Satya Jain(d) Vs Anis Ahmed Rushdie(d) Tr.Lrs..

03 December 2012
Supreme Court
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SATYA JAIN(D) Vs ANIS AHMED RUSHDIE(D) TR.LRS..

Bench: P. SATHASIVAM,RANJAN GOGOI
Case number: C.A. No.-008653-008653 / 2012
Diary number: 1209 / 2012
Advocates: ARUNA GUPTA Vs SANJAY SHARAWAT

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Reportable

IN THE SUPREME COURT OF INDIA CIVIL APPELATE JURISDICTION CIVIL APPEAL No. of 2012

(Arising out of SLP (C) No.1891 of 2012) SATYA JAIN (D) THR. LRS. & ORS. ...Appellant(s)

VERSUS

ANIS AHMED RUSHDIE (D) TR.LRS. & ORS. ...Respondent(s)

With C.A. Nos. of 2012

(Arising out of SLP(C) Nos. 10441-10442/2012) With

C.A. No. of 2012 Arising out of SLP(C) No. 3570/2012)

With C.A. No. of 2012

Arising out of SLP(C) No. 3786/2012) With

C.A. Nos. of 2012 Arising out of SLP(C) Nos.4245-4246/2012)

J U D G M E N T

RANJAN GOGOI, J.

Leave granted.

2. The appellants, apart from the appellant Narendra

Jain (Plaintiff No.2), claim to be the Legal heirs and

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representatives of the original plaintiffs 1 and 3 who had

instituted suit No. 994/1977 in the High Court of Delhi

seeking a decree of specific performance in respect of an

agreement dated 22.12.1970 executed by and between

original plaintiff No.1 (Bhikhu Ram Jain) and the original

defendant Anis Ahmed Rushdie in respect of a property

described as Bungalow No.4, Flag Staff Road, Civil Lines,

Delhi (hereinafter referred to as the ‘suit property’). The

plaintiff Nos.2 and 3 were/are the sons of the original

plaintiff No.1. The suit was decreed by the learned trial

judge. The decree having been reversed by a Division Bench

of the High Court the present appeals have been filed by the

original plaintiff No.2, Narendra Jain and the other

appellants who claim to be vested with a right to sue on the

basis of the claims made by the original plaintiffs in the

suit. It is, however, made clear at the very outset that

though all such persons claiming a right to sue through the

deceased plaintiffs 1 and 3 are being referred to hereinafter

as the plaintiffs and an adjudication of the causes/claims

espoused is being made herein the said exercise does not,

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in any way, recognize any right in any such impleaded

‘plaintiffs’ which Question(s) are left open for decision if and

when so raised.

3. The pleaded case of the respective parties may now be

briefly noticed.

In the suit filed by the original plaintiffs it was

pleaded that the defendant, who was the owner of the suit

property, after inducting the plaintiff No. 1 as a tenant in

respect of the half portion of the suit property at a

monthly rent of Rupees three hundred w.e.f. 20.12.1970

had executed an agreement dated 22.12.1970 to sell the

suit property to the said plaintiff No.1. According to the

plaintiffs the price fixed under the agreement was Rupees

3,75,000/- (Rupees three lakh and seventy five thousand

only) out of which an amount of Rupees 50,000/- (Rupees

fifty thousand only) was paid to the defendant by the

plaintiff No.1 as part payment. Under clauses 4, 5 and 7 of

the agreement dated 22.12.1970 the defendant was

required to obtain necessary Tax Clearance Certificate

from the Income Tax Authorities for sale of the suit

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property and intimate the said fact and also deliver to the

plaintiff No.1 a copy of such certificate within twelve

months from the date of the execution of the agreement

dated 22.12.1970. Within three months thereafter, the

plaintiff No.1 was required to pay the balance sale

consideration on receipt of which the defendant was under

an obligation to execute the sale deed in favour of the

plaintiff. Under clause (7) of the agreement dated

22.12.1970 the plaintiff No.1 was to pay to the Income Tax

Authorities such amount as may be desired by the

defendant (not exceeding the balance sale price of the

property) against the tax dues of the defendant so as to

facilitate the grant of the required tax clearance certificate.

Clause (7) of the agreement also contemplated that such

money as may be paid by the plaintiff No.1 to the Income

Tax Authorities in the defendant-vendor’s account was to

be deducted by the plaintiff from the balance of the sale

price at the time of the execution of the sale deed.

