Reportable

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NOS. 7254-7256  OF 2002

And

Contempt Petition (C) No. 28-29 of 2009

Mrs. Saradamani Kandappan … Appellant

Vs.

Mrs. S. Rajalakshmi & Ors. … Respondents

With

CIVIL APPEAL NOS. 4641-42/2002      

Mrs. S. Rajalakshmi & Ors. … Appellants  

Vs.

Mrs. Saradamani Kandappan & Anr. … Respondents

J U D G M E N T

R. V. Raveendran J.,

These appeals by special leave (CA Nos.7254 to 7256 of 2002) are  

directed  against  the  common  judgment  and  decree  dated  19.6.2002

passed by the Madras High Court in O.S.A. Nos.12 of 1992, 32 of 1995  

and  148  of  1999  filed  by  the  appellant  herein  against  the  common  

judgment dated 29.11.1991 passed by a learned Single Judge of that court  

in  Civil  Suit  Nos.  95/1984,  302/1989  and  170/1984  and  filed  by  the  

respondents herein. The appellants and respondents herein who were the  

plaintiffs and defendants respectively in the three suits, will be referred,  

for the purpose of convenience, by their ranks in the suit also.

2. Respondent Nos.2, 3 and 4 are respectively the son, daughter and  

husband of first respondent. The first respondent is the owner of Survey  

Nos. 13, 14 and 15, the second respondent is the owner of lands bearing  

Survey Nos. 16 and 18 and the third respondent is the owner of Survey  

Nos. 19 and 20, all situated in Chettiaragaram Village, Saidapet Taluk,  

Chingleput  District  in all  measuring 24 acres 95 cents.  The said lands  

along with the trees, wells, pump-houses, farm godowns, perimeter fence  

and some furniture, are together referred to as the ‘schedule properties’.  

Respondents 1 to 4 entered into agreement of sale dated 17.1.1981 with  

the  appellant  herein  for  sale  of  the  schedule  properties,  at  a  price  of  

Rs.15,000 per acre (in all Rs.3,74,250 rounded off to Rs.3,75,000). On  

the  date  of  the  agreement,  Rs.1,00,000  was  paid  as  advance  to  

respondents, which was duly acknowledged in the agreement. Clauses 3,  

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4, 5, 6, 7, 12 and 15 of the agreement which are relevant for our purposes  

are extracted below :-

“3. The execution of the sale deeds shall depend upon the party of the  second part getting satisfied regarding the title to the land, so also the  nil encumbrance.

4. The mode of payment of the balance of Rs.2,75,000/- (Rupees Two  lakhs and seventy five thousand only) shall be as under :  

(a) Rs.1,00,000/- (one lakh) on or before 28.2.1981 (b) Rs.1,00,000/- (one lakh) on or before 6.4.1981 (c) Rs.75,000/- (seventy five thousand) on or before 30.5.1981

5.  If however any of the above mentioned dates are subsequently declared  as holidays then the next immediate working day shall be the day of the  payment.  

6.  The payments on due dates is the essence of this contract and in  case of failure on the part of the party of the second part, the party of  the first part shall cancel this agreement.  

7.  The sale deed shall be executed at the convenience of the party of the  second part as and when she wants them to be executed either in her name  or in the name of her nominee or nominees.  

12.  If the party of the second part finds the titles of the properties herein  above mentioned to be unsatisfactory or unacceptable, the party of the first  part shall be put on notice revealing her intention not to conclude the sale  and in such event if the party of the first part, fails to satisfy the party of  the second part regarding the title the party of the first part shall pay to the  party  of  the  second part  within  three  months  the  date  there  of  all  the  monies advanced by the party of the second part till then.  

15.  The party of the first part has a caretaker at present. From the day of  this agreement the party of the second part shall act as a caretaker for the  entire properties and be in trust of all the properties till the party of the  first part given the possession of the entire properties to the party of the  second part on payment of the sale amount i.e. after the entire sale amount  is paid.  

(emphasis supplied)

3. On  the  same  day  (17.1.1981)  the  fourth  respondent,  in  a  letter  

addressed to the appellant, acknowledged the receipt of Rs.1,25,000 paid  

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on various dates as commission for the said transaction relating to sale of  

the said 24.95 acres of land. By the said letter, he agreed that in case the  

transaction of sale remained unconcluded or got cancelled because of the  default  on the part  of the sellers  or buyers  under the agreement dated  

17.1.1981 or because of defective title, the entire amount of Rs.1,25,000  

received by him as commission would be refunded within three months  

thereof.   

4. In  pursuance  of  the  said  agreement  the  appellant  paid  further  

advances of Rs.1,00,000 on 28.2.1981 and of Rs.25,000 on 2.4.1981. The  

balance of 75,000 in regard to the instalment payable on 6.4.1981 and the  

last instalment of Rs.75,000 payable on or before 30.5.1981 was not paid  

by the appellant.  

5. Respondents 1 to 3 caused a notice dated 2.8.1981 to be issued  

through  their  counsel  to  appellant,  cancelling  the  agreement  dated  

17.1.1981,  on the  ground of  default  in  paying the  balance of  the  sale  

consideration, in exercise of their right to cancel the agreement on such  

default,  under  clause  6  of  the  agreement.  The  relevant  portion  of  the  

cancellation notice is extracted below:

“My clients state that even at the time of entering into the said agreement  of sale, you looked into the documents of title and satisfied yourself about  the title of my clients to the said property.  My clients were always ready  

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and wiling to conclude the sale and expected you to pay the balance of  sale consideration of Rs.2,75,000/- in accordance with clause 4 of the said  agreement. Now that you have committed defaults in the payment of the  balance of consideration. Not withstanding the fact that you have not even  sent any communication whatsoever to my clients as to whether you were  ready  and  willing  to  pay  the  balance  of  consideration  under  the  said  agreement, my clients waited for a long time and in the circumstances my  clients  have no other  alternative  except  to  invoke clause  6 of  the  said  agreement.  Accordingly,  my  clients  hereby  cancel  the  said  agreement  dated 17th January 1981 entered into between yourself and my clients in  view  of  your  failure  to  have  paid  the  balance  of  sale  consideration  according  to  clause  4  of  the  said  agreement,  as  the  payment  of  the  instalment on due dates was agreed to be the essence of the contract.

Please  take  notice  that  the  said  agreement  dated  17.1.1981  has  been  cancelled and my clients will be refunding the sum of Rs. 2,25,000/- only  so far received by them as aforesaid on their concluding the sale with any  third  party  and  ascertaining  the  deficit,  if  any,  in  the  sale  price  for  deducting  the  same  from the  amounts  refundable  to  you  in  receipt  of  which  you  may  expect  a  communication  from  my  clients  on  their  concluding the sale with third party”.

6. The  appellant  sent  a  reply  dated  7.8.1981  through  counsel  

contending  that  time  was  never  intended  to  be  the  essence  of  the  

agreement though it was formally mentioned in the agreement that time  

was of the essence; that respondents had failed to produce the original  

documents  of  title  in  spite  of  repeated  demands  and  therefore  it  was  

agreed between the appellant’s husband and the fourth respondent during  

discussions held in March 1981 in the presence of  witnesses,  that  the  

original documents would be made available as soon as possible and the  

appellant should pay the balance only thereafter, and that sale should be  

completed within a reasonable time of handing over the documents; and  

that as a token of such understanding, a further advance of Rs.25,000 was  

received  on  2.4.1981.  The  appellant  also  denied  the  claim  of  the  

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respondents that the appellant had got examined the documents of title  

and  satisfied  herself  about  that  title  at  the  time  of  entering  into  the  

agreement of sale. The appellant asserted that there was no default on her  

part and contended as follows :-

“The allegation that your client was always ready and willing to conclude  the  sale  and  expected  my  client  to  pay  the  balance  of  the  sale  consideration of Rs. 2.75 lakhs in accordance with clause 4 of the said  agreement etc. is not correct. The very attitude your client is not giving the  documents of title for scrutiny from January 1981 for the past 6 months  will  prove the hollowness  of the claim.  The further  allegation that  my  client has committed default in payment etc. is also not true, because my  client has already paid Rs. 2,25,000/- and on 2.4.1981 when the sum of  Rs. 25,000/- was paid it was specifically understood that the balance of  money will be paid and the sale will be completed within a reasonable  time as soon as the documents of title were handed over to her. Therefore,  the  question  of  default  in  payment  of  the  instalment  does  not  arise.  Moreover, it is very unreasonable on the part of your client to allege that  default has been committed when the truth is otherwise.  

My client is ready and willing to pay the balance of sale consideration and  have the sale completed provided the documents are handed over to her  immediately for scrutiny and approval. Once again in the circumstances  set out above, there is no default on the part of my client and she is always  ready and willing  to  perform her  part  of  the  agreement  provided your  client hands over the documents for scrutiny and the title is found good to  the satisfaction of my client’s legal advisers.

My client therefore stated that the purported cancellation of the  agreement  by the said notice is not legal and valid and your client is called upon to  perform her part of the obligation, viz., the handing over of the original  documents forthwith and without any undue delay, so that the transaction  may be completed. I hope that your client will see the reasonableness in  the offer and will not precipitate the matter any further.  My client expects  an early reply in this regard.”

7. This brought forth a rejoinder dated 26.8.1981 from respondents 1  

to 3 through their counsel. They denied the claim of the appellant that  

there  was  a  variation  in  the  term  regarding  payment  of  balance  

consideration  in  specified  instalments.  They  also  denied  that  such  a  

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variation was agreed at a meeting held in March 1981. They reiterated  

that the time was the essence of the contract and that the agreement was  

executed only after the appellant had satisfied herself about their title and  

the  respondent’s  husband  had  in  fact  taken  true  copies  of  all  the  

documents together with the encumbrance certificate upto 1980, and in  

those  circumstances,  the  question  of  appellant  again  seeking  any  

document of title did not arise. They contended that they were not bound  

to deliver the original documents before payment of the entire price. It  

was pointed out that payment of instalments relating to sale consideration  

stipulated in the agreement did not depend upon the appellant satisfying  

herself about the title after scrutinising the documents of title and that the  

appellant had unconditionally agreed to pay the entire consideration on  

the due dates mentioned in clause (4) of the agreement.  It  was further  

pointed out that as appellant was already in possession of xerox copies of  

the documents of title, if she wanted inspection of the originals, she could  

have addressed a letter seeking inspection.  

