SATYA JAIN(D) Vs ANIS AHMED RUSHDIE(D) TR.LRS..
Bench: P. SATHASIVAM,RANJAN GOGOI
Case number: C.A. No.-008653-008653 / 2012
Diary number: 1209 / 2012
Advocates: ARUNA GUPTA Vs
SANJAY SHARAWAT
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Reportable
IN THE SUPREME COURT OF INDIA CIVIL APPELATE JURISDICTION CIVIL APPEAL No. of 2012
(Arising out of SLP (C) No.1891 of 2012) SATYA JAIN (D) THR. LRS. & ORS. ...Appellant(s)
VERSUS
ANIS AHMED RUSHDIE (D) TR.LRS. & ORS. ...Respondent(s)
With C.A. Nos. of 2012
(Arising out of SLP(C) Nos. 10441-10442/2012) With
C.A. No. of 2012 Arising out of SLP(C) No. 3570/2012)
With C.A. No. of 2012
Arising out of SLP(C) No. 3786/2012) With
C.A. Nos. of 2012 Arising out of SLP(C) Nos.4245-4246/2012)
J U D G M E N T
RANJAN GOGOI, J.
Leave granted.
2. The appellants, apart from the appellant Narendra
Jain (Plaintiff No.2), claim to be the Legal heirs and
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representatives of the original plaintiffs 1 and 3 who had
instituted suit No. 994/1977 in the High Court of Delhi
seeking a decree of specific performance in respect of an
agreement dated 22.12.1970 executed by and between
original plaintiff No.1 (Bhikhu Ram Jain) and the original
defendant Anis Ahmed Rushdie in respect of a property
described as Bungalow No.4, Flag Staff Road, Civil Lines,
Delhi (hereinafter referred to as the ‘suit property’). The
plaintiff Nos.2 and 3 were/are the sons of the original
plaintiff No.1. The suit was decreed by the learned trial
judge. The decree having been reversed by a Division Bench
of the High Court the present appeals have been filed by the
original plaintiff No.2, Narendra Jain and the other
appellants who claim to be vested with a right to sue on the
basis of the claims made by the original plaintiffs in the
suit. It is, however, made clear at the very outset that
though all such persons claiming a right to sue through the
deceased plaintiffs 1 and 3 are being referred to hereinafter
as the plaintiffs and an adjudication of the causes/claims
espoused is being made herein the said exercise does not,
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in any way, recognize any right in any such impleaded
‘plaintiffs’ which Question(s) are left open for decision if and
when so raised.
3. The pleaded case of the respective parties may now be
briefly noticed.
In the suit filed by the original plaintiffs it was
pleaded that the defendant, who was the owner of the suit
property, after inducting the plaintiff No. 1 as a tenant in
respect of the half portion of the suit property at a
monthly rent of Rupees three hundred w.e.f. 20.12.1970
had executed an agreement dated 22.12.1970 to sell the
suit property to the said plaintiff No.1. According to the
plaintiffs the price fixed under the agreement was Rupees
3,75,000/- (Rupees three lakh and seventy five thousand
only) out of which an amount of Rupees 50,000/- (Rupees
fifty thousand only) was paid to the defendant by the
plaintiff No.1 as part payment. Under clauses 4, 5 and 7 of
the agreement dated 22.12.1970 the defendant was
required to obtain necessary Tax Clearance Certificate
from the Income Tax Authorities for sale of the suit
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property and intimate the said fact and also deliver to the
plaintiff No.1 a copy of such certificate within twelve
months from the date of the execution of the agreement
dated 22.12.1970. Within three months thereafter, the
plaintiff No.1 was required to pay the balance sale
consideration on receipt of which the defendant was under
an obligation to execute the sale deed in favour of the
plaintiff. Under clause (7) of the agreement dated
22.12.1970 the plaintiff No.1 was to pay to the Income Tax
Authorities such amount as may be desired by the
defendant (not exceeding the balance sale price of the
property) against the tax dues of the defendant so as to
facilitate the grant of the required tax clearance certificate.
Clause (7) of the agreement also contemplated that such
money as may be paid by the plaintiff No.1 to the Income
Tax Authorities in the defendant-vendor’s account was to
be deducted by the plaintiff from the balance of the sale
price at the time of the execution of the sale deed.