4. According to the plaintiffs, as the plaintiff No.1 had

not received any intimation from the defendant in the

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matter of execution of the sale deed he had written a letter

dated 27.12.1971 to the defendant enquiring about the

steps taken to obtain the necessary Tax Clearance

certificate from the Income Tax Authorities. The plaintiffs

had pleaded that the said letter was not replied to. Instead

a legal notice dated 6.11.1972 was issued on behalf of the

defendant wherein it was, inter alia, claimed that

defendant had written a letter to the plaintiff No.1 as far

back as on 9.9.1971 calling upon him to pay a sum of

Rupees One lakh so as to enable the defendant to furnish

a bank guarantee to the Income Tax Authorities in order

to facilitate the issuance of the necessary Tax Clearance

certificate. The request of the defendant was not

responded to by the plaintiff No.1. Accordingly, by the

notice dated 6.11.1972, the defendant had asked/required

the plaintiff to pay the aforesaid amount of Rupees One

lakh within three days failing which, it was mentioned, the

agreement dated 22.12.1970 would stand terminated and

the earnest money (Rupees fifty thousand) paid shall

stand forfeited. According to the plaintiffs, in response to

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the aforesaid notice dated 6.11.1972, the plaintiff No.1

wrote a letter dated 14.11.1972 denying the receipt of any

communication from the defendant that he had applied for

the tax clearance certificate or any intimation to the effect

any amount is required to be paid to the Income Tax

Authority for processing the matter of grant of the

clearance certificate. In the aforesaid letter the plaintiff

No.1 had further stated that under clause (7) of the

agreement he was obliged to deposit, at the request of the

defendant, any amount not exceeding the total sale

consideration with the Income Tax Authorities and no

further/additional amount was required to be tendered to

the defendant after payment of the initial amount of

Rupees Fifty Thousand. In the said letter dated

14.11.1972 the plaintiff No.1 had also reiterated his

readiness to tender any payment as may be due under the

aforesaid clause (7) of the agreement. As the letter dated

14.11.1972 was not responded to, the plaintiff No.1 had

addressed another letter dated 15.12.1972 to the Advocate

of the defendant reiterating the contents of his earlier

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letter dated 14.11.1972. Thereafter, there was no

correspondence between the parties for about five years

until the suit was filed on 3.11.1997. It may be specifically

noted, at this stage, that according to the plaintiffs the

suit could not be instituted earlier as the defendant was

all along residing in London. Another relevant fact that

would be required to be noticed is that on 16.9.1977 the

plaintiff No.1 had received a notice terminating the

tenancy qua half portion of the suit property which had

commenced on and from 20.12.1970. It is in these

circumstances that the plaintiff had filed the suit seeking

a decree of specific performance of the agreement dated

22.12.1970 and, in the alternative, for a decree of a sum

of Rs.1,30,120.50 being the total of the part amount paid

to the defendant and damages along with interest thereon.

5. Denying the claims made by the plaintiffs the original

defendant had filed a written statement contending, inter

alia, that the suit was barred by limitation. Though the

defendant had admitted the creation of the tenancy in

favour of the plaintiff No.1 on 20.12.1970 as well as

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execution of the agreement to sell dated 22.12.1970, it

was contended that the plaintiffs were not entitled to a

decree of specific performance of the agreement inasmuch,

as the plaintiff No.1 had breached the conditions of the

agreement, particularly, clause (7) thereof. In this regard,

it was specifically pleaded by the defendant that on

09.09.1971 the defendant had addressed a letter to the

plaintiff No.1 informing him that as the Income Tax

Authorities had agreed to issue the necessary tax

clearance certificate on furnishing of a bank guarantee of

Rs.One lakh in favour of the Commissioner of the Income

Tax, the aforesaid amount be made available to the

defendant or the same be credited in the defendant’s bank

account. According to the defendant, the plaintiff No.1

failed to so act as a result of which the bank guarantee

could not be furnished and consequently the Income Tax

clearance certificate was not issued. The defendant had

also filed an amended/additional written statement

pleading that undue hardship would be caused to him in

the event a decree for specific performance is to be

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granted. The defendant had also taken the plea that apart

from addressing the letter dated 9.9.1971, the

demand/request of the defendant to make available the

additional amount of Rs. One lakh for the purpose of

furnishing the bank guarantee to the Income Tax

authorities was conveyed to the plaintiff No.1 through the

common broker of the parties, one Lajjya Ram Kapur (PW-

3).

6. On the pleadings of the parties the following issues

were framed for trial in the suit:

1. Whether the suit is within time?

2. Whether the suit is for mis-joinder of plaintiff

Nos. 2 and 3?

