) of the  

Specific Relief Act, 1963.  The Division Bench held  

that in terms of Clause 9 of the Agreement to Sell,  

the contract was determinable if the sale  

permission was not forthcoming within a period of 6  

months from the date of execution of the Agreement.  

The Division Bench also referred to Section 20 of  

the aforesaid Act to indicate that relief of  

specific performance is discretionary and in the  

instant case, such discretion should not be  

exercised in favour of the Appellant who had  

approached the Court on the last date of  

limitation, i.e., within 3 years from the date when  

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cause of action for the suit had accrued. Observing  

that it was a matter of common knowledge that  

between 1979 and 1982 the price of property had  

risen very sharply in Delhi, the Division Bench  

also observed that it could not also be lost sight  

of that the Appellant had accepted the refund of  

Rs.50,000/-, which had been paid by him to the  

Respondents as earnest money-cum-part Sale  

consideration. It is on the basis of such reasoning  

that the appeal was dismissed by the Division Bench  

of the Delhi High Court.

15. Mr. Altaf Ahmad, learned Senior Advocate, who  

appeared in support of the Appeal, contended that  

in terms of Clause 2 of the Agreement to Sell, the  

Sellers were under an obligation to apply to the  

DDA and the Competent Authority under the Urban  

Land (Ceiling and Regulation) Act, 1976, to obtain  

the requisite permission to transfer the property  

to the Appellant, free from all encumbrances.  Mr.  

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Ahmad submitted that the liberty given to the  

Respondents/Sellers under Clause 9 of the Agreement  

to exit therefrom could not be taken advantage of  

by the Sellers in case they were in default in  

obtaining the said permission within the stipulated  

time, without making serious and conscientious  

efforts to obtain the same.  Mr. Ahmad submitted  

that in the instant case, the Respondents had been  

informed by the DDA of the deficiencies in the  

affidavit filed by them, but they did not take any  

step to remove the deficiencies. Mr. Ahmad  

submitted that it is no doubt true that the  

Appellant/Purchaser had taken upon himself the  

burden of acquiring the sale permission and Income  

Tax Clearance Certificate, but it was only to  

assist the Respondents and the same did not absolve  

the Respondents of their responsibility of  

performing the tasks that they were required to  

perform under the Agreement.  Mr. Ahmad contended  

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that the role played by the Appellant in the entire  

episode was at best that of a facilitator in his  

own interest.  

16. Mr. Ahmad submitted that both the Trial Court,  

as well as the High Court, had erred in holding  

that the Appellant was not ready and willing to  

complete the sale transaction and the same would be  

evident from the fact that he filed the suit for  

specific performance on the last date of  

limitation.  Mr. Ahmad submitted that the very fact  

that the Appellant took on himself the burden of  

assisting the Respondents to procure the necessary  

sale permission and Income Tax Clearance  

Certificate, indicated his willingness and anxiety  

to complete the transaction. Learned counsel  

submitted that despite the Appellant’s readiness  

and willingness to complete the sale transaction,  

he was unable to do so on account of the  

deficiencies on the part of the Respondents in  

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complying with the instructions of the DDA.  

Learned counsel submitted that both the Courts  

below had dealt with the issues in the suit without  

properly understanding the case made out by the  

Appellant vis-à-vis the terms and conditions of the  

Agreement to Sell dated 8th September, 1978, and the  

judgment and decree of the Trial Court as well as  

the judgment of the High Court were liable to be  

set aside.  

17. On the other hand, appearing for the  

Respondents, Mr. Mukul Rohatgi, learned Senior  

Advocate, contended that despite the obligation  

cast upon the Respondents to obtain the necessary  

sale permission and Income Tax Clearance  

Certificate, the Appellant had taken upon himself  

the responsibility to obtain the same and the  

Respondents could not be made responsible for the  

Appellant’s failure to obtain the same. Mr. Rohatgi  

submitted that the Respondents/Sellers were fully  

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justified in invoking Clause 9 of the Agreement to  

Sell and to terminate the same.  