4. According to the plaintiffs, as the plaintiff No.1 had
not received any intimation from the defendant in the
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matter of execution of the sale deed he had written a letter
dated 27.12.1971 to the defendant enquiring about the
steps taken to obtain the necessary Tax Clearance
certificate from the Income Tax Authorities. The plaintiffs
had pleaded that the said letter was not replied to. Instead
a legal notice dated 6.11.1972 was issued on behalf of the
defendant wherein it was, inter alia, claimed that
defendant had written a letter to the plaintiff No.1 as far
back as on 9.9.1971 calling upon him to pay a sum of
Rupees One lakh so as to enable the defendant to furnish
a bank guarantee to the Income Tax Authorities in order
to facilitate the issuance of the necessary Tax Clearance
certificate. The request of the defendant was not
responded to by the plaintiff No.1. Accordingly, by the
notice dated 6.11.1972, the defendant had asked/required
the plaintiff to pay the aforesaid amount of Rupees One
lakh within three days failing which, it was mentioned, the
agreement dated 22.12.1970 would stand terminated and
the earnest money (Rupees fifty thousand) paid shall
stand forfeited. According to the plaintiffs, in response to
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the aforesaid notice dated 6.11.1972, the plaintiff No.1
wrote a letter dated 14.11.1972 denying the receipt of any
communication from the defendant that he had applied for
the tax clearance certificate or any intimation to the effect
any amount is required to be paid to the Income Tax
Authority for processing the matter of grant of the
clearance certificate. In the aforesaid letter the plaintiff
No.1 had further stated that under clause (7) of the
agreement he was obliged to deposit, at the request of the
defendant, any amount not exceeding the total sale
consideration with the Income Tax Authorities and no
further/additional amount was required to be tendered to
the defendant after payment of the initial amount of
Rupees Fifty Thousand. In the said letter dated
14.11.1972 the plaintiff No.1 had also reiterated his
readiness to tender any payment as may be due under the
aforesaid clause (7) of the agreement. As the letter dated
14.11.1972 was not responded to, the plaintiff No.1 had
addressed another letter dated 15.12.1972 to the Advocate
of the defendant reiterating the contents of his earlier
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letter dated 14.11.1972. Thereafter, there was no
correspondence between the parties for about five years
until the suit was filed on 3.11.1997. It may be specifically
noted, at this stage, that according to the plaintiffs the
suit could not be instituted earlier as the defendant was
all along residing in London. Another relevant fact that
would be required to be noticed is that on 16.9.1977 the
plaintiff No.1 had received a notice terminating the
tenancy qua half portion of the suit property which had
commenced on and from 20.12.1970. It is in these
circumstances that the plaintiff had filed the suit seeking
a decree of specific performance of the agreement dated
22.12.1970 and, in the alternative, for a decree of a sum
of Rs.1,30,120.50 being the total of the part amount paid
to the defendant and damages along with interest thereon.
5. Denying the claims made by the plaintiffs the original
defendant had filed a written statement contending, inter
alia, that the suit was barred by limitation. Though the
defendant had admitted the creation of the tenancy in
favour of the plaintiff No.1 on 20.12.1970 as well as
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execution of the agreement to sell dated 22.12.1970, it
was contended that the plaintiffs were not entitled to a
decree of specific performance of the agreement inasmuch,
as the plaintiff No.1 had breached the conditions of the
agreement, particularly, clause (7) thereof. In this regard,
it was specifically pleaded by the defendant that on
09.09.1971 the defendant had addressed a letter to the
plaintiff No.1 informing him that as the Income Tax
Authorities had agreed to issue the necessary tax
clearance certificate on furnishing of a bank guarantee of
Rs.One lakh in favour of the Commissioner of the Income
Tax, the aforesaid amount be made available to the
defendant or the same be credited in the defendant’s bank
account. According to the defendant, the plaintiff No.1
failed to so act as a result of which the bank guarantee
could not be furnished and consequently the Income Tax
clearance certificate was not issued. The defendant had
also filed an amended/additional written statement
pleading that undue hardship would be caused to him in
the event a decree for specific performance is to be
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granted. The defendant had also taken the plea that apart
from addressing the letter dated 9.9.1971, the
demand/request of the defendant to make available the
additional amount of Rs. One lakh for the purpose of
furnishing the bank guarantee to the Income Tax
authorities was conveyed to the plaintiff No.1 through the
common broker of the parties, one Lajjya Ram Kapur (PW-
3).
6. On the pleadings of the parties the following issues
were framed for trial in the suit:
1. Whether the suit is within time?
2. Whether the suit is for mis-joinder of plaintiff
Nos. 2 and 3?