3. Whether the written statement has been signed

and verified by a duly authorized person? If not

to what effect?

4. Whether plaintiff No.1 has always been ready

and willing to perform his part of the agreement

dated 22.12.1970?

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5. Whether the defendant has committed the

breach of the agreement dated 22.12.1970?

6. Whether plaintiff No.1 has committed breach of

any of the terms of the agreement dated

22.12.1977, if so, to what effect?

7. Whether the plaintiffs are entitled to specific

performance of the agreement dated

22.12.1970?

8. If Issue No.7 is not proved, whether plaintiff

No.1 is not entitled to refund of earnest money

and interest thereon?

7. The learned trial judge by judgment dated 5.10.1983

decreed the suit of the plaintiffs for specific performance of

the agreement dated 22.12.1970 and directed execution of

the sale deed by the defendant in favour of any of the

plaintiffs, failing which, the Registry of the Court was

directed to ensure the execution of the same. The balance

of the sale consideration i.e. Rupees 3.25 lakhs was to be

paid by the plaintiffs at the time of the execution of the

sale deed and in the event the sale deed was to be

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executed through the Registry of the Court the aforesaid

amount was to be deposited in Court before registration of

the sale document.

8. Aggrieved by the aforesaid judgment and decree

passed by the learned trial judge, the original defendant

had filed an appeal which was allowed by the impugned

judgment dated 31.10.2011. During the proceedings of the

appeal before the High Court the original plaintiffs 1 and 3

as well as the original defendant had died. As already

noticed, while the original plaintiff No.2 continues to

remain on record as an appellant, the remaining

appellants claim to be the legal heirs/representatives of

the deceased plaintiff Nos.1 and 3. In so far as the original

defendant in the suit is concerned the legal

representatives of the said defendant are on record having

been so impleaded.

9. We have heard Mr.Shanti Bhushan, Mr.A.B. Dial and

Mr.P.Vishwanatha Shetty, learned senior counsels

appearing for the appellants and Dr.Abhishek Singhvi,

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Mr.V.Giri and Mr. Vijay Hansaria, learned senior counsels

appearing for the respondents.

10. On behalf of the appellants it is urged that the decree

passed by the learned trial Judge has been reversed in

appeal, inter alia, on the ground that the plaintiffs’ suit is

barred by limitation. It is contended that the said

conclusion has been reached on an apparent mis-

interpretation of the provisions of Section 15(5) of the

Limitation Act, 1963. It is also contended that the claim of

the plaintiff that a letter dated 9.9.1971, had been sent by

the defendant to the plaintiff, requesting for a further sum

of Rupees One lakh for the purpose of furnishing a bank

guarantee in favour of the Income Tax Authorities so as to

facilitate the issuance of the tax clearance certificate(s)

and the alleged refusal/failure of the plaintiff to comply

with the said request, is not borne out by the evidence on

record. No such request was made and neither the letter

dated 9.9.1971 nor the verbal request to the said effect

allegedly made through the broker, Lajjia Ram Kapur, was

received or communicated to the plaintiffs. In any event,

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according to learned counsel, under clause (7) of the

agreement the plaintiff was obliged to make further

amounts available, on the defendant’s account, to the

Income Tax Authorities only. Apart from the initial

payment of Rupees Fifty thousand the plaintiff was not

required to make any further payment directly to the

defendant. The meaning attributed by the first appellate

court to clause (7) of the agreement on the principle of

“business efficacy” and the consequential findings on the

question of readiness and willingness of the plaintiffs are

plainly incorrect. Learned counsel has submitted that in

such a situation, notwithstanding the expiry of long efflux

of time, when the plaintiff was in no way at fault a decree

of specific performance should follow, if required by

suitably enhancing the value of the property. Specifically,

learned counsel has indicated the willingness of the

plaintiffs to offer an amount of Rs. 6 crores for the

property in question as against the amount of Rs.3.75

lakhs as mentioned in the agreement dated 22.12.1970.

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11. Opposing the contentions advanced on behalf of the

appellants, learned counsels for the respondent (referred

hereinafter in the singular) have submitted that the

meaning sought to be attributed to the provisions of

Section 15(5) of the Limitation Act, 1963 is wholly

unacceptable. It is argued that the law does not

countenance a situation where the initiation of a civil

action can be postponed till the availability of the

defendant in India, which would be the virtual effect of

Section 15(5) of the Limitation Act if the arguments made

on behalf of the appellants on this score are to be

accepted. It is further urged that the cause of action for

the suit arose on the expiry of 15 months from the date of

the agreement, namely, on 22.03.1972 and the period of

three years for filing the suit had expired on 22.03.1975.