8. This  brought  forth  a  second  reply  dated  4.9.1981  from  the  

appellant,  reiterating the averments in the reply notice dated 7.8.1981.  

Thereafter the appellant got a public notice published in the newspaper  

‘Hindu’ dated 11.11.1981 through her counsel, informing the public that  

she had purchased the schedule properties (as also Sy. Nos.20/1, 21 and  

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24) from respondents 1 to 3 through the fourth respondent and that she  

was in possession thereof and was cultivating them. The notice further  

stated  that  pending  completion  of  documentation,  she  had  learnt  that  

respondents were trying to resell the properties and issued a warning that  

if any third party enters into any agreement with the owners, they will be  

doing so at their own risk, and the same will not bind her. This public  

notice  brought  forth  two  responses.  The  first  was  a  notice  dated  

14.11.1981 from one Gulecha stating that the documents relating to Sy.  

Nos. 16 and 18 were deposited with him by the second respondent as  

security for a loan taken from him and that if appellant purchased the said  

lands, she will be doing so at her risk. The second was a notice dated  

14.11.1981 from respondent Nos. 1 to 3 through their counsel stating that  

the claim of the appellant that she had purchased the lands bearing Nos.8,  

10,  12,  13,  14,  15,  16,  17,  18,  19,  20,  20/1,  21  and  24  and  was  in  

possession  thereof   was  false;  the  survey  numbers  mentioned  were  

erroneous; that after the agreement dated 17.1.1981 was cancelled, they  

had  entered  into  an  agreement  with  a  third  party  which  fell  through  

because of the public notice, causing loss to them; that the appellant had  

been appointed only as a caretaker of the lands under the agreement dated  

17.1.1981 and the said appointment was cancelled and a new caretaker  

had been appointed. Respondents 1 to 3 called upon the appellant to hand  

over all movables on 19.11.1981 to the new caretaker.  

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9. In this factual background the appellant filed the following three  

suits:-

(i) O.S. No. 1709/1981 on the file of the District Munsif, Poonamallee  

against  respondents  1  to  4  for  a  permanent  injunction  restraining  the  

respondents, their men and agents from in any way interfering with her  

peaceful possession and enjoyment of the suit properties. (This suit was  

subsequently transferred to Madras High Court and renumbered as C.S.  

No.302 of 1989).  

ii) C.S.  No.  95/1984  on  the  file  of  Madras  High  Court,  filed  on  

19.6.1982,  against  respondents  1  to  4  seeking  a  decree  for  specific  

performance of the agreement of sale dated 17.1.1981 and a direction to  

respondents 1 to 3 to execute a sale deed after receiving the balance.  

iii) C.S. No. 170 of 1984 on the file of the Madras High Court, filed on  

12.1.1984 against the fourth respondent for return of Rs.1,25,000/- paid  

as commission along with the interest at market rate from 17.1.1981 to  

date of payment.  

10. The first two suits were resisted by the defendants contending that  

time was of the essence of the term regarding payment of sale price and  

that the agreement was cancelled as a consequence of default committed  

by appellant in paying the balance sale price in terms of the agreement. It  

was  alleged that  appellant’s  husband knew even before the  agreement  

was signed that the original documents were with State Bank of Mysore  

and Gulecha and that the release of the documents could be obtained only  

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on payment of amounts due and that could have been done only if the  

appellant had paid the instalments in terms of the agreement.  

11. The four respondents contested the third suit (C.S. No.170 of 1984)  

filed  against  him  by  denying  that  he  had  received  a  commission  of  

Rs.1.25 lakhs and contending  that  it  was  received as  security  for  due  

performance of the contract in terms of the agreement dated 17.1.1981.  

12. The following issues were framed in the injunction suit :

(i) Whether the plaintiff is entitled to the permanent injunction  as prayed for against the defendants?

(ii) To what reliefs, the plaintiff is entitled to?

The following issues were framed in the specific performance suit :

(1) Whether the plaintiff has committed breach of the contract  by  way  of  default  in  payment  and  thus  was  lacking  in  readiness and willingness to perform his part of the contract?

(2) Is the time essence of the contract?

(3) If  so,  whether  the  termination  of  the  contract  by  the  defendant is valid?

(4) Is not the plaintiff entitled to specific performance?

(5) To what relief is the parties entitled?

Addl. Issue (1) : Whether the fourth defendant is a necessary and  proper party to the suit?

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Addl. Issue (2) : Whether by reason of filing of C.S. No. 170 of  1984,  is  the  plaintiff  entitled  to  specific  performance?

In the suit for refund of Rs.1,25,000/-, the following issues were framed:

(1) Whether the payment of Rs. 1,25,000/- made by the plaintiff  to the defendant on 17.1.1981 was towards the commission  charges as per the letter given by the defendant or towards  part of consideration for the sale in question?

(2) Whether the plaintiff is entitled to return of the said amount  of Rs.1,25,000/-.

(3) To what other relief, if any, the plaintiff is entitled?

13. Common evidence was recorded in the three suits. On behalf of the  

plaintiff, three witnesses were examined, that is plaintiff as PW1 and one  

Babu as PW-2 and one Balaraman as PW-3. Ex P-1 to P-20 were marked  

on behalf of the plaintiff.   On behalf of the defendants,  two witnesses  

were examined, that is one Rajendran as DW-1 and fourth defendant as  

DW-2. Ex.D-1 to D-6 were marked on behalf of the defendants.  After  

considering the oral and documentary evidence, a learned Single Judge of  

the High Court, by his common judgment dated 29.11.1991, dismissed all  

the three suits.

14. Aggrieved by the said judgment, the appellant filed three original  

side appeals. A Division Bench of the Madras High Court dismissed the  

said  appeals  by  common  judgment  dated  19.6.2002,  affirming  the  

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judgment of  the trial  court.  The Division Bench however directed  the  

respondents to repay Rs.3,50,000 (i.e. Rs.2,25,000 paid to defendants 1 to  

3 and Rs.1,25,000 paid to defendant No. 4) with interest at 9% per annum  

for the period during which the appellant was not acting as caretaker till  

the  complete  payment  was  made.  While  disposing  of  the  said  three  

appeals, the Division Bench also dismissed three applications. The first  

(CMP No.2888/1996)  was  an  application  filed  for  appointment  of  an  

Advocate  Commissioner  to  note  the  existing  condition  and  physical  

features of the suit property. The second (CMP No.17401/1997) was an  

application filed by the appellant’s son to implead him as a party alleging  

that the substantial part of the amounts paid to defendant came from him.  

The third (CMP No.7471/1002) was an application by the appellant to  

receive by way of additional evidence,  a judgment rendered by this Court  

in  suo moto contempt proceedings, as also a letter from the appellant’s  

counsel to the Bank of India, Mylapore Branch and a reply thereto.  

15. The learned Single Judge and the Division Bench, after exhaustive  

consideration of the evidence,  have recorded the following findings of  

fact :

(a) Respondents  1  to  3  entered  into  an  agreement  dated  17.1.1981  

agreeing  to  sell  24  acres  95  cents  of  land  to  the  plaintiff  for  a  

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consideration  of  Rs.3,75,000/-  and  received  in  all,  Rs.2,25,000  as  

advance.

(b) Plaintiff had paid an additional consideration of Rs.1,25,000 for the  

movables and taken a letter from the fourth respondent describing it as  

‘commission’, by way of security, with the understanding that if the sale  

did not take place, the amount should be refunded.   

(c) The time for payment of the balance sale price stipulated in Clause  

(4) of the agreement of sale was the essence of the contract.

(d) Plaintiff’s claim that in March, 1981, clause (4) regarding payment  

schedule was modified by oral agreement under which it was agreed that  

the instalments due on 6.4.1981 and 30.5.1981 could be paid after the  

defendants satisfied the plaintiff about their title to the property agreed to  

be  sold,  was  not  established by plaintiff.  The  terms of  the  agreement  

remained unaltered.  

(e) Plaintiff committed breach by failing to pay the sum of Rs.1,00,000  

due on 6.4.1981 (except  Rs.25,000 paid on 2.4.1981)  and the sum of  

Rs.75,000 due on 30.5.1981 and the defendants were therefore justified in  

cancelling the agreement on 2.8.1981.  

(f) The defendants did not deliver possession of the properties agreed  

to be sold, to the plaintiff in part performance of the agreement of sale  

dated 17.1.1981. The defendants delivered the property to the plaintiff in  

trust to hold the same as caretaker, until the vendors received the entire  

sale price and delivered possession. Therefore when the agreement was  

cancelled and consequently the appointment as caretaker came to an end,  

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the plaintiff became liable to return the suit  schedule properties to the  

defendants.  

(g) The plaintiff and her husband had knowledge of the existence of  

mortgage, before entering into the agreement of sale on 17.1.1981; and  

the case put forth by the defendants that as per the understanding between  

the parties, the defendants had to discharge the mortgage debts and secure  

the original title deeds after receiving the entire consideration, merited  

acceptance.  As  per  the  term of  the  agreement,  the  defendants  had  no  

obligation  to  produce the  original  title  deeds  or  proof  of  clearance of  

loans, before plaintiff paid the entire sale consideration.  

(h) The plaintiff  failed to establish her  readiness  and willingness  to  

complete the sale in terms of the agreement and she was not entitled to  

the relief of specific performance.  