3. Whether the written statement has been signed
and verified by a duly authorized person? If not
to what effect?
4. Whether plaintiff No.1 has always been ready
and willing to perform his part of the agreement
dated 22.12.1970?
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5. Whether the defendant has committed the
breach of the agreement dated 22.12.1970?
6. Whether plaintiff No.1 has committed breach of
any of the terms of the agreement dated
22.12.1977, if so, to what effect?
7. Whether the plaintiffs are entitled to specific
performance of the agreement dated
22.12.1970?
8. If Issue No.7 is not proved, whether plaintiff
No.1 is not entitled to refund of earnest money
and interest thereon?
7. The learned trial judge by judgment dated 5.10.1983
decreed the suit of the plaintiffs for specific performance of
the agreement dated 22.12.1970 and directed execution of
the sale deed by the defendant in favour of any of the
plaintiffs, failing which, the Registry of the Court was
directed to ensure the execution of the same. The balance
of the sale consideration i.e. Rupees 3.25 lakhs was to be
paid by the plaintiffs at the time of the execution of the
sale deed and in the event the sale deed was to be
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executed through the Registry of the Court the aforesaid
amount was to be deposited in Court before registration of
the sale document.
8. Aggrieved by the aforesaid judgment and decree
passed by the learned trial judge, the original defendant
had filed an appeal which was allowed by the impugned
judgment dated 31.10.2011. During the proceedings of the
appeal before the High Court the original plaintiffs 1 and 3
as well as the original defendant had died. As already
noticed, while the original plaintiff No.2 continues to
remain on record as an appellant, the remaining
appellants claim to be the legal heirs/representatives of
the deceased plaintiff Nos.1 and 3. In so far as the original
defendant in the suit is concerned the legal
representatives of the said defendant are on record having
been so impleaded.
9. We have heard Mr.Shanti Bhushan, Mr.A.B. Dial and
Mr.P.Vishwanatha Shetty, learned senior counsels
appearing for the appellants and Dr.Abhishek Singhvi,
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Mr.V.Giri and Mr. Vijay Hansaria, learned senior counsels
appearing for the respondents.
10. On behalf of the appellants it is urged that the decree
passed by the learned trial Judge has been reversed in
appeal, inter alia, on the ground that the plaintiffs’ suit is
barred by limitation. It is contended that the said
conclusion has been reached on an apparent mis-
interpretation of the provisions of Section 15(5) of the
Limitation Act, 1963. It is also contended that the claim of
the plaintiff that a letter dated 9.9.1971, had been sent by
the defendant to the plaintiff, requesting for a further sum
of Rupees One lakh for the purpose of furnishing a bank
guarantee in favour of the Income Tax Authorities so as to
facilitate the issuance of the tax clearance certificate(s)
and the alleged refusal/failure of the plaintiff to comply
with the said request, is not borne out by the evidence on
record. No such request was made and neither the letter
dated 9.9.1971 nor the verbal request to the said effect
allegedly made through the broker, Lajjia Ram Kapur, was
received or communicated to the plaintiffs. In any event,
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according to learned counsel, under clause (7) of the
agreement the plaintiff was obliged to make further
amounts available, on the defendant’s account, to the
Income Tax Authorities only. Apart from the initial
payment of Rupees Fifty thousand the plaintiff was not
required to make any further payment directly to the
defendant. The meaning attributed by the first appellate
court to clause (7) of the agreement on the principle of
“business efficacy” and the consequential findings on the
question of readiness and willingness of the plaintiffs are
plainly incorrect. Learned counsel has submitted that in
such a situation, notwithstanding the expiry of long efflux
of time, when the plaintiff was in no way at fault a decree
of specific performance should follow, if required by
suitably enhancing the value of the property. Specifically,
learned counsel has indicated the willingness of the
plaintiffs to offer an amount of Rs. 6 crores for the
property in question as against the amount of Rs.3.75
lakhs as mentioned in the agreement dated 22.12.1970.
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11. Opposing the contentions advanced on behalf of the
appellants, learned counsels for the respondent (referred
hereinafter in the singular) have submitted that the
meaning sought to be attributed to the provisions of
Section 15(5) of the Limitation Act, 1963 is wholly
unacceptable. It is argued that the law does not
countenance a situation where the initiation of a civil
action can be postponed till the availability of the
defendant in India, which would be the virtual effect of
Section 15(5) of the Limitation Act if the arguments made
on behalf of the appellants on this score are to be
accepted. It is further urged that the cause of action for
the suit arose on the expiry of 15 months from the date of
the agreement, namely, on 22.03.1972 and the period of
three years for filing the suit had expired on 22.03.1975.