Alternatively, as by letter dated 06.11.1972, three days

further time has been granted by the defendant to the

plaintiff the cause of action may be understood to have

arisen on 09.11.1972 and the period of limitation of three

years to be over on 09.11.1975. Learned counsel has also

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submitted that as by letter dated 13/15.11.1972 further

four month’s time had been granted by the plaintiff to the

defendant the cause of action may be understood to have

accrued on 14.03.1973 and the period of three years for

fling the suit to be over on 14.03.1976. Yet, the present

suit was filed on 03.11.1977 though from the materials on

record it is evident that the defendant was present in India

between 07.9.1977 to 01.10.1977. The provisions of

Section 15(5) of the Limitation Act, according to learned

counsel, have to be purposively and reasonably

interpreted so as to avoid any absurd consequence(s).

Continuing, learned counsel has urged that the materials

on record, particularly the correspondence exchanged

between the parties, indicate that even when the contents

of the letter dated 09.09.1971 were specifically brought to

the notice of the plaintiff in the subsequent

correspondence addressed by the defendant, the plaintiff

had not denied receipt of the said letter. As the plaintiff

failed to respond to the defendant’s request to make

available the amount of Rupees One lakh required by him

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for the purpose of furnishing the bank guarantee, the

defendant, who was a British national, could not comply

with the demand of the Income Tax Authorities as a result

of which the necessary Tax Clearance certificate (s), which

is a pre-requisite for the sale of the property, could not be

obtained. It is, therefore, contended that though the

defendant was, at all times, ready and willing to execute

the sale deed it is the plaintiff who had failed to perform

his part of the bargain. Consequently, the High Court was

correct in refusing the decree of specific performance. In

any event, according to learned counsel, specific

performance of the agreement dated 22.12.1970 ought not

to be ordered by this Court at this juncture in view of the

completely altered market conditions in respect of

immovable property in the National Capital where the suit

property is situated. It is also pointed out that the High

Court had already granted refund of the part

consideration (Rupees fifty thousand) paid by the plaintiff

to the defendant alongwith interest at the rate of 12% from

the date of payment of the said amount till the date of the

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realization/return of the same. The said direction, it is

submitted, adequately takes care of the equities arising in

the present case.

12. On the basis of the discussions that have preceded

three issues, in the main, arise for our determination. In

proper sequential order, the first would be whether the

suit is barred by limitation. If not, which of the parties to

the agreement dated 22.12.1970 are in breach of the

terms and conditions thereof and, lastly, if no such breach

can be attributed to the plaintiff whether a decree of

specific performance should be granted at this belated

point of time.

13. Even going by any of the three different/alternative

dates on which the cause of action for the plaintiffs’ suit

had arisen, as conceded by the learned counsel for the

respondent, it is evident that the suit was filed beyond the

stipulated period of three years from any of the dates of

the accrual of the cause of action. However, the plaintiffs

have invoked the provisions of Section 15 (5) of the

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Limitation Act, 1963 to claim the benefit of the exclusion

of the period during which the defendant was absent from

India. There can, indeed, be no doubt that if the plaintiff

is entitled to exclude the period of such absence the bar of

limitation will not apply to the present suit. The court,

therefore, must make an endeavour to find out the true

meaning of the provisions contained in Section 15 (5) of

the Limitation Act in order to determine as to whether the

plea put forward by the plaintiffs is sustainable in law.

14. The provisions contained in Section 15 (5) of the

Limitation Act, 1963 are pari materia with those in Section

13 of the Indian Limitation Act, 1908. The aforesaid

provision of the Act of 1908 has received a full and

complete consideration of this Court in P C K Muthia

Chettiar & Ors v. V E S Shanmugham Chettair (D) &

Anr. 1 . While holding that the words of the Section

(Section 13), namely, “that time during which the

defendant has been absent from India ” are clear and

therefore must be excluded in computing the period of

limitation, two earlier decisions in Atul Kristo Bose v. 1 AIR 1969 SC 552

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Lyon & Co. 2 and Muthukanni Mudaliar v. Andappa

Pillai 3 were also noticed by this Court. The discussion in

respect of the aforesaid two earlier decisions which had

formed the basis of the conclusions in P C K Muthia

Chettiar (Supra), as noticed above, have been set out in

paragraph 6 of the judgment which may be profitably

extracted below :