16. Feeling  aggrieved  by  the  judgment  of  the  division  bench,  the  

appellant  has  filed  these  appeals  (CA  Nos.  7254  to  7256  of  2002),  

challenging the findings of fact  arrived at by the High Court and also  

raising some legal contentions. Where findings of fact recorded by the  

learned single Judge (trial court) are affirmed by the appellate bench of  

the High Court in appeal,  this court  will  be reluctant to interfere with  

such  findings  in  exercise  of  jurisdiction  under  Article  136  of  the  

Constitution,    unless  there  are  very  strong reasons  to  do  so.  On the  

contentions urged, the following questions arise for our consideration:  

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(i) Whether the time stipulated for payment of balance consideration  

was the essence of contract and whether the defendants were justified in  

cancelling  the  agreement,  when  the  time  schedule  stipulated  for  such  

payment was not adhered to?

(ii) Whether  the  parties  had  agreed  upon  sequence  of  performance,  

which  required  payment  of  balance  consideration  by  appellant,  as  

stipulated  in  clause  (4)  of  the  agreement,  only  after  the  respondents  

satisfied the appellant regarding their title to the lands?

(iii) Whether the respondents had failed to disclose the encumbrances  

over the properties and thereby committed fraud, entitling the appellant  

for extension of time stipulated for payment corresponding to the delay  

caused by the fraud and consequently the cancellation of the agreement  

by notice dated 2.8.1981 is illegal and invalid?

(iv) Whether an adverse inference ought to be drawn on account of the  

non-examination of defendants 1 to 3 who were the vendors under the  

agreement of sale?

Re: Question (i)

17. The  appellant  contends  that  time  is  not  the  essence  of  the  

agreement of sale dated 17.1.1981. She contends that where the vendors  

fail to give the documents of title to satisfy the purchaser about their title,  

and  the  purchaser  is  ready  and  willing  to  perform  the  contract,  the  

termination of the agreement of sale by the vendors is illegal and amounts  

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to breach of contract. They submit that High Court had failed to apply  

section 55 of the Contract Act, 1872. Section 55 of Contract Act deals  

with the effect of failure to perform at a fixed time, in contract in which  

time is essential. Said Section is extracted below :     

“Section 55.  Effect of failure to perform at a fixed time, in contract in   which time is  essential.--  When a party to a  contract  promises to  do a  certain thing at or before a specified time, or certain things at or before a  specified time, and fails to do such thing at or before a specified time, the  contract, or so much of it as has not been performed, becomes voidable at  the option of the promisee, if the intention of the parties was that time  should be of essence of the contract.

Effect of such failure when time is not essential: If it was not the intention  of  the  parties  that  time  should  be  of  the  essence  of  the  contract,  the  contract does not become voidable by the failure to do such thing at or  before  the specified  time;  but  the  promisee  is  entitled  to compensation  from the promisor for any loss occasioned to him by such failure.   Effect of acceptance of performance at time other than agreed upon: If, in  case of a contract voidable on account of the promisor's failure to perform  his promise at the time agreed, the promisee accepts performance of such  promise  at  any  time  other  than  agreed,  the  promisee  cannot  claim  compensation  of  any  loss  occasioned  by  the  non-performance  of  the  promise  at  the  time agreed,  unless,  at  the  time of  acceptance,  he  give  notice to the promisor of his intention to do so.”   

The above section deals with the effect of failure to perform at a fixed  

time, in contracts in which time is essential. The question whether time is  

the  essence  of  the  contract,  with  reference  to  the  performance  of  a  

contract, what generally may arise for consideration either with reference  

to  the  contract  as  a  whole  or  with  reference  to  a  particular  term  or  

condition of the contract which is breached. In a contract relating to sale  

of immovable property if time is specified for payment of the sale price  

16

but not in regard to the execution of the sale deed, time will become the  

essence only with reference to payment of sale price but not in regard to  

execution of the sale deed. Normally in regard to contracts relating to sale  

of immovable properties, time is not considered to be the essence of the  

contract unless such an intention can be gathered either from the express  

terms of the contract  or impliedly from the intention of the parties  as  

expressed by the terms of the contract.

18. Relying  upon  the  observation  of  this  court  in  N.Srinivasa  v.   

Kuttukaran Machine Tools Ltd. [2009 (5) SCC 182] that “in the contract  

relating  to  immovable  property,  time  cannot  be  the  essence  of  the  

contract”,  the  appellant  put  forth  the  contention  that  in  all  contracts  

relating to sale of immovable property, time stipulated for performance,  

even  if  expressed  to  be  the  essence,  has  to  be  read  as  not  being  the  

essence of the contract and consequently the contract does not become  

voidable by the failure to perform before the specified time. A careful  

reading  of  the  said  decision  would  show  that  the  sentence  relied  on  

(occurring in para 31) apparently was not the statement of legal position,  

but a conclusion on facts regarding the contract that was being considered  

by the court  in that case,  with reference to its terms. In fact  the legal  

position is differently stated in para 27 of the said decision, thus:  

17

“27. In a contract for sale of immoveable property,  normally it is  presumed that time is not the essence of the contract. Even if there is  an  express  stipulation  to  that  effect,  the  said  presumption  can  be  rebutted. It is well settled that to find out whether time was the essence  of the contract. It is better to refer to the terms and conditions of the  contract itself.”

19. The  legal  position  is  clear  from the  decision  of  a  Constitution  

Bench of this court in  Chand Rani v. Kamal Rani [1993 (1) SCC 519],  

wherein this court outlined the principle thus:

“It is a well-accepted principle that in the case of sale of immovable  property, time is never regarded as the essence of the contract. In fact,  there is a presumption against time being the essence of the contract.  This  principle  is  not  in  any  way  different  from that  obtainable  in  England.  Under  the  law of  equity  which  governs  the  rights  of  the  parties  in  the  case  of  specific  performance  of  contract  to  sell  real  estate, law looks not at the letter but at the substance of the agreement.  It  has to be ascertained whether under the terms of the contract the  parties  named a specific  time within which completion was to take  place,  really  and  in  substance  it  was  intended  that  it  should  be  completed within a reasonable time.  An intention to make time the  essence of the contract must be expressed in unequivocal language.”

Relying  upon  the  earlier  decisions  of  this  court  in  Gomathinayagam  

Pillai v.  Pallaniswami Nadar [1967 (1) SCR 227] and  Govind Prasad  

Chaturvedi v. Hari Dutt Shastri [1977 (2) SCC 539], this Court further  

held  that  fixation  of  the  period  within  which  the  contract  has  to  be  

performed does not make the stipulation as to time the essence of the  

contract. Where the contract relates to sale of immovable property, it will  

normally be presumed that the time is not the essence of the contract.  

Thereafter  this  court  held  that  even  if  time  is  not  the  essence  of  the  

contract, the Court may infer that it is to be performed in a reasonable  

18

time : (i) from the express terms of the contract; (ii) from the nature of the  

property and (iii) from the surrounding circumstances as for example, the  

object of making the contract. The intention to treat time as the essence of  

the  contract  may  however  be  evidenced  by  circumstances  which  are  

sufficiently strong to displace the normal presumption that time is not the  

essence in contract  for sale  of  land.  In  Chand Rani,  clause (1)  of the  

agreement of sale required the balance consideration to be paid as under:  

“Rs.98,000/- will be paid by the second party to the first party within a  

period  of  ten  days  only  and  the  balance  Rs.50,000  at  the  time  of  

registration  of  the  sale  deed….”.  This  court  held  that  time  regarding  

payment of Rs.98,000 was the essence, on the following reasoning:  

“The analysis of evidence would also point out that the plaintiff was not  willing to pay this amount  unless vacant  delivery of possession of one  room on the ground floor was given. In cross-examination it was deposed  that since income-tax clearance certificate had not been obtained the sum  of  Rs.  98,000  was  not  paid.  Unless  the  property  was  redeemed  the  payment would not be made. If this was the attitude it is clear that the  plaintiff was insisting upon delivery of possession as a condition precedent  for making this payment. The income-tax certificate was necessary only  for completion of sale. We are unable to see how these obligations on the  part of the defendant could be insisted upon for payment of Rs. 98,000.  Therefore, we conclude that though as a general proposition of law time is  not the essence of the contract in the case of a sale of immovable property  yet the parties intended to make time as the essence under Clause (1) of  the suit agreement.”

The  intention  to  make  time  stipulated  for  payment  of  balance  

consideration will be considered to be essence of the contract where such  

intention  is  evident  from  the  express  terms  or  the  circumstances  

necessitating the sale, set out in the agreement. If for example, the vendor  

19

discloses in the agreement of sale, the reason for the sale and the reason  

for stipulating that time prescribed for payment to be the essence of the  

contract, that is, say, need to repay a particular loan before a particular  

date, or to meet an urgent time bound need (say medical or educational  

expenses  of  a  family  member)  time  stipulated  for  payment  will  be  

considered  to  be  the  essence.  Even  if  the  urgent  need for  the  money  

within the specified time is not set out, if the words used clearly show an  

intention of the parties to make time the essence of the contract,  with  

reference to payment, time will be held to be the essence of the contract.