18. In order to drive home his point, Mr. Rohatgi  

submitted that the letters dated 27th November, 1978  

and 7th March, 1979, which had been addressed to the  

Respondents by the Executive Officer, DDA,  

requesting that a proper affidavit be filed in the  

department to enable the DDA to take further steps  

in the matter, had been received by the Appellant  

and forwarded to the Respondents in original with  

his letter dated 8th March, 1979.   

19. Mr. Rohatgi urged that from his conduct it  

would be clear that the Appellant was not ready and  

willing to complete the sale and both the Courts  

had rightly dismissed the Appellant’s suit.  

20. Mr. Rohatgi referred to various decisions on  

Section 20 of the Specific Relief Act, 1963, to  

bolster his submissions, but the same are all  

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peculiar to the facts of each case.  Relying on the  

Constitution Bench decision of this Court in Shri  

Balwantrai     Chimanlal     Trivedi   Vs. M.N.     Nagrashna     and    

Others [(1961) 1 SCR 113], Mr. Rohatgi lastly  

submitted that the Supreme Court is not bound to  

interfere under Article 136 of the Constitution  

when dealing with an appeal where there is no  

failure of justice.

21. What emerges from the submissions made on  

behalf of the respective parties is that the  

Appellant’s suit was dismissed by the Trial Court  

on the finding that he had intentionally and  

without demand, accepted refund of the earnest  

money, though, without prejudice to his rights and  

contentions in the suit. The learned Trial Court  

also found that by encashing the Bank Draft, the  

Appellant had clearly indicated that he was no  

longer interested in completing the sale  

transaction.  The Trial Court also took note of the  

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fact that although under the Agreement it was for  

the Respondents to obtain the sale permission and  

Income Tax Clearance Certificate, it was the  

Appellant who had elected to pursue the matter and  

was, therefore, responsible for the failure to  

obtain the same within the stipulated period of six  

months, which entitled the Respondents/Sellers to  

terminate the Agreement under Clause 9 thereof.   

22. The High Court approved the view taken by the  

Trial Court, but adding that in view of Section  

14(1)(c) of the Specific Relief Act, 1963, the  

contract, which was by its very nature  

determinable, was incapable of being specifically  

enforced.  The High Court, for abundant caution,  

also referred to Section 20 of the aforesaid Act to  

indicate that the relief of specific performance  

was purely discretionary and dependent on the facts  

of each case.  The High Court also took note of the  

steep rise in the prices of real estate while  

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dismissing the Appellant’s suit for specific  

performance.   

23. In our view, the reasoning of both the Trial  

Court and the High Court, cannot be supported on  

several grounds. Firstly, the acceptance of refund  

of the earnest money paid by the Appellant to the  

Respondents was not considered by the Trial Court  

as also the High Court in its proper perspective,  

as both the Courts appeared to have ignored the  

fact that such refund had been accepted by the  

Appellant, without prejudice to his rights and  

contentions in the suit.  That the said amount was  

received under protest has not been considered  

either by the Trial Court or by the High Court,  

which had relied mainly on the provisions of  

Clauses 2 and 9 of the Agreement to Sell in  

dismissing the Appellant’s suit for specific  

performance.  We do not find from the materials on  

record that the Appellant had ever given up his  

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claim under the Agreement or that he was not ready  

and willing to perform his part of the contract.  

24. Secondly, the Trial Court also quite  

erroneously absolved the Respondents of their  

obligation under the Agreement to obtain sale  

permission and Income Tax Clearance Certificate,  

which were required for completion of the sale.  We  

reiterate that the role of the Appellant was merely  

that of a facilitator and the primary  

responsibility for obtaining permission and  

clearance from the Income Tax Authorities remained  

with the Respondents.  In fact, there is nothing on  

record to indicate that by his acts, the Appellant  

ever agreed to play a role other than that of a  

supportive role and that too in his own interest,  

in obtaining the necessary clearances.   

25. The other point raised on behalf of the  

Respondents regarding the import of Clause 9 of the  

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Agreement to sell is also not of much substance.  

In our view Clause 9 was never meant to provide the  

Respondents with an escape route if they themselves  

failed to discharge their responsibility of not  

only applying for sale permission, but to also  

follow up the matter with the authorities in order  

to obtain the same within the stipulated period of  

six months.  In the absence of any material on  

record to show that the Respondents had made  

positive efforts for procuring the necessary sale  

permission and clearance certificates, they were  

not entitled to determine the Agreement in terms of  

Clause 9.  