“ 6. In Atul Kriato Bose v. Lyon & Co.4 the defendants were foreigners and they never came to India on or after the date of the accrual of the cause of action. The Calcutta High Court held that Section 13 applied and that the suit was not barred by limitation. The Court was not impressed with the argument that according to this construction a defendant who was in England when a cause of action against him accrued, and has remained there ever since might be liable after an indefinite time to be sued in a Calcutta court. In Mathukanni v. Andappa5 the plaintiff and the defendant who were residents of Mannargudi in India had gone to Kaula Lampur to earn their livelihood, and while there the defendant executed a promissory note to the plaintiff on November 16, 1921. In 1925 the plaintiff brought a suit on the promissory note in the District Munsif's Court of Mannargudi. The cause of action in the suit arose outside India. A Full Bench of the Madras High Court held that the plaintiff was entitled to the benefit of Section 13 and in computing the period of limitation he was entitled to exclude the time during which the defendant was absent in Kaula Lampur. We agree with this decision. The Full Bench rightly overruled the earlier decisions in Ruthinu v. Packiriswami6 and Subramania Chettiar v. Maruthamuthu7. We hold that the suit is not barred by limitation.

2 ILR 14 Cal 457 para 6 3 AIR 1955 Mad 96 4 (1887) ILR 14 Cal 457 5 AIR 1955 Mad 96 6 AIR 1928 Mad 1088 7 AIR 1944 Mad 437

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15. In the present case from the evidence on record it is

established that till the date of filing of the suit i.e.

03.11.1977, the defendant was in India during following

periods:

1. from 24.09.1970 to 15.10.1970, 2. from 17.12.1970 to 28.12.1970, 3. from 16.08.1971 to 11.09.1971, 4. from 29.10.1972 to 10.11.1972, 5. from 02.09.1977 to 01.10.1977

The decision of this Court in P C K Muthia Chettiar

(Supra) clearly lays down that the operation of Section 13

of the Limitation Act, 1908 (corresponding to Section 15

(5) of the Limitation Act, 1963) does not make any

exception in cases where the cause of action had arisen in

a foreign country or in India or in cases in which the

defendant was in India or in a foreign country at the time

of the accrual of the cause of action. Taking into account

the ratio laid down by this Court in P C K Muthia

Chettiar (Supra) and the period during which the

defendant was absent from India there can be no doubt,

whatsoever, that on due application of the provisions of

Section 15(5) of the Limitation Act of 1963, the suit filed

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by the plaintiff was well within time as the period of the

absence of the defendant from India has to be excluded

while computing the limitation for filing of the suit.

16. To answer the next question that would arise

consequent to our decision on the first issue the clauses of

the agreement between the parties will have to be noticed

in some detail. The total sale price was agreed at Rs.

3,75,000/- out of which a sum of Rs.50,000/- had been

acknowledged to have been paid by the purchaser(plaintiff

No.1) to the vendor (defendant) by means of an account

payee cheque. Under clause 4 of the agreement, the

vendor was required to obtain, at his own cost, a Wealth

Tax clearance certificate to enable the transfer of property

to be made and to intimate the said fact along with a copy

of the tax clearance certificate to the purchaser not later

than 12 months from the date of the agreement. Under

Clause 5 of the agreement, the vendor was to execute the

sale deed within a period of 15 months from the date of

the agreement. The purchaser, in turn, was to pay to the

vendor the balance sale consideration after deducting the

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amount of Rs.50,000/- at the time of the registration of

the sale deed which was to be within three months after

receipt of the necessary intimation that the tax clearance

certificate has been obtained along with the copy thereof

as contemplated under clause 4 of the agreement. Under

Clause 7 of the agreement, the purchaser was obliged to

pay to the Income Tax authorities such amount as may be

desired by the vendor (not exceeding the balance sale

price payable) in order to enable the vendor to get the

required Wealth Tax clearance certificate. The aforesaid

clause further stipulated that such money as may be paid

to the Income Tax authorities, at the request of the vendor

and on the vendor’s account, will be deducted by the

purchaser from the balance sale consideration at the time

of the execution of the sale deed. It must also be noted

that under the terms of the agreement between the parties

apart from the payment contemplated by Clause 7 to the

authority and in the manner specified therein the

purchaser had no obligation to tender any further

payment directly to the vendor.