20. Let us consider the terms of the agreement of sale in this case to  

find out whether time was the essence. The standard agreements of sale  

normally provide for payment of earnest money deposit or an advance at  

the  time  of  execution  of  agreement  and  the  balance  of  consideration  

payable  at  the  time  of  execution/registration  of  the  sale  deed.  In  the  

absence of contract to the contrary, the purchaser is bound to tender the  

balance consideration only at the time and place of completing the sale  

[see clause (b) of section 55(5) of Transfer of Property Act, 1882 ‘TP  

Act’ for short].  In this case we find that there is a conscious effort to  

delink the terms relating to payment of balance price (clauses 4, 5 and 6)  

from the term relating to execution of sale deed (clause 7) and making the  

time  essence  only  in  regard  to  the  payment  of  the  balance  sale  

20

consideration. There is also a clear indication that while time would be  

the essence of the contract in regard to the terms relating to payment of  

balance price, time would not be the essence of the contract in regard to  

the execution of the sale deed. The intention making time essence of the  

contract for payment of balance price is clear from the following : (a)  

clause 4 requires the balance consideration to be paid in three instalments  

that  is  Rs.1,00,000  on  or  before  28.2.1981;  Rs.1,00,000  on  or  before  

6.4.1981; and Rs.75,000 on or before 30.5.1981; (b) Clause 5 makes it  

clear that if any of the abovementioned dates of payment is subsequently  

declared as a holiday, then the next immediate working day shall be the  

date of payment.  This shows a clear intention that payment should be  

made on the stipulated dates and even a day’s delay was not acceptable  

unless the due date was declared to be a holiday; (c) Clause 6 specifically  

stipulates that the payments on due dates is the essence of the contract  

and in case of failure on the part of the purchaser the vendors shall cancel  

the agreement.

21. On the other hand, if we look at the terms relating to performance  

of sale, there is a clear indication that time was not intended to be the  

essence, for completion of the sale. Clause 3 provides that the execution  

of  sale  deed  shall  depend  upon  the  second  party  (purchaser)  getting  

satisfied regarding the title to the lands, so also the nil encumbrance. It is  

21

significant  that  the  said  clause  does  not  say  that  payment  of  balance  

consideration shall depend upon the purchaser getting satisfied regarding  

title or nil encumbrances. Clause 7 provides that the sale deed shall be  

executed at  the convenience of the purchaser,  as  and when she wants  

them to be executed either in her name or in the name of her nominee or  

nominees. Clause 12 provides that if the second party (purchaser) finds  

the title of the properties to be unsatisfactory or unacceptable, the vendors  

shall be put on notice about her intention not to conclude the sale and in  

such an event, if the vendors fail to satisfy the purchaser regarding their  

title, the vendors shall pay to the purchaser within three months from that  

date,  all monies advanced by the purchaser till  then. It  is thus evident  

from clause  12  also  that  the  payments  of  balance  sale  price  in  three  

instalments  on  the  specified  due  dates  were  not  dependent  upon  the  

further examination of title or the satisfaction of the purchaser about the  

title.  It  is  clear  that  the  purchaser  on  the  basis  of  whatever  initial  

examination she had taken of the documents, had unconditionally agreed  

to  pay  the  amounts  in  three  instalments  of  Rs.1,00,000  on  or  before  

28.2.1981; Rs.1,00,000 on or before 6.4.1981 and Rs.75,000 on or before  

30.5.1981; and if the purchaser was not thereafter satisfied with the title  

or found the title  unacceptable and if  the vendors failed to satisfy her  

about  their  title  when  she  notified  them about  her  dissatisfaction,  the  

vendors had to refund all payments made within three months. Thus it is  

22

categorically made clear in the agreement that time regarding payment of  

balance price was the essence of the contract and such payment was not  

dependent upon the purchaser’s satisfaction regarding title.  

22. Apart from the above, the plaintiff in her evidence admitted that  

time for performance was the essence of the contract vide the following  

questions and answers :

Q : The payment of the due date and in case of failure on the part of the  party of second part, the party of the first part shall cancel the agreement.  Is this in the agreement or not?

Ans. Yes. The dates and the title are important.

Q : Do you know that everywhere in this agreement one thing is made  clear that time is the essence of the agreement ?

Ans. Yes. Time is the essence of the contract and also the title must be  proved in the agreement.

Her evidence also shows that she apparently did not have the funds to pay  

the  balance  of  Rs.75,000  due  on  6.4.1981  and  Rs.75000/-  due  on  

30.5.1981  as  was  evident  from the  Bank  pass  book.  It  was  therefore  

possible  that  being  not  ready  to  perform the  contract  in  terms  of  the  

agreement, the appellant had invented a modification in the terms of the  

agreement.  The  learned  Single  Judge  and  the  Division  Bench  have  

recorded  a  concurrent  finding  that  the  time  was  the  essence  of  the  

contract and that no change was agreed in respect of the agreement terms  

23

as alleged by the appellant. The appellant is unable to place any material  

which calls for reversal of the said findings. Therefore it has to be held  

that time regarding payment stipulated in clauses (4), (5) and (6) of the  

agreement  of  sale  was  the  essence  of  the  contract  and  failure  of  the  

appellant to adhere to it,  justified cancellation of the agreement by the  

respondents.  

An aside  regarding  the  principle  “time is  not  of  the  essence”  for  future consideration

23. It is of some interest to note that the distinction between contracts  

relating to immovable properties and other contracts was not drawn by  

section 55 of Contract Act (or any other provisions of Contract Act or  

Specific Relief Act, 1963). Courts in India made the said distinction, by  

following the English law evolved during the nineteenth century.  This  

Court  held that  time is  not  of  the essence of  the  contracts  relating to  

immovable properties; and  that notwithstanding default in carrying out   

the  contract  within  the  specified  period, specific  performance  will  

ordinarily be granted, if having regard to the express stipulation of the  

parties,  nature of the property and surrounding circumstances, it is not   

inequitable  to grant  such relief.  [vide  Gomathinayagam Pillai (supra),  

Govind Prasad Chaturvedi (supra) and Indira Kaur v. Sheo Lal Kapoor –  

1988 (2)  SCC 188 and  Chand Rani (supra)  following the decision of  

24

Privy Council in Jamshed Khodaram Irani v. Burjorji Dhunjibhai – AIR  

1915 PC 83 and other cases]. Of course, the Constitution Bench in Chand  

Rani made a slight departure from the said view.

24. The principle that time is not of the essence of contracts relating to  

immovable  properties  took  shape  in  an  era  when  market  value  of  

immovable  properties  were  stable  and  did  not  undergo  any  marked  

change even over a few years (followed mechanically, even when value  

ceased to be stable).  As a consequence, time for performance, stipulated  

in  the  agreement  was  assumed  to  be  not  material,  or  at  all  events  

considered  as  merely  indicating  the  reasonable  period  within  which  

contract should be performed. The assumption was that grant of specific  

performance  would  not  prejudice  the  vendor-defendant  financially  as  

there would not be much difference in the market value of the property  

even if  the contract  was performed after a few months.  This principle  

made sense during the first half of the twentieth century, when there was  

comparatively  very  little  inflation,  in  India.  The  third  quarter  of  the  

twentieth century saw a very slow but steady increase in prices. But a  

drastic  change  occurred  from the  beginning  of  the  last  quarter  of  the  

twentieth century. There has been a galloping inflation and  prices  of  

immovable  properties  have  increased  steeply,  by  leaps  and  bounds.  

Market values of properties are no longer stable or steady. We can take  

25

judicial notice of the comparative purchase power of a rupee in the year  

1975 and now, as also the steep increase in the value of the immovable  

properties  between  then  and  now.  It  is  no  exaggeration  to  say  that  

properties in cities, worth a lakh or so in or about 1975 to 1980, may cost  

a crore or more now.  

25. The reality arising from this economic change cannot continue to  

be ignored in deciding cases relating to specific performance. The steep  

increase in prices is a circumstance which makes it inequitable to grant  

the relief of specific performance where the purchaser does not take steps  

to complete the sale within the agreed period, and the vendor has not  

been responsible for any delay or non-performance. A purchaser can no  

longer  take  shelter  under  the  principle  that  time  is  not  of  essence  in  

performance of  contracts  relating to  immovable  property,  to cover  his  

delays, laches,  breaches and ‘non-readiness’. The precedents from an era,  

when high inflation was unknown, holding that time is not of the essence  

of the contract in regard to immovable properties, may no longer apply,  

not because the principle laid down therein is unsound or erroneous, but  

the circumstances that existed when the said principle was evolved, no  

longer exist. In these days of galloping increases in prices of immovable  

properties, to hold that a vendor who took an earnest money of say about  

10% of the sale price and agreed for three months or four months as the  

26

period for performance, did not intend that time should be the essence,  

will be a cruel joke on him, and will result in injustice. Adding to the  

misery is the delay in disposal of cases relating to specific performance,  

as  suits  and appeals  therefrom routinely  take  two to  three  decades  to  

attain  finality.  As  a  result,  an  owner  agreeing  to  sell  a  property  for  

Rs.One lakh and received Rs.Ten Thousand as advance may be required  

to execute a sale deed a quarter century later by receiving the remaining  

Rs.Ninety  Thousand,  when  the  property  value  has  risen  to  a  crore  of  

rupees.

26. It is now well settled that laws, which may be reasonable and valid  

when  made,  can,  with  passage  of  time  and  consequential  change  in  

circumstances, become arbitrary and unreasonable.  

26.1) In  Rattan Arya v.  State of  Tamil  Nadu – (1986) 3 SC 385,  this  

Court held:  

"We must also observe here that whatever justification there may have  been in 1973 when Section 30(ii) was amended by imposing a ceiling of  Rs. 400 on rent payable by tenants of residential buildings to entitle them  to seek the protection of the Act, the passage of time has made the ceiling   utterly  unreal. We are entitled  to take  judicial  notice  of  the enormous  multifold increase of rents throughout the country,  particularly in urban  areas. It is common knowledge today that the accommodation which one  could have possible got for Rs. 400 per month in 1973 will today cost at  least five times more. In these days of universal day to day escalation of  rentals any ceiling such as that imposed by Section 30(ii) in 1973 can only  be considered to be totally artificial and irrelevant today. As held by this  court  in  Motor General Traders v.  State of A.P.  (1984) 1 SCC 222,  a  provision which was perfectly valid at the commencement of the Act could   

27

be challenged later on the ground of unconstitutionality and struck down   on that basis. What was once a perfectly valid legislation, may in course   of time, become discriminatory and liable to challenge on the ground of   its being violative of Article 14."