26. The last point, and, in our view the most  

substantive point, is the steep hike in the value  

of real estate which has been taken note of by the  

High Court.  However, in the absence of definite  

evidence to show that the Appellant/purchaser was  

not ready and willing to conclude the sale  

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transaction, the Respondents cannot be given the  

benefit of the delay in concluding the same.  

27. Both the Courts below have attached a good deal  

of importance to the fact that the Appellant filed  

the suit for specific performance on the last day  

of limitation, which, according to the learned  

Judges, indicated that the Appellant was not ready  

and willing to complete the sale transaction, as  

otherwise he would have filed the suit earlier.  We  

have no hesitation in rejecting the said  

contention, since the Appellant filed the suit  

within the period of limitation and his readiness  

and willingness to conclude the sale transaction  

was quite obvious from the fact that he had taken  

upon himself the burden of pursuing the matter with  

the authorities for obtaining sale permission and  

Income Tax Clearance Certificate. The role played  

by the Appellant in this regard cannot, therefore,  

be applied to his disadvantage.  In our view, the  

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approach of both the Courts below to the problem  

was coloured by the fact that the Appellant had  

actively involved himself in the matter of  

obtaining the sale permission as well as Income Tax  

Clearance Certificate.  The fact that the Appellant  

had made several requests to the Respondents to  

file a proper affidavit, as requested by the DDA,  

is another indication that the Appellant was ready  

and willing to complete the sale transaction.  Both  

the Courts below dealt with the suit filed by the  

Appellant, as though the Respondents had no  

obligation under the agreement for completing the  

sale and this appears to have influenced their  

judgment in dismissing the Appellant’s suit for  

specific performance.   

28. Issue Nos.1, 3 and 4 as settled by the Trial  

Court on 1st November, 1983 and 19th February, 1991,  

are, therefore, answered in favour of the Appellant  

and the remaining issues are answered against the  

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Respondents. In the light of what has been  

indicated hereinabove, we are of the view that the  

Agreement to Sell dated 8th September, 1978, has  

been wrongly terminated.   

29. This, however, brings us face to face with a  

rather difficult situation having regard to the  

fact that the Agreement to Sell was executed 34  

years ago on 8th September, 1978, in respect of the  

suit property.  We cannot shut our eyes to the fact  

that during this period the price of real estate  

has escalated sharply.  In addition to the above,  

the Appellant has not suffered any material loss,  

since only the earnest money of Rs.50,000/- had  

been paid by him to the Respondents and the balance  

consideration was yet to be paid when the agreement  

came to be terminated.  Even the said sum of  

Rs.50,000/- was returned to the Appellant  

immediately upon termination of the Agreement and  

the said amount was duly accepted by the Appellant,  

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though by recording his objections subsequently.  

The Appellant, therefore, has not suffered any  

monetary loss, and, on the other hand, the value of  

the property must have sky-rocketed during the  

period between the execution of the Agreement till  

date.  In fact, that is why there is no prayer in  

the alternative for return of any sums advanced,  

which is one of the usual prayers in suits for  

specific performance.  

30. However, we are also of the view that the  

Appellant should be compensated for the time spent  

by him in pursuing his remedy in respect of the  

Agreement to Sell.  Accordingly, we decree the  

suit, but instead of decreeing the suit for  

specific performance of the Agreement, we direct  

that the Respondents shall pay the Appellant costs  

for the litigation right throughout, assessed at  

Rs.25,00,000/-, to be paid by the Respondents to  

the Appellant within one month from date, without  

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the Appellant having to proceed in execution for  

recovery of the same. In the event, the Respondents  

fail to pay the said amount to the Appellant within  

the aforesaid period, the Appellant will be  

entitled to put this decree for costs into  

execution before the Trial Court and the said  

amount will carry simple interest at the rate of  

18% per annum from one month after the date of the  

decree till its realization.  

31. The Appeal is disposed of, accordingly.         

………………………………………………………J.    (ALTAMAS KABIR)

………………………………………………………J.    (J. CHELAMESWAR)

New Delhi Dated:8.8.2012.

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