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17. The defendant had claimed that on 09.09.1971 he

had hand delivered a letter of the even date (Exh.D/1) to

the plaintiff No. 1 requesting the plaintiff to pay to the

defendant or to deposit in the defendant’s bank account a

sum of one lakh in order to enable the defendant to

furnish a bank guarantee for the purpose of obtaining the

necessary tax clearance certificate. According to the

defendant though the plaintiff had written a letter dated

27.12.1971 (Ex. PW/11) enquiring about the status of the

tax clearance certificate and reiterating his anxiety to have

the sale transaction completed there was neither any

mention of the letter dated 09.09.1971 in the said

communication dated 27.12.1971 nor did the same

contain the response of the plaintiff to the request of the

defendant for further money. The defendant has also

relied on a notice dated 06.11.1972 issued to the plaintiff

(Exh.P-6) wherein reference to the letter dated 09.09.1971

of the defendant was made and the request for further

money was reiterated. Furthermore, according to the

defendant, though the plaintiff had replied to the aforesaid

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notice dated 06.11.1972 by his letter dated 14.11.1972,

once again, the plaintiff had remained silent with regard to

the letter dated 09.09.1971. On the other hand, according

to the plaintiffs, the letter dated 09.09.1971 was not

received by the plaintiff No.1 at any point of time; neither

had the plaintiff been intimated about the defendant’s

demand or request, as may be, for the further amount of

Rs.1 lakh through the broker Lajja Ram (PW 3).

Furthermore, in his reply dated 14.11.1972 the plaintiff

No.1 had stated that under the agreement he was duty

bound to pay such further amount as may be requested

by the defendant (upto the limit of the balance sale

consideration) only to the Income Tax authorities. No such

request had been received by the plaintiff, though, the

plaintiff was ready to deposit any amount, upto the extent

of the balance sale price, with the Income Tax authorities

as required under Clause 7 of the agreement.

18. Though considerable arguments had been advanced

by the learned counsels for either side on what would be

the correct conclusion that should be drawn from the

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above correspondence exchanged by and between the

parties in so far as the question of identification of the

party at fault is concerned it will not be necessary for us to

enter into the said arena and record any finding on the

contentions advanced. Nothing would hinge on the

existence or receipt of the letter dated 09.09.1971 as the

demand for the additional payment of Rs.1 lakh by the

defendant was clearly made by the defendant’s legal notice

dated 06.11.1972 which, admittedly, the plaintiff No.1 had

received. In his reply dated 14.11.1972 to the said notice

dated 06.11.1972 the plaintiff No.1 had unequivocally

stated that under the terms of the agreement he was

required to pay, at the defendant’s request, further

amount(s) only to the Income Tax authorities which he is

ready to do, if a request is so made by the defendant.

What, therefore, has to be addressed by the Court is

whether the demand raised by the defendant for an

additional amount of rupees one lakh for the purpose of

facilitating the issuance of the Tax Clearance certificate

and the refusal of the plaintiff to pay any such amount

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renders either of the parties in default of the terms of the

agreement dated 22.12.1970.

19. Clause 7 of the agreement is in the following terms:

“7. That the purchaser agree to pay to the Income Tax authorities such money as may be desired by the Vendor(not exceeding the balance sale price of the property, against the Tax dues from the Vendor to facilitate the Vendor to get the required wealth tax certificate. Such money as paid to the Income Tax Authorities on the request of the Vendor will be paid in the Vendor’s account and will be deducted by the purchaser from the balance of the sale price at the time of the execution of the sale Deed.”

20. Under the said clause 7 of the agreement, clearly, the

obligation of the plaintiff No.1 was to pay to the Income

Tax department such sum (not exceeding the balance

consideration payable) as may be requested by the

defendant. Neither clause 7 nor any other Clause of the

agreement had cast upon the plaintiff No.1 a duty to

tender any further payment to the defendant or to credit

the bank account of the defendant with any further

advance amount after payment of the initial amount of

Rs.50,000/-. In as far as the obligation to pay the Income

Tax Department as contemplated by clause 7 is concerned

it has been already noticed that the plaintiff No.1 had

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repeatedly asserted in the correspondence referred to

above that he was always ready and willing to pay any

amount (within the balance consideration payable) to the

Income Tax department so that the necessary tax

clearance certificate can be issued in favour of the

defendant. Nothing has been brought on record by the

defendant to show that any demand or request had been

made by him to the plaintiff No.1 for payment of any

amount to the Income Tax Department.

21. The High Court, notwithstanding the clear

language of clause 7 of the agreement, had invoked the

principle of “business efficacy” to hold that a slight

deviation from the plain meaning of the language of

clause 7 would be justified so as to read an obligation on

the part of plaintiff to pay the further amount of Rs. One

lakh as demanded by the defendant instead of insisting

on making such further payment(s) only to the Income

Tax authorities.