Alternatively, as by letter dated 06.11.1972, three days
further time has been granted by the defendant to the
plaintiff the cause of action may be understood to have
arisen on 09.11.1972 and the period of limitation of three
years to be over on 09.11.1975. Learned counsel has also
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submitted that as by letter dated 13/15.11.1972 further
four month’s time had been granted by the plaintiff to the
defendant the cause of action may be understood to have
accrued on 14.03.1973 and the period of three years for
fling the suit to be over on 14.03.1976. Yet, the present
suit was filed on 03.11.1977 though from the materials on
record it is evident that the defendant was present in India
between 07.9.1977 to 01.10.1977. The provisions of
Section 15(5) of the Limitation Act, according to learned
counsel, have to be purposively and reasonably
interpreted so as to avoid any absurd consequence(s).
Continuing, learned counsel has urged that the materials
on record, particularly the correspondence exchanged
between the parties, indicate that even when the contents
of the letter dated 09.09.1971 were specifically brought to
the notice of the plaintiff in the subsequent
correspondence addressed by the defendant, the plaintiff
had not denied receipt of the said letter. As the plaintiff
failed to respond to the defendant’s request to make
available the amount of Rupees One lakh required by him
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for the purpose of furnishing the bank guarantee, the
defendant, who was a British national, could not comply
with the demand of the Income Tax Authorities as a result
of which the necessary Tax Clearance certificate (s), which
is a pre-requisite for the sale of the property, could not be
obtained. It is, therefore, contended that though the
defendant was, at all times, ready and willing to execute
the sale deed it is the plaintiff who had failed to perform
his part of the bargain. Consequently, the High Court was
correct in refusing the decree of specific performance. In
any event, according to learned counsel, specific
performance of the agreement dated 22.12.1970 ought not
to be ordered by this Court at this juncture in view of the
completely altered market conditions in respect of
immovable property in the National Capital where the suit
property is situated. It is also pointed out that the High
Court had already granted refund of the part
consideration (Rupees fifty thousand) paid by the plaintiff
to the defendant alongwith interest at the rate of 12% from
the date of payment of the said amount till the date of the
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realization/return of the same. The said direction, it is
submitted, adequately takes care of the equities arising in
the present case.
12. On the basis of the discussions that have preceded
three issues, in the main, arise for our determination. In
proper sequential order, the first would be whether the
suit is barred by limitation. If not, which of the parties to
the agreement dated 22.12.1970 are in breach of the
terms and conditions thereof and, lastly, if no such breach
can be attributed to the plaintiff whether a decree of
specific performance should be granted at this belated
point of time.
13. Even going by any of the three different/alternative
dates on which the cause of action for the plaintiffs’ suit
had arisen, as conceded by the learned counsel for the
respondent, it is evident that the suit was filed beyond the
stipulated period of three years from any of the dates of
the accrual of the cause of action. However, the plaintiffs
have invoked the provisions of Section 15 (5) of the
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Limitation Act, 1963 to claim the benefit of the exclusion
of the period during which the defendant was absent from
India. There can, indeed, be no doubt that if the plaintiff
is entitled to exclude the period of such absence the bar of
limitation will not apply to the present suit. The court,
therefore, must make an endeavour to find out the true
meaning of the provisions contained in Section 15 (5) of
the Limitation Act in order to determine as to whether the
plea put forward by the plaintiffs is sustainable in law.