(emphasis supplied)

26.2) In Malpe Vishwanath Acharya v. State of Maharashtra – (1998) 2  

SCC  1  a  three  Judge  bench  of  this  court  considered  the  validity  of  

determination of standard rent by freezing or pegging down the rent as on  

1.9.1940 or  as  on the date  of  first  letting,  under  sections 5(10)(B),  7,  

9(2)(b) and 12(3) of the Bombay Rents, Hotel and Lodging House Rates  

Control Ac, 1947. This court held that the said process of determination  

under the Act, which was reasonable when the law was made, became  

arbitrary and unreasonable in view of constant escalation of prices due to  

inflation and corresponding rise in money value with the passage of time.  

This Court held:   

“In so far as social legislation, like the Rent Control Act is concerned, the  law must strike a balance between rival interests and it should try to be  just  to  all.  The  law  ought  not  to  be  unjust  to  one  and  give  a  disproportionate  benefit  or  protection to another  section of the  society.  When there is shortage of accommodation it is desirable, nay, necessary  that some protection should be given to the tenants in order to ensure that  they  are  not  exploited.  At  the  same  time  such  a  law  to  be  revised  periodically so as to ensure that a disproportionately larger benefit than the  one which was intended is not given to the tenants……

Taking  all  the  facts  and circumstances  into  consideration,  we  have  no  doubt that the existing provisions of the Bombay Rent Act relating to the  determination  and  fixation  of  the  standard  rent  can  no  longer  be  considered to be reasonable……”  

The principle  underlying  the  said  decisions  with  reference  to  statutes,  

would on the same logic, apply to decisions of courts also.

28

27. A correct perspective relating to the question whether time is not of  

the essence of the contract in contracts relating to immovable property, is  

given by this court in K.S. Vidyanadam and Others vs. Vairavan – (1997)  

3 SCC 1 (by Jeevan Reddy J.  who incidentally  was a member  of  the  

Constitution Bench in Chand Rani). This Court observed:

“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.  

In the case of urban properties in India, it is well-known that their   prices  have  been  going  up  sharply  over  the  last  few  decades  -   particularly after 1973. ………We cannot be oblivious to the reality   and the reality is constant and continuous rise in the values of urban   properties  –  fuelled  by  large  scale  migration  of  people  from rural   areas to urban centres and by inflation.

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

(emphasis supplied)    

Therefore there is an urgent need to revisit the principle that time is not of  

the essence in contracts relating to immovable properties and also explain  

the current position of law with regard to contracts relating to immovable  

property made after 1975, in view of the changed circumstances arising  

from  inflation  and  steep  increase  in  prices.  We  do  not  propose  to  

undertake  that  exercise  in  this  case,  nor  referring  the  matter  to  larger  

bench as we have held on facts in this case that time is the essence of the  

29

contract, even with reference to the principles in  Chand Rani and other  

cases. Be that as it may.  

28. Till  the issue is  considered in an appropriate  case,  we can only  

reiterate what has been suggested in K.S. Vidyanadam (supra) :

(i) Courts,  while  exercising  discretion  in  suits  for  specific  

performance,  should  bear  in  mind  that  when  the  parties  

prescribe  a  time/period,  for  taking  certain  steps  or  for  

completion of the transaction, that must have some significance  

and therefore time/period prescribed cannot be ignored.

(ii) Courts  will  apply  greater  scrutiny  and  strictness  when  

considering whether the purchaser was ‘ready and willing’ to  

perform his part of the contract.  

(iii) Every suit for specific performance need not be decreed merely  

because it is filed within the period of limitation by ignoring the  

time-limits stipulated in the agreement. Courts will also ‘frown’  

upon  suits  which  are  not  filed  immediately  after  the  

breach/refusal.  The fact that limitation is three years does not  

mean a purchaser can wait for 1 or 2 years to file a suit and  

obtain specific performance. The three year period is intended  

to assist purchasers in special cases, as for example, where the  

major part of the consideration has been paid to the vendor and  

possession has been delivered in part performance, where equity  

shifts in favour of the purchaser.

30

Re: Question (ii)

29. Before the learned Single Judge, the appellant had concentrated on  

the contention that time for payment was not the essence of the contract  

and  therefore  the  failure  to  pay  the  second  instalment  on  or  before  

6.4.1981 and the final instalment on or before 30.5.1981 did not entitle  

the vendors to cancel/terminate the agreement.  As that  contention was  

rightly  rejected  by  the  learned  Single  Judge,  the  emphasis  before  the  

Division Bench was on the contention that the term regarding payment  

was altered by an oral understanding. It was contended that though time  

was the essence of  the contract  in regard to payments,  it  was equally  

necessary for the defendants to produce original title deeds to show that  

there were no encumbrances over the suit properties; that after paying the  

first  instalment  of  Rs.1,00,000  on  28.2.1981,  the  plaintiff  and  her  

husband got doubts about the original title deeds as they learnt that the  

properties  had  been  mortgaged;  that  therefore  the  plaintiff’s  husband  

along  with  his  friends  Babu  (PW2)  and  Balaraman  (PW3)  went  to  

defendants’  house  in  March,  1981  and  made  inquiries  and  then  the  

defendants requested for some more time promising that they would get  

original  title  deeds  for  verification  and  therefore  on  2.4.1981  only  

Rs.25000 was paid towards the second instalment of Rs.1,00,000 due on  

6.4.1981 with the understanding that the balance of Rs.75,000 towards  

31

the second instalment  as  also the third instalment  would be paid only  

after the production of original title deeds. Therefore the contention was  

that though time regarding payment was essence of the contract and the  

balance consideration of Rs.2,75,000 had to be paid in three instalments  

of  Rs.1,00,000,  Rs.1,00,000 and Rs.75000 on 28.2.1981, 6.4.1981 and  

30.5.1981 respectively, there was an alteration in those terms, as per an  

oral understanding in March, 1981 to postpone payment of the second  

and third instalments, till the original documents of title were produced  

by the defendants. In short the emphasis of the plaintiff was on an oral  

agreement altering the time schedule and the terms which made time for  

payment the essence of the contract.  Neither the Single Judge nor the  

Division Bench accepted the claim of appellant that there were any such  

discussions or oral understanding in March 1981 leading to variation in  

terms or that the time for payment was postponed.  

30. Before this court there was again a significant shift in the stand of  

the  appellant.  Faced  with  the  finding  that  time  for  payment  was  the  

essence and that there was no change in the terms relating to payment, the  

emphasis is on a different contention based on section 52 of the Contract  

Act. The appellant contended that the agreement of sale laid down the  

order in which the reciprocal promises were to be performed; that it first  

required respondents 1 to 3 as vendors, to furnish the original title deeds  

32

and a nil encumbrance certificate to satisfy the appellant about their title;  

that the appellant had to pay the balance of the sale price only after the  

vendors discharged their said obligation; that the appellant was entitled to  

withhold the balance sale price till the vendors discharged their liabilities,  

secured the original title deed and delivered them to her and satisfied her  

about  their  title;  and  that  without  performing  their  obligation  by  

producing the original title deeds, the vendors cannot expect performance  

by the purchaser, to pay the balance price. The appellant contended that  

courts below failed to appreciate the scope of section 51 to 54 of Contract  

Act. To appreciate the said contention it is necessary to refer to sections  

51 to 53 of the Contract Act.  

31. Section  51  provides  that  when  a  contract  consists  of  reciprocal  

promises to be simultaneously performed, no promisor need perform his  

promise,  unless  the  promisee  is  ready  and  willing  to  perform  his  

reciprocal promise. For example, if the contract provides that the balance  

of sale consideration shall be paid by the purchaser to the vendor against  

execution of sale  deed within a period of  three months,  the purchaser  

need not pay the balance sale consideration if the vendor was not willing  

to execute the sale deed. Similarly the vendor need not execute the sale  

deed unless the purchaser is ready to pay the balance sale consideration.   

33

32. Section  52  relates  to  the  order  of  performance  of  reciprocal  

promises. It provides that where the order in which reciprocal promises  

are  to be performed  is  expressly  fixed by the contract,  they shall  be   

performed in that order; and where the order is not expressly fixed by the  

contract,  they shall be performed in that order which the nature of the  

transaction requires. Let us illustrate with reference to an agreement of  

sale which provides that the vendor shall make out to the satisfaction of  

the  purchaser  a  good,  marketable  and  subsisting  title  and  provide  all  

documents as required by the purchaser to satisfy him about the title of  

the vendor, that the vendor shall obtain a certificate of clearance from a  

specified authority for the sale, that the sale shall be completed within a  

period  of  four  months  of  receipt  of  the  clearance  certificate  and  the  

purchaser shall pay the balance sale price at the time of registration of the  

sale. It is evident that the vendor will have first to make out a title by  

producing the documents required by the purchaser and also obtain the  

clearance  certificate.  Only  thereafter  the  sale  deed  shall  have  to  be  

executed and payment of the sale consideration will have to be made at  

the time of registration of the sale deed. The vendor cannot seek payment  

of the balance sale price without performing his obligations as per the  

agreement.  

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33. Section  53  provides  that  when  a  contract  contains  reciprocal  

promises,  and  one  party  to  the  contract  prevents  the  other  from  

performing his promise, the contract becomes voidable at the option of  

the party so prevented; and he is entitled to compensation from the other  

party  for  any  loss  which  he  may  sustain  in  consequence  of  the  non-

performance  of  the  contract.  Let  us  take  by  way  of  illustration  an  

agreement  which  provides  that  out  of  the  sale  price  Rs.10,00,000,  

Rs.1,00,000 was paid as advance, Rs.4,00,000 was to be paid within one  

month to enable the vendor to purchase an alternative property and shift  

his residence from the property agreed to be sold, and the sale deed has to  

be executed within three months from the date of agreement of sale and  

vacant possession of the premises should be given, against payment of  

balance  price.  If  the  purchaser  failed  to  pay  Rs.4,00,000  within  one  

month  and  thereby  prevented  the  vendor  from  purchasing  another  

property and shifting to such premises,  the vendor will  not be able to  

perform his  obligation  to  deliver  vacant  possession.  Thus the  contract  

becomes voidable at the option of the vendor.