22. The principle of business efficacy is normally

invoked to read a term in an agreement or contract so as

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to achieve the result or the consequence intended by the

parties acting as prudent businessmen. Business efficacy

means the power to produce intended results. The

classic test of business efficacy was proposed by Lord

Justice Bowen in The Moorcock8. This test requires that

a term can only be implied if it is necessary to give

business efficacy to the contract to avoid such a failure

of consideration that the parties cannot as reasonable

businessmen have intended. But only the most limited

term should then be implied – the bare minimum to

achieve this goal. If the contract makes business sense

without the term, the courts will not imply the same. The

following passage from the opinion of L.J. Bowen in the

Moorcock (supra) sums up the position:

“x x x x x x x x x

In business transactions such as this, what the law desires to effect by the implication is to give such business efficacy to the transaction as must have been intended at all events by both parties who are business men; not to impose on one side all the perils of the transaction, or to emancipate one side from all the chances of failure, but to make each party promise in law as much, at all events, as it must have been in the contemplation of both parties that he should be responsible for in respect of those perils or chances.”

8 (1889) 14 PD 64

Page 29

23. Though in an entirely different context, this court in

United India Insurance Company Limited vs.

Manubhai Dharamasinhbhai Gajera and others9 had

considered the circumstances when reading an

unexpressed term in an agreement would be justified on

the basis that such a term was always and obviously

intended by and between the parties thereto. Certain

observations in this regard expressed by Courts in some

foreign jurisdictions were noticed by this court in para 51

of the report. As the same may have application to the

present case it would be useful to notice the said

observations:

“Prima facie that which in any contract is left to be implied and need not be expressed is something so obvious that it goes without saying; so that, if, while the parties were making their bargain, an officious bystander, were to suggest some express provision for it in their agreement, they would testily suppress him with a common ‘Oh, of course!

Shirlaw v. Southern Foundries (1926) Ltd. (1939) 2 All ER 113 (CA) ” ---------------------------------------------------------------------------------- “An expressed term can be implied if and only if the court finds that the parties must have intended that term to form part of their contract: it is not enough for the court to find that such a term would have been adopted by the parties as reasonable men if it had been suggested to them: it must have been a term that went without saying, a term necessary to give business efficacy to the contract,

9 (2008) 10 SCC 404

Page 30

a term which, although tacit, formed part of the contract which the parties made for themselves.

Trollope and Colls Ltd. v. North West Metropolitan Regl. Hospital Board (1973) 2 All ER 260 (HL)”

24. The business efficacy test, therefore, should be

applied only in cases where the term that is sought to be

read as implied is such which could have been clearly

intended by the parties at the time of making of the

agreement. In the present case not only the language of

clause (7) of agreement dated 22.12.1970 is clear and

unambiguous there is no other clause in the agreement

which had obliged the Plaintiff No.1 to make any further

payment after the initial part payment of Rs.50,000/-.

The obligation of the Plaintiff No.1 was to pay any further

amount(s) to the Income-Tax authorities, at the request of

the defendant, in order to facilitate the issuance of the Tax

Clearance Certificate. No payment to the defendant

beyond the initial amount of Rs.50,000/- was

contemplated by all. The above would appear to be

consciously intended by the parties so as to exclude the

possibility of any substantial monetary loss to the plaintiff

Page 31

in the event the defendant is to resile from his

commitment to execute the sale document. The intent of

the parties, acting as prudent businessmen, appears to be

clear. An obvious intent to exclude any obligation of the

plaintiff to pay any further amount (beyond Rs.50,000/-)

to the defendant is clearly discernible. Consequently,

resort to the principle of business efficacy by the High

Court to read such an implied term in the agreement

dated 22.12.1970, in our considered view, was not

warranted in the facts and circumstances of the present

case.

25. The principles of law on the basis of which the

readiness and willingness of the plaintiff in a suit for

specific performance is to be judged finds an elaborate

enumeration in a recent decision of this Court in J.P.

Builders and another v. A. Ramadas Rao and

another10 . In the said decision several earlier cases i.e.

in R.C. Chandiok vs. Chuni Lal Sabharwal11, N.P.