14. The provisions contained in Section 15 (5) of the
Limitation Act, 1963 are pari materia with those in Section
13 of the Indian Limitation Act, 1908. The aforesaid
provision of the Act of 1908 has received a full and
complete consideration of this Court in P C K Muthia
Chettiar & Ors v. V E S Shanmugham Chettair (D) &
Anr. 1 . While holding that the words of the Section
(Section 13), namely, “that time during which the
defendant has been absent from India ” are clear and
therefore must be excluded in computing the period of
limitation, two earlier decisions in Atul Kristo Bose v. 1 AIR 1969 SC 552
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Lyon & Co. 2 and Muthukanni Mudaliar v. Andappa
Pillai 3 were also noticed by this Court. The discussion in
respect of the aforesaid two earlier decisions which had
formed the basis of the conclusions in P C K Muthia
Chettiar (Supra), as noticed above, have been set out in
paragraph 6 of the judgment which may be profitably
extracted below :
“ 6. In Atul Kriato Bose v. Lyon & Co.4 the defendants were foreigners and they never came to India on or after the date of the accrual of the cause of action. The Calcutta High Court held that Section 13 applied and that the suit was not barred by limitation. The Court was not impressed with the argument that according to this construction a defendant who was in England when a cause of action against him accrued, and has remained there ever since might be liable after an indefinite time to be sued in a Calcutta court. In Mathukanni v. Andappa5 the plaintiff and the defendant who were residents of Mannargudi in India had gone to Kaula Lampur to earn their livelihood, and while there the defendant executed a promissory note to the plaintiff on November 16, 1921. In 1925 the plaintiff brought a suit on the promissory note in the District Munsif's Court of Mannargudi. The cause of action in the suit arose outside India. A Full Bench of the Madras High Court held that the plaintiff was entitled to the benefit of Section 13 and in computing the period of limitation he was entitled to exclude the time during which the defendant was absent in Kaula Lampur. We agree with this decision. The Full Bench rightly overruled the earlier decisions in Ruthinu v. Packiriswami6 and Subramania Chettiar v. Maruthamuthu7. We hold that the suit is not barred by limitation.
2 ILR 14 Cal 457 para 6 3 AIR 1955 Mad 96 4 (1887) ILR 14 Cal 457 5 AIR 1955 Mad 96 6 AIR 1928 Mad 1088 7 AIR 1944 Mad 437
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15. In the present case from the evidence on record it is
established that till the date of filing of the suit i.e.
03.11.1977, the defendant was in India during following
periods:
1. from 24.09.1970 to 15.10.1970, 2. from 17.12.1970 to 28.12.1970, 3. from 16.08.1971 to 11.09.1971, 4. from 29.10.1972 to 10.11.1972, 5. from 02.09.1977 to 01.10.1977
The decision of this Court in P C K Muthia Chettiar
(Supra) clearly lays down that the operation of Section 13
of the Limitation Act, 1908 (corresponding to Section 15
(5) of the Limitation Act, 1963) does not make any
exception in cases where the cause of action had arisen in
a foreign country or in India or in cases in which the
defendant was in India or in a foreign country at the time
of the accrual of the cause of action. Taking into account
the ratio laid down by this Court in P C K Muthia
Chettiar (Supra) and the period during which the
defendant was absent from India there can be no doubt,
whatsoever, that on due application of the provisions of
Section 15(5) of the Limitation Act of 1963, the suit filed
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by the plaintiff was well within time as the period of the
absence of the defendant from India has to be excluded
while computing the limitation for filing of the suit.
16. To answer the next question that would arise
consequent to our decision on the first issue the clauses of
the agreement between the parties will have to be noticed
in some detail. The total sale price was agreed at Rs.
3,75,000/- out of which a sum of Rs.50,000/- had been
acknowledged to have been paid by the purchaser(plaintiff
No.1) to the vendor (defendant) by means of an account
payee cheque. Under clause 4 of the agreement, the
vendor was required to obtain, at his own cost, a Wealth
Tax clearance certificate to enable the transfer of property
to be made and to intimate the said fact along with a copy
of the tax clearance certificate to the purchaser not later
than 12 months from the date of the agreement. Under
Clause 5 of the agreement, the vendor was to execute the
sale deed within a period of 15 months from the date of
the agreement. The purchaser, in turn, was to pay to the
vendor the balance sale consideration after deducting the
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amount of Rs.50,000/- at the time of the registration of
the sale deed which was to be within three months after
receipt of the necessary intimation that the tax clearance
certificate has been obtained along with the copy thereof
as contemplated under clause 4 of the agreement. Under
Clause 7 of the agreement, the purchaser was obliged to
pay to the Income Tax authorities such amount as may be
desired by the vendor (not exceeding the balance sale
price payable) in order to enable the vendor to get the
required Wealth Tax clearance certificate. The aforesaid
clause further stipulated that such money as may be paid
to the Income Tax authorities, at the request of the vendor
and on the vendor’s account, will be deducted by the
purchaser from the balance sale consideration at the time
of the execution of the sale deed. It must also be noted
that under the terms of the agreement between the parties
apart from the payment contemplated by Clause 7 to the
authority and in the manner specified therein the
purchaser had no obligation to tender any further
payment directly to the vendor.