34. Section 54 of Contract Act provides that when a contract consists  

of reciprocal promises, such that one of them cannot be performed, or that  

its performance cannot be claimed till the other has been performed, and  

the  promisor  of  the  promise  last  mentioned  fails  to  perform  it,  such  

35

promisor  cannot claim the performance  of the reciprocal  promise,  and  

must make compensation to the other party to the contract for any loss  

which  such  other  party  may  sustain  by  the  non-performance  of  the  

contract. The agreement in this case provides a good illustration for this  

section. The purchaser cannot claim that the vendors should produce the  

original title deeds and satisfy her regarding their title, or claim execution  

of the sale deed, unless and until she paid the entire consideration within  

the time stipulated in clause (4) of the agreement, which would enable the  

vendors to repay the loans and obtain release of the original title deeds.  

35. The appellant contends that clause (3) of the agreement provides  

that execution of the sale deed shall depend upon the purchaser getting  

satisfied regarding (vendors’) title to the lands and that the property is not  

subject  to  any  encumbrance;  that  the  said  clause  precedes  clause  (4)  

requiring  payment  of  balance  consideration  of  Rs.2,75,000  in  three  

instalments;  and  that  shows  that  the  intention  of  parties  was  that  the  

satisfaction of the purchaser in regard to the vendors’ title to the land and  

encumbrance,  was  a  condition  precedent  for  payment  of  the  balance  

consideration. In other words, it is contended that the contract provides  

the order in which reciprocal promises are to be performed, by placing  

clause (3) before clause (4), that is the vendors should first satisfy the  

purchaser regarding title of the vendors and only when that promise is  

36

performed  by  the  vendors,  the  question  of  purchaser  performing  her  

promise to pay the balance consideration would arise.  

36. The order of performance of reciprocal promises does not depend  

upon the  order  in  which the  terms of  the  agreement  are  reduced into  

writing. The order of performance should be expressly stated or provided,  

that is, the agreement should say only after performance of obligations of  

vendors  under  clause  (3),  the  purchaser  will  have  to  perform  her  

obligations under clause (4). As there is no such express fixation of the  

order  in  which  the  reciprocal  promises  are  to  be  performed,  the  

appellant’s contention is liable to be rejected. We have already noticed  

that  the  contract  contains  two  different  streams  of  provisions  for  

performance. One relates to payment of the balance consideration by the  

purchaser  in  the  manner  provided,  which  is  not  dependent  upon  any  

performance of obligation by the vendors. It is significant that clause (4)  

of the agreement did not say that the balance of the sale price shall be  

paid only after the vendors satisfied the purchaser in regard to title or that  

the purchaser shall pay the balance of sale price only after she satisfies  

herself regarding title of the vendors to the lands. Nor does clause (3)  

contain  a  provision,  after  stating that  execution  of  the  sale  deed shall  

depend upon the purchaser getting satisfied regarding title to the land as  

also the nil encumbrance, that the payment of sale consideration will also  

37

depend upon such satisfaction regarding title and nil  encumbrance. As  

noticed  above  there  is  an  unconditional  promise  to  pay  the  balance  

consideration in three instalments and the said promise by the purchaser  

is  not dependent upon performance of any obligation by vendors.  The  

contract  specifically  states  that  having  paid  the  balance  price,  if  the  

purchaser is not satisfied about the title and on being intimated about the  

same  if  the  vendors  fail  to  satisfy  the  purchaser  about  their  title,  all  

amounts paid towards the price should be refunded to purchaser.  This  

clearly demonstrates that the payment of balance of sale price in terms of  

the contract was not postponed nor made conditional upon the purchaser  

being  satisfied  about  the  title,  but  that  payment  of  the  balance  price  

should be made to the vendors as agreed unconditionally. In fact if the  

intention  of  the  parties  was  that  only  after  the  vendors  satisfying  the  

purchaser about their title, balance consideration had to be paid, clause  

(12) would be redundant as the situation contemplated therein would not  

arise. Further, if that was the intention, the purchaser would not have paid  

Rs.1,00,000 as further advance on 28.1.1981 and Rs.25,000 on 2.4.1981.  

It  is  therefore  clear  that  the  contract  does  not  expressly  (or  even  

impliedly) specify the order  of performance of reciprocal  promises,  as  

alleged by the appellant.  

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37. The terms of the contract makes it clear that payment of sale price  

did not  depend on execution of  the sale  deed.  The sale  deed was not  

required to be executed within any specific period. The purchaser had to  

fulfil her obligation in regard to payment of price as provided in clause 4  

and thereafter vendors were required to perform their reciprocal promise  

of executing the sale deed, whenever required by the purchaser, either in  

her  name or  in  the  names  of  her  nominees.  The sale  deed had to  be  

executed only after payment of complete sale consideration within the  

time stipulated. In these circumstances,  section 52 of the Contract Act  

does not help the appellant but actually supports the vendors-respondents.

Re: Question (iii)

38. Learned  counsel  for  the  appellant  next  submitted  that  the  lands  

belonging to the first respondent were mortgaged to Bank of India, the  

lands belonging to the second defendant were mortgaged to one Gulecha,  

the lands belonging to third respondent were mortgaged to State Bank of  

Mysore and therefore none of the original title deeds were in the custody  

of vendors; that having regard to section 55 (1) of Transfer of Property  

Act, 1882 (‘TP Act’ for short)  the vendors were bound to disclose to the  

purchaser, any material defect in their title to the property; that the failure  

of  vendors  to  disclose  the  existence  of  the  mortgages/encumbrances  

amounted to fraudulent conduct within the meaning of section 55 of TP  

39

Act. It was submitted that the vendors had deliberately failed to disclose  

the  existence  of  the  said  encumbrances  to  the  purchaser  and  thereby  

committed a fraud which made the purchaser to enter into an agreement  

of sale and part with a potion of the sale consideration in advance; that  

when the purchaser got doubts and insisted on production of the original  

title deeds, the fourth respondent took time to get the original title deeds  

and agreed that the balance of sale price due may be paid after production  

of sale deeds. It was submitted that having regard to section 55 of the TP  

Act, failure to disclose the encumbrances amounted to fraud; and in view  

of  such  fraud  by  the  respondents,  the  appellant  was  prevented  from  

performing her part of the contract by paying the balance price before the  

agreed  dates  and  therefore  the  appellant  was  entitled  to  extension  of  

further  time  for  performing  her  promise  to  pay  the  balance  price,  

corresponding to the delay caused by such fraud, having regard to the  

provisions of section 34 of the TP Act.

39. Section 55 of TP Act lists the rights and liabilities of the buyer and  

the seller in the absence of a contract to the contrary. The relevant portion  

of section 55 reads thus:   

“55. Rights and liabilities of buyer and seller -- In the absence of a  contract  to  the  contrary,  the  buyer  and  the  seller  of  immovable  property respectively are subject to the liabilities, and have the rights,  mentioned in the rules next following or such of them as are applicable  to the property sold:

40

(1) The seller is bound-

(a) to disclose to the buyer any material defect in the property or in the  seller's title thereto of which the seller is, and the buyer is not, aware,  and which the buyer could not with ordinary care discover;

(b)  to  produce  to  the  buyer  on  his  request  for  examination  all  documents  of title  relating to the property which are in  the seller's  possession or power;

(c) to answer to the best of his information all relevant questions put to  him by the buyer in respect to the property or the title thereto; x x x x x  

Section 34 of  the TP Act relied upon by appellant,  is  extracted  

below:

“34.  Transfer  conditional  on  performance  of  act,  time  being  specified

Where an act is to be performed by a person either as a condition to be  fulfilled before an interest created on a transfer of property is enjoyed  by him, or as a condition on the non-fulfilment of which the interest is  to pass from him to another person, and a time is specified for the  performance of the act, if such performance within the specified time  is prevented by the fraud of a person who would be directly benefited  by non-fulfilment of the condition, such further time shall as against  him be allowed for performing the act as shall be requisite to make up  for the delay caused by such fraud. But if no time is specified for the  performance of the act, then, if its performance is by the fraud of a  person  interested  in  the  non-fulfilment  of  the  condition  rendered  impossible or indefinitely postponed, the condition shall as against him  be deemed to have been fulfilled.”

40. Whenever a party wants to put forth a contention of fraud, it has to  

be specifically pleaded and proved. It is significant that the plaint does  

not allege any fraud by the defendants. Evidence shows that before the  

agreement was entered, the purchaser’s husband and legal advisor had  

examined the  xerox  copies  of  the  title  deeds  and satisfied  themselves  

about  the  title  of  the  vendors.  The  appellant  in  her  evidence  clearly  

41

admits that xerox copies of the title deeds were shown to her husband.  

The  agreement  of  sale  provided  that  the  sale  would  depend  upon  

purchaser getting satisfied about the title of the vendors. The manner in  

which  the  agreement  was  drafted  by  the  purchaser  shows  that  the  

purchaser  and/or  her  husband were  made aware of  the  encumbrances.  