Thirugnanam vs. Dr. R. Jagan Mohan Rao12 and P.D’

10 (2011) 1 SCC 429 11 (1970) 3 SCC 140 12 (1995) 5 SCC 115

Page 32

Souza vs. Shondrilo Naidu13 have been noticed. To sum

up, no straitjacket formula can be laid down and the

test of readiness and willingness of the plaintiff would

depend on his overall conduct i.e. prior and subsequent

to the filing of the suit which has also to be viewed in the

light of the conduct of the defendant. Having considered

the matter in the above perspective we are left with no

doubt whatsoever that in the present case the Plaintiff

No.1 was, at all times, ready and willing to perform his

part of the contract. On the contrary it is the defendant

who had defaulted in the execution of the sale document.

The insistence of the defendant on further payments by

the plaintiff directly to him and not to the Income Tax

authorities as agreed upon was not at all justified and no

blame can be attributed to the plaintiff for not complying

with the said demand(s) of the defendant.

26. Having arrived at the above conclusion it is wholly

unnecessary for us to consider the arguments advanced

on behalf of the appellants with regard to the provisions

of the Foreign Exchange Regulation Act, 1973 (FERA) in

13 (2004) 6 SCC 649

Page 33

the light of which it had been contended that it was not

open in law for the plaintiff to comply with the demands

for the additional amount(s) made by the defendant. The

failure of the defendant to bring on record the draft sale

deed which had to accompany the application for the

required Tax Clearance Certificate, an aspect highlighted

on behalf of the appellants to show the absence of a

genuine desire of the defendant to go through the

transaction, also, would not require any consideration for

the above stated reason.

27. The ultimate question that has now to be considered

is whether the plaintiff should be held to be entitled to a

decree for specific performance of the agreement of

22.12.1970. The long efflux of time (over 40 years) that

has occurred and the galloping value of real estate in the

meantime are the twin inhibiting factors in this regard.

The same, however, have to be balanced with the fact that

the plaintiffs are in no way responsible for the delay that

has occurred and their keen participation in the

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proceedings till date show the live interest on the part of

the plaintiffs to have the agreement enforced in law.

28. The discretion to direct specific performance of an

agreement and that too after elapse of a long period of

time, undoubtedly, has to be exercised on sound,

reasonable, rational and acceptable principles. The

parameters for the exercise of discretion vested by Section

20 of the Specific Relief Act, 1963 cannot be entrapped

within any precise expression of language and the

contours thereof will always depend on the facts and

circumstances of each case. The ultimate guiding test

would be the principles of fairness and reasonableness as

may be dictated by the peculiar facts of any given case,

which features the experienced judicial mind can perceive

without any real difficulty. It must however be emphasized

that efflux of time and escalation of price of property, by

itself, cannot be a valid ground to deny the relief of specific

performance. Such a view has been consistently adopted

by this Court. By way of illustration opinions rendered in

P.S. Ranakrishna Reddy v. M.K. Bhagyalakshmi14 and 14 (2007) 10 SCC 231

Page 35

more recently in Narinderjit Singh v. North Star Estate

Promoters Ltd.15 may be usefully recapitulated.

29. The twin inhibiting factors identified above if are to

be read as a bar to the grant of a decree of specific

performance would amount to penalizing the plaintiffs for

no fault on their part; to deny them the real fruits of a

protracted litigation wherein the issues arising are being

answered in their favour. From another perspective it may

also indicate the inadequacies of the law to deal with the

long delays that, at times, occur while rendering the final

verdict in a given case. The aforesaid two features, at

best, may justify award of additional compensation to the

vendor by grant of a price higher than what had been

stipulated in the agreement which price, in a given case,

may even be the market price as on date of the order of

the final Court.

30. Having given our anxious consideration to all

relevant aspects of the case we are of the view that the

ends of justice would require this court to intervene and

set aside the findings and conclusions recorded by the

15 (2012) 5 SCC 712

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High Court of Delhi in R.F.A.No.11/1984 and to decree

the suit of the plaintiffs for specific performance of the

agreement dated 22.12.1970. We are of the further view

that the sale deed that will now have to be executed by the

defendants in favour of the plaintiffs will be for the market

price of the suit property as on the date of the present

order. As no material, whatsoever is available to enable

us to make a correct assessment of the market value of

the suit property as on date we request the learned trial

judge of the High Court of Delhi to undertake the said

exercise with such expedition as may be possible in the

prevailing facts and circumstances.

31. All the appeals shall accordingly stand allowed in

terms of our above conclusions and directions.

...…………………………J. [P. SATHASIVAM]

Page 37

.........……………………J. [RANJAN GOGOI]

New Delhi, December 3, 2012.