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17. The defendant had claimed that on 09.09.1971 he
had hand delivered a letter of the even date (Exh.D/1) to
the plaintiff No. 1 requesting the plaintiff to pay to the
defendant or to deposit in the defendant’s bank account a
sum of one lakh in order to enable the defendant to
furnish a bank guarantee for the purpose of obtaining the
necessary tax clearance certificate. According to the
defendant though the plaintiff had written a letter dated
27.12.1971 (Ex. PW/11) enquiring about the status of the
tax clearance certificate and reiterating his anxiety to have
the sale transaction completed there was neither any
mention of the letter dated 09.09.1971 in the said
communication dated 27.12.1971 nor did the same
contain the response of the plaintiff to the request of the
defendant for further money. The defendant has also
relied on a notice dated 06.11.1972 issued to the plaintiff
(Exh.P-6) wherein reference to the letter dated 09.09.1971
of the defendant was made and the request for further
money was reiterated. Furthermore, according to the
defendant, though the plaintiff had replied to the aforesaid
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notice dated 06.11.1972 by his letter dated 14.11.1972,
once again, the plaintiff had remained silent with regard to
the letter dated 09.09.1971. On the other hand, according
to the plaintiffs, the letter dated 09.09.1971 was not
received by the plaintiff No.1 at any point of time; neither
had the plaintiff been intimated about the defendant’s
demand or request, as may be, for the further amount of
Rs.1 lakh through the broker Lajja Ram (PW 3).
Furthermore, in his reply dated 14.11.1972 the plaintiff
No.1 had stated that under the agreement he was duty
bound to pay such further amount as may be requested
by the defendant (upto the limit of the balance sale
consideration) only to the Income Tax authorities. No such
request had been received by the plaintiff, though, the
plaintiff was ready to deposit any amount, upto the extent
of the balance sale price, with the Income Tax authorities
as required under Clause 7 of the agreement.
18. Though considerable arguments had been advanced
by the learned counsels for either side on what would be
the correct conclusion that should be drawn from the
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above correspondence exchanged by and between the
parties in so far as the question of identification of the
party at fault is concerned it will not be necessary for us to
enter into the said arena and record any finding on the
contentions advanced. Nothing would hinge on the
existence or receipt of the letter dated 09.09.1971 as the
demand for the additional payment of Rs.1 lakh by the
defendant was clearly made by the defendant’s legal notice
dated 06.11.1972 which, admittedly, the plaintiff No.1 had
received. In his reply dated 14.11.1972 to the said notice
dated 06.11.1972 the plaintiff No.1 had unequivocally
stated that under the terms of the agreement he was
required to pay, at the defendant’s request, further
amount(s) only to the Income Tax authorities which he is
ready to do, if a request is so made by the defendant.
What, therefore, has to be addressed by the Court is
whether the demand raised by the defendant for an
additional amount of rupees one lakh for the purpose of
facilitating the issuance of the Tax Clearance certificate
and the refusal of the plaintiff to pay any such amount
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renders either of the parties in default of the terms of the
agreement dated 22.12.1970.
19. Clause 7 of the agreement is in the following terms:
“7. That the purchaser agree to pay to the Income Tax authorities such money as may be desired by the Vendor(not exceeding the balance sale price of the property, against the Tax dues from the Vendor to facilitate the Vendor to get the required wealth tax certificate. Such money as paid to the Income Tax Authorities on the request of the Vendor will be paid in the Vendor’s account and will be deducted by the purchaser from the balance of the sale price at the time of the execution of the sale Deed.”
20. Under the said clause 7 of the agreement, clearly, the
obligation of the plaintiff No.1 was to pay to the Income
Tax department such sum (not exceeding the balance
consideration payable) as may be requested by the
defendant. Neither clause 7 nor any other Clause of the
agreement had cast upon the plaintiff No.1 a duty to
tender any further payment to the defendant or to credit
the bank account of the defendant with any further
advance amount after payment of the initial amount of
Rs.50,000/-. In as far as the obligation to pay the Income
Tax Department as contemplated by clause 7 is concerned
it has been already noticed that the plaintiff No.1 had
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repeatedly asserted in the correspondence referred to
above that he was always ready and willing to pay any
amount (within the balance consideration payable) to the
Income Tax department so that the necessary tax
clearance certificate can be issued in favour of the
defendant. Nothing has been brought on record by the
defendant to show that any demand or request had been
made by him to the plaintiff No.1 for payment of any
amount to the Income Tax Department.