Firstly  there is  no provision in the agreement that  the lands were  not  

subject to any encumbrances. Secondly, the provision for payment of sale  

price within a specified time does not link the payment to execution of a  

sale  deed.  Thirdly  the  contract  provided  that  on  execution  of  the  

agreement the  purchaser  will  take possession as care  taker  of  the  suit  

schedule properties and that on complete payment of the sale price on  

30.5.1981, she will be entitled to possession in part performance and that  

the  execution  of  the  sale  deed  will  be  whenever  required  by  the  

purchaser, totally disconnected with either payment of price or delivery  

of possession. All these provisions demonstrate that the vendors were in  

urgent  need  of  money,  that  the  purchaser  was  made  aware  of  the  

encumbrances, that on the purchaser paying the sale price, the vendors  

had to clear the encumbrances and thereafter convey the property, free  

from  encumbrances.  The  contention  that  the  vendors  deliberately  or  

intentionally  suppressed  any  information  regarding  the  pending  

encumbrances or the fact that the original documents were not available  

and thereby committed fraud is neither pleaded nor proved.  

42

41. The appellant did not allege in the plaint, any fraud on the part of  

vendors, in regard to suppression of encumbrances over the property. The  

entire plaint tried to justify that the plaintiff did not commit  breach of  

contract  by  not  paying  the  balance  instalments  on  6.4.1981  and  

30.5.1981, except for a stray sentence that the plaintiff will be entitled to  

proceed  against  the  third  defendants  1  to  3  for  damages,  for  not  

performing  their  part  of  the  contract  and  not  disclosing  several  prior  

encumbrances over the property. In the written statement the defendants  

submitted that the encumbrance certificate upto the year 1980 had been  

given to appellant’s husband, which showed the encumbrance in favour  

of State Bank of Mysore, that plaintiff and her husband both knew before  

entering into the agreement of sale that original documents were with the  

said bank and that therefore the allegation that the encumbrance was not  

disclosed was false. It was also disclosed in the written statement, that a  

document was surreptitiously detained by one Gulecha. It was stated that  

the defendants intended to utilise the last  two instalments  for securing  

back the original documents by discharging the loans. It is not disputed  

that the amount due to Gulecha was around Rs.40,000 and the amount  

due to State Bank of Mysore was around Rs.39,000 and any of the last  

two  instalments  would  have  been  sufficient  to  discharge  the  said  

liabilities. The appellant having committed default in paying the last two  

instalments which would have enabled discharging the debts, can not find  

43

fault with the vendors by contending that they did not secure the original  

title deeds. If the mortgage/encumbrance was made known to appellant’s  

husband and if it  had been understood that the same would be cleared  

from the last  of  the  instalments  paid  by  the  appellant,  the  absence of  

original title deeds could not be made a ground for not paying the last two  

instalments.  The  claim of  the  appellant  that  the  vendors  should  have  

cleared all the encumbrances before payment of the last two instalments  

is  not  borne  out  by  any evidence.  Even  in  law,  the  obligation  of  the  

vendors  is  to  convey  an  encumbrance  free,  good and marketable  title  

subject to contract to the contrary. The stage of execution of sale deed  

had not arrived as the appellants did not paid the amount due in terms of  

the contract.

42. The appellant contended that the debt due to the Bank of India had  

been fraudulently  suppressed by the vendors.  There is  no reference to  

such a mortgage either in the plaint or the evidence of the plaintiff. No  

one has been examined from the bank nor any document produced to  

prove the existence of such mortgage.  Appellant  attempted to produce  

some documents relating to the said mortgage with an application under  

Order 41 Rule 27 CPC which was rejected by the High Court. Before us,  

the  appellants  relied  upon  the  decision  in  Bank  of  India  v.  Vijay   

Transport [2000 (8) SCC 512] which related to the bank’s suit against  

44

Vijay Transport of which the first respondent was stated to be a partner.  

The  said  decision  of  this  court  discloses  that  proceedings  were  

commenced  in  the  year  1975  against  the  firm  in  which  the  first  

respondent was a partner, for recovery of Rs.18,14,817.91 in the Court of  

Sub-Judge, Eluru; that the partnership firm raised a counter claim of Rs.  

34,48,799 against  the Bank; and that on 6.7.1976 the Bank’s suit  was  

decreed only for Rs.1,00,418/55 whereas the counter claim of the first  

respondent was decreed for Rs.34,48,799 with costs. The bank filed an  

appeal before the High Court which was allowed on 20.9.1983 and the  

Bank’s suit was decreed for Rs.18,49,209.70 with interest and the firm’s  

counter claim was dismissed. But what is significant and relevant is the  

fact  that  as  on the date  of  the  agreement  of  sale  (17.1.1981) the  first  

defendant was not a debtor of Bank of India but on the other hand the  

bank itself was a debtor to the extent of more than Rs.33,00,000 with  

interest. Therefore the contention of the appellant that an encumbrance in  

favour of Bank of India was in existence and that was not disclosed and  

the  said  liability  was  not  disclosed,  is  wholly  untenable.  From  the  

evidence on record as rightly held by the courts below it is not possible to  

make out either any fraud or any suppression or failure to disclose facts  

on the part of the respondents.

45

43. We are therefore of the view that the failure of the appellant to pay  

the  balance  of  Rs.75,000  on  6.4.1981  and  failure  to  pay  the  last  

instalment  of  Rs.75,000  on  or  before  30.5.1981  clearly  amounted  to  

breach and time for such payment was the essence of the contract,  the  

respondents were justified in determining the agreement of sale which  

they did by notice dated 2.8.1981 (Ex. P5).  Therefore rejection of the  

prayer for specific performance is upheld.

44. We may next briefly deal with the correctness of the dismissal of  

the suit for injunction.  The appellant was not put in possession of the suit  

properties in part-performance of the agreement of sale. Under clause 15  

of the agreement of sale, she was only entrusted with the suit schedule  

properties as a caretaker until possession is given on receipt of the entire  

sale consideration. As neither the entire sale consideration was paid nor  

possession delivered,  the plaintiff  remained merely  a caretaker  and on  

cancellation  of  the  agreement  of  sale  by  the  respondents,  the  plaintiff  

became  liable  to  leave  the  suit  schedule  properties  as  the  possession  

continued to be with the defendants. As appellant never had ‘possession’  

she  was  not  entitled  to  seek  a  permanent  injunction  to  protect  her  

possession.   We  have  held  that  the  cancellation  of  agreement  was  

justified and upheld the rejection of the suit for specific performance. In  

the circumstances, the dismissal of the suit for injunction by the learned  

46

Single  Judge,  affirmed  by  the  Division  Bench,  is  also  not  open  to  

challenge.

45. We also find no reason to interfere with the dismissal of the suit for  

recovery of Rs.1,25,000 from the fourth respondent. The trial court held  

that  the  said  amount  was  not  paid  as  commission  but  was  paid  as  

consideration for the movables. The said suit was dismissed by the trial  

court.  In  the  High Court  the  learned  counsel  for  the  appellant  during  

arguments  clearly  stated  that  the  appellant  was  not  pressing  for  any  

decree  against  the  fourth  respondent  in  view  of  the  finding  that  the  

amount paid was part of the consideration for movables. Therefore the  

dismissal of suit for Rs.1,25,000 is also upheld.

46. The division bench to do broad justice and work out the equities,  

took  note  of  the  offer  of  the  defendants  in  their  written  statement  to  

refund the amount paid as advance and directed the defendants to refund  

the sum of Rs.2,25,000 paid to defendants 1 to 3 under the agreement and  

Rs.1,25,000  paid  to  the  fourth  respondent,  in  all,  Rs.3,50,000  with  

interest at 9% per annum for the period when the appellant was not acting  

as a care taker till date of payment. We find no reason to interfere with  

the direction to refund Rs.3,50,000 with interest. We however propose to  

make a modification in regard to the rate of interest and the period for  

47

which interest is payable.  The High Court has awarded interest  on the  

sum  of  Rs.3,50,000  at  9%  per  annum  for  the  period  in  which  the  

appellant had not acted as caretaker till the date of payment. As noticed  

above,  the  agreement  of  sale  does  not  provide  for  forfeiture  of  the  

amounts paid as advance under any circumstances and on the other hand,  

specifically provides that if the plaintiff was not satisfied with the title of  

the defendants, the amounts received as advance would be refunded. In  

fact,  the  respondents,  in  their  written  statement,  offered  to  refund the  

amount. Therefore, the High Court ought to have granted interest from  

the date of cancellation of the agreement (2.8.1981) to date of payment.  

The High Court was not justified in restricting the interest to only for the  

period during which the appellant had not acted as caretaker. The liability  

to  refund the  advance  has  nothing  to  do  with  the  appointment  of  the  

plaintiff  as  caretaker  or  the  obligation  of  the  plaintiff  to  return  the  

property on cancellation of the agreement. Having regard to the facts and  

circumstances,  we  are  of  the  view  that  the  rate  of  interest  shall  be  

increased to 12% per annum instead of 9% per annum.

Re : Question No. (iv)

47. The appellant contended that none of the three vendors (defendants  

1, 2 and 3) stepped into the witness box to give evidence and therefore an  

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adverse inference should be drawn against them that the case put forth by  

them is incorrect. Reliance was also placed on the decisions of this court  

in  Vidhyadhar v. Mankikrao & Anr.  (1999) 3 SCC 573 and  Balasaheb  

Dayandeo Naik (Dead) through LRs. and Ors. v. Appasaheb Dattatraya  

Pawar  (2008 ) 4 SCC 464 in that behalf. There were four defendants in  

the suit. Defendants 1,2 and 3, who were the owners of the lands were  

respectively the wife, son and daughter of the fourth defendant.  It is an  

admitted position that the entire transaction was done on behalf of the  

defendants  1,2  and  3  by  defendant  No.4  who  alone  had  complete  

knowledge of the entire transaction. Fourth defendant has given evidence  

on behalf of all the other defendants. When one of the defendants who is  

conversant with the facts has given evidence, it is not necessary for the  

other defendants to be examined as witnesses to duplicate the evidence.  

The legal position as to who should give evidence in regard to the matters  

involving personal knowledge have been laid down by this court in Man  

Kaur (dead) by LRS. v. Hartar Singh Sangha  (2010) 10 SCC 512.  This  

court  has  held  that  where  the  entire  transaction  has  been  conducted  

through a particular agent or representative, the principal has to examine  

that  agent  to prove the transaction;  and that where the principal  at  no  

point of time had personally handled or dealt with or participated in the  

transaction and has no personal knowledge of the transaction, and where  

the entire transaction has been handled by the agent, necessarily the agent  

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alone can give evidence in regard to the transaction. This court further  

observed:  

“Where all the affairs of a party are completely managed, transacted and  looked  after  by  an  attorney  (who  may  happen  to  be  a  close  family  member), it may be possible to accept the evidence of such attorney even  with reference to bona fides or 'readiness and willingness'. Examples of  such attorney holders are a husband/wife exclusively managing the affairs  of his/her spouse, a son/daughter exclusively managing the affairs of an  old and infirm parent, a father/mother exclusively managing the affairs of  a son/daughter living abroad.”

Therefore the evidence of the fourth defendant (examined as DW2) was  

sufficient to put forth the case of the defendants and there was no need to  

examine the other three defendants who did not have full or complete  

knowledge of the transactions. In the circumstances we find no merit in  

the contention that the suits ought to have been decreed, as defendants 1,2  

and 3 did not step into the witness box.

Re : Contempt Petition (C) Nos.28-29/2009 :

48. The  appellant  has  filed  these  contempt  petitions  praying  that  

respondents  1  to  4  be punished for committing  contempt of  the  order  

dated 11.11.2002 made in C.A. Nos.7254-7256/2002. The appellant filed  

the  said  appeals  aggrieved  by  the  common  judgment  dated  19.6.2002  

passed by the Division Bench of the High Court, affirming the dismissal  

of the three suits of appellant for injunction, for specific performance and  

for  refund  of  Rs.1,25,000/-.  This  Court  on  11.11.2002  while  granting  

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leave  in  the  special  leave  petitions,  made  an  interim  order  that  the  

respondent shall not encumber the property in any manner.

49. The appellant alleges that one Jeevanandam filed three suits against  

respondents 1 to 3 in the years 2007 and 2008 for injunctions and other  

reliefs,  alleging  that  he  had  entered  into  three  Memorandum  of  

Understanding (MOU for short) dated 5.7.2002 with them, under which  

they had agreed to enter  into  agreements  of  sale  in  regard to  the  suit  

schedule  properties;  that  he  had  paid  advances  to  each  of  them  on  

5.7.2002, and that he had further paid to respondents 1 to 3 in the years  

2004 and 2005, a sum of Rs.1,50,00,000. The appellants contend that the  

alleged act of receiving Rs.1,50,00,000 in the years 2004 and 2005 by  

respondents  1  to  3  from  Jeevanandam,  amounted  to  creating  an  

encumbrance over the suit property and thereby respondents 1 to 3 have  

committed  contempt of  the  order  dated 11.11.2002 of  this  Court.  The  

appellant also wants this court to hold an enquiry and hold that the MOUs  

were actually entered subsequent to the interim order dated 11.11.2002,  

but deliberately anti-dated to get over the interim order and therefore the  

execution of the said MOUs also amounts to creating an encumbrance. It  

is not necessary for us to examine the question whether the MOUs were  

anti-dated as the said question is not relevant as will presently be seen,  

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apart from the fact that no material has been produced by the appellant to  

establish the said allegation.

50. An ‘encumbrance’ is a charge or burden created by transfer of any  

interest in a property. It is a liability attached to the property that runs  

with  the  land.  [See  National  Textile  Corporation  vs.  State  of   

Maharashtra - AIR 1977 SC 1566 and  State of H.P. vs. Tarsem Singh -  

2001 (8) SCC 104]. Mere execution of an MOU, agreeing to enter into an  

agreement  to  sell  the  property,  does  not  amount  to  encumbering  a  

property. Receiving advances or amounts in pursuance of an MOU would  

not also amount to creating an encumbrance.  The MOUs said to have  

been executed by respondents 1 to 3 provide that agreements of sale with  

mutually agreed terms and conditions will be entered between the parties  

after clearance of all pending or future litigations. Therefore the MOUs  

are not even agreements of sale. In these circumstances, it is not possible  

to hold that the respondents have created any encumbrances or violated  

the order dated 11.11.2002. Hence, these contempt petitions are liable to  

be rejected.  

51. We make it clear that nothing stated in this order on the contempt  

petitions will be construed as an expression of any opinion on the merits  

of  the  dispute  between  Jeevanandam  and  respondents  1  to  3,  and  

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necessarily any pending litigation between them will have to be decided  

on the merits of the respective cases.

CIVIL APPEAL NOS. 7254-7256  OF 2002

52. These appeals are filed by the vendors – defendants 1 to 3 (who are  

respondents 1 to 3 in C.A. Nos.7254-7256/2002). They are aggrieved by  

the judgment and decree of the Division Bench in O.S.A. No.12/1992  

(arising  from  the  specific  performance  suit)  and  O.S.A.No.  148/1999  

(arising  out  of  the  money  suit)  whereby  the  Division  Bench  directed  

defendants 1 to 3 to jointly repay Rs.3,50,000 with interest  at  9% per  

annum during the period the plaintiff was not acting as a caretaker till the  

date of payment. Defendants 1 to 3 urge the following contentions :

(a) In their written statement (filed in the specific performance suit),  

their  offer  was to  repay the amount advanced was a  conditional  offer  

subject  to  the  plaintiff  not  obstructing the  defendants  from interfering  

with the property or filing any frivolous, mischievous or vexatious suit  

and voluntarily handing over the possession of the property. They had not  

unconditionally agreed to repay the sum of Rs.3,50,000. As the plaintiff  

failed to hand over the possession and obstructed the defendants from  

selling the property, the offer to return the advance had stood withdrawn.

(b) During the pendency of the Original Side Appeals, the plaintiff was  

permitting to continue in possession as Receiver of the suit properties and  

she  had  reaped  a  huge  benefit  of  more  than  Rs.37,00,000  due  to  

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continuing  in  possession  for  about  15  years.  As  the  plaintiff  was  

permitted to retain the said benefit, no further benefit ought to have been  

given by directing refund of the sum of Rs.3,50,000 with interest.

53. The fact that defendants 1 to 3 received Rs.2,25,000 out of the sale  

price of Rs.3,75,000 is not in dispute. Similarly, there is no dispute that  

the fourth defendant had received a sum of Rs.1,25,000 from the plaintiff  

and agreed to refund the said amount if the sale remained unconcluded or  

if the agreement of sale was cancelled. The division bench of the High  

Court found fit  to award the said amount, after affirming the decision  

rejecting the prayer for specific performance, in view of the offer made  

by  defendants  1  to  3  in  their  written  statement  to  repay  the  amounts  

received  towards  the  sale  consideration.  We  have  held  that  the  time  

stipulated  for  payment  of  the  balance  price  by  the  plaintiff  was  the  

essence of the contract and when the same was not paid, defendants 1 to 3  

were justified in cancelling the sale agreement. But, we also found that  

there was no provision in the agreement for forfeiture of the amounts  

already paid, even in the event of breach by the purchaser. On the other  

hand it provides that if the vendors did not satisfy the purchaser in regard  

to  their  title,  the amounts  received would be refunded.  The consistent  

case of the plaintiff was that the defendants 1 to 3 failed to satisfy her  

about their title.

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54. Further,  defendants 1 to 3 in their written statement  filed in the  

specific performance suit had agreed to refund all amounts received by  

them from the plaintiff. It is true that the offer was conditional upon the  

plaintiff not creating any hindrance in the way of the defendants by filing  

false,  frivolous  and  mischievous  suits.  Though  we  have  affirmed  the  

decision  of  the  learned  Single  Judge  and the  Division  Bench that  the  

plaintiff is not entitled to the relief of specific performance, it cannot be  

said that the plaintiff had filed false, frivolous and mischievous suits. In  

view of the above, in terms of the agreement and in terms of its offer, the  

plaintiff  was  entitled  to  recover  the  amounts  paid  by  her.  A  sum of  

Rs.2,25,000 was paid under the agreement of sale to defendants 1 to 3.  

The finding of the learned Single Judge that the sum of Rs.1,25,000 paid  

by the plaintiff to the fourth defendant was also the consideration for the  

movables  in  addition  to  the  consideration  of  Rs.3,75,000  under  the  

agreement of sale,  was not been challenged by the defendants.  In the  

circumstances, the Division Bench was justified in granting a decree in  

favour of the plaintiff  for Rs.3,50,000 with interest.  These appeals are  

therefore liable to be dismissed.

Conclusion :

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55. In view of the foregoing the appeals and contempt petitions are  

disposed of as follows:  

(i) C.A. Nos.7254-7256/2002 are allowed in part only in regard to the  

rate of interest and period for which interest is payable, with respect to  

the decretal amount of Rs.3,50,000/-. We direct that respondents 1 to 3  

shall  refund the sum of Rs.3,50,000/- to appellant as directed by High  

Court,  with  interest  at  12% per  annum from 2.8.1981  to  the  date  of  

payment. Subject to the aforesaid modification in regard to the period for  

which interest is payable and rate of interest, the judgment of the Division  

Bench of the Madras High Court is upheld in its entirety.  

(ii) Contempt Petition Nos.28-29/2009 are dismissed.  

(iii) C.A. Nos.4641-4642/2003 are dismissed.  

(iv) Parties are directed to bear their respective costs.

As  a  consequence,  CS  No.  170/1984  and  CS  No.  302/1989  stand  

dismissed. CS No. 95/1984 is decreed in part in favour of the appellant  

for Rs.3,50,000 with interest at 12% per annum from 2.8.1981 to date of  

payment.  

………………………….J. (R V Raveendran)

New Delhi; ……………………….J. July 4, 2011 (K S Radhakrishnan)

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