21. The High Court, notwithstanding the clear
language of clause 7 of the agreement, had invoked the
principle of “business efficacy” to hold that a slight
deviation from the plain meaning of the language of
clause 7 would be justified so as to read an obligation on
the part of plaintiff to pay the further amount of Rs. One
lakh as demanded by the defendant instead of insisting
on making such further payment(s) only to the Income
Tax authorities.
22. The principle of business efficacy is normally
invoked to read a term in an agreement or contract so as
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to achieve the result or the consequence intended by the
parties acting as prudent businessmen. Business efficacy
means the power to produce intended results. The
classic test of business efficacy was proposed by Lord
Justice Bowen in The Moorcock8. This test requires that
a term can only be implied if it is necessary to give
business efficacy to the contract to avoid such a failure
of consideration that the parties cannot as reasonable
businessmen have intended. But only the most limited
term should then be implied – the bare minimum to
achieve this goal. If the contract makes business sense
without the term, the courts will not imply the same. The
following passage from the opinion of L.J. Bowen in the
Moorcock (supra) sums up the position:
“x x x x x x x x x
In business transactions such as this, what the law desires to effect by the implication is to give such business efficacy to the transaction as must have been intended at all events by both parties who are business men; not to impose on one side all the perils of the transaction, or to emancipate one side from all the chances of failure, but to make each party promise in law as much, at all events, as it must have been in the contemplation of both parties that he should be responsible for in respect of those perils or chances.”
8 (1889) 14 PD 64
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23. Though in an entirely different context, this court in
United India Insurance Company Limited vs.
Manubhai Dharamasinhbhai Gajera and others9 had
considered the circumstances when reading an
unexpressed term in an agreement would be justified on
the basis that such a term was always and obviously
intended by and between the parties thereto. Certain
observations in this regard expressed by Courts in some
foreign jurisdictions were noticed by this court in para 51
of the report. As the same may have application to the
present case it would be useful to notice the said
observations:
“Prima facie that which in any contract is left to be implied and need not be expressed is something so obvious that it goes without saying; so that, if, while the parties were making their bargain, an officious bystander, were to suggest some express provision for it in their agreement, they would testily suppress him with a common ‘Oh, of course!
Shirlaw v. Southern Foundries (1926) Ltd. (1939) 2 All ER 113 (CA) ” ---------------------------------------------------------------------------------- “An expressed term can be implied if and only if the court finds that the parties must have intended that term to form part of their contract: it is not enough for the court to find that such a term would have been adopted by the parties as reasonable men if it had been suggested to them: it must have been a term that went without saying, a term necessary to give business efficacy to the contract,
9 (2008) 10 SCC 404
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a term which, although tacit, formed part of the contract which the parties made for themselves.
Trollope and Colls Ltd. v. North West Metropolitan Regl. Hospital Board (1973) 2 All ER 260 (HL)”
24. The business efficacy test, therefore, should be
applied only in cases where the term that is sought to be
read as implied is such which could have been clearly
intended by the parties at the time of making of the
agreement. In the present case not only the language of
clause (7) of agreement dated 22.12.1970 is clear and
unambiguous there is no other clause in the agreement
which had obliged the Plaintiff No.1 to make any further
payment after the initial part payment of Rs.50,000/-.
The obligation of the Plaintiff No.1 was to pay any further
amount(s) to the Income-Tax authorities, at the request of
the defendant, in order to facilitate the issuance of the Tax
Clearance Certificate. No payment to the defendant
beyond the initial amount of Rs.50,000/- was
contemplated by all. The above would appear to be
consciously intended by the parties so as to exclude the
possibility of any substantial monetary loss to the plaintiff
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in the event the defendant is to resile from his
commitment to execute the sale document. The intent of
the parties, acting as prudent businessmen, appears to be
clear. An obvious intent to exclude any obligation of the
plaintiff to pay any further amount (beyond Rs.50,000/-)
to the defendant is clearly discernible. Consequently,
resort to the principle of business efficacy by the High
Court to read such an implied term in the agreement
dated 22.12.1970, in our considered view, was not
warranted in the facts and circumstances of the present
case.
25. The principles of law on the basis of which the
readiness and willingness of the plaintiff in a suit for
specific performance is to be judged finds an elaborate
enumeration in a recent decision of this Court in J.P.
Builders and another v. A. Ramadas Rao and
another10 . In the said decision several earlier cases i.e.
in R.C. Chandiok vs. Chuni Lal Sabharwal11, N.P.
Thirugnanam vs. Dr. R. Jagan Mohan Rao12 and P.D’
10 (2011) 1 SCC 429 11 (1970) 3 SCC 140 12 (1995) 5 SCC 115
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Souza vs. Shondrilo Naidu13 have been noticed. To sum
up, no straitjacket formula can be laid down and the
test of readiness and willingness of the plaintiff would
depend on his overall conduct i.e. prior and subsequent
to the filing of the suit which has also to be viewed in the
light of the conduct of the defendant. Having considered
the matter in the above perspective we are left with no
doubt whatsoever that in the present case the Plaintiff
No.1 was, at all times, ready and willing to perform his
part of the contract. On the contrary it is the defendant
who had defaulted in the execution of the sale document.
The insistence of the defendant on further payments by
the plaintiff directly to him and not to the Income Tax
authorities as agreed upon was not at all justified and no
blame can be attributed to the plaintiff for not complying
with the said demand(s) of the defendant.
26. Having arrived at the above conclusion it is wholly
unnecessary for us to consider the arguments advanced
on behalf of the appellants with regard to the provisions
of the Foreign Exchange Regulation Act, 1973 (FERA) in
13 (2004) 6 SCC 649
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the light of which it had been contended that it was not
open in law for the plaintiff to comply with the demands
for the additional amount(s) made by the defendant. The
failure of the defendant to bring on record the draft sale
deed which had to accompany the application for the
required Tax Clearance Certificate, an aspect highlighted
on behalf of the appellants to show the absence of a
genuine desire of the defendant to go through the
transaction, also, would not require any consideration for
the above stated reason.
27. The ultimate question that has now to be considered
is whether the plaintiff should be held to be entitled to a
decree for specific performance of the agreement of
22.12.1970. The long efflux of time (over 40 years) that
has occurred and the galloping value of real estate in the
meantime are the twin inhibiting factors in this regard.
The same, however, have to be balanced with the fact that
the plaintiffs are in no way responsible for the delay that
has occurred and their keen participation in the
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proceedings till date show the live interest on the part of
the plaintiffs to have the agreement enforced in law.
28. The discretion to direct specific performance of an
agreement and that too after elapse of a long period of
time, undoubtedly, has to be exercised on sound,
reasonable, rational and acceptable principles. The
parameters for the exercise of discretion vested by Section
20 of the Specific Relief Act, 1963 cannot be entrapped
within any precise expression of language and the
contours thereof will always depend on the facts and
circumstances of each case. The ultimate guiding test
would be the principles of fairness and reasonableness as
may be dictated by the peculiar facts of any given case,
which features the experienced judicial mind can perceive
without any real difficulty. It must however be emphasized
that efflux of time and escalation of price of property, by
itself, cannot be a valid ground to deny the relief of specific
performance. Such a view has been consistently adopted
by this Court. By way of illustration opinions rendered in
P.S. Ranakrishna Reddy v. M.K. Bhagyalakshmi14 and 14 (2007) 10 SCC 231
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more recently in Narinderjit Singh v. North Star Estate
Promoters Ltd.15 may be usefully recapitulated.
29. The twin inhibiting factors identified above if are to
be read as a bar to the grant of a decree of specific
performance would amount to penalizing the plaintiffs for
no fault on their part; to deny them the real fruits of a
protracted litigation wherein the issues arising are being
answered in their favour. From another perspective it may
also indicate the inadequacies of the law to deal with the
long delays that, at times, occur while rendering the final
verdict in a given case. The aforesaid two features, at
best, may justify award of additional compensation to the
vendor by grant of a price higher than what had been
stipulated in the agreement which price, in a given case,
may even be the market price as on date of the order of
the final Court.
30. Having given our anxious consideration to all
relevant aspects of the case we are of the view that the
ends of justice would require this court to intervene and
set aside the findings and conclusions recorded by the
15 (2012) 5 SCC 712
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High Court of Delhi in R.F.A.No.11/1984 and to decree
the suit of the plaintiffs for specific performance of the
agreement dated 22.12.1970. We are of the further view
that the sale deed that will now have to be executed by the
defendants in favour of the plaintiffs will be for the market
price of the suit property as on the date of the present
order. As no material, whatsoever is available to enable
us to make a correct assessment of the market value of
the suit property as on date we request the learned trial
judge of the High Court of Delhi to undertake the said
exercise with such expedition as may be possible in the
prevailing facts and circumstances.
31. All the appeals shall accordingly stand allowed in
terms of our above conclusions and directions.
...…………………………J. [P. SATHASIVAM]
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.........……………………J. [RANJAN GOGOI]
New Delhi, December 3, 2012.
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