BALASAHEB DAYANDEO NAIK (DEAD) THROUGH LRS & ORS.versusAPPASAHEB DATTATRAYA PAWAR

                       (2008) 1 S.C.R. 1169


A           BALASAHEB DAYANDEO NAIK (DEAD)
                  THROUGH LRS & ORS.
                                v.
              APPASAHEB DATTATRAYA PAWAR
                (Civil Appeal No. 647 of 2008)
B                      JANUARY 24, 2008

       [DR. ARIJIT PASAYAT AND P. SATHASIVAM, JJ]

        Specific Relief Act, 1963 -Agreement to sell land - Non-
e execution of - Suit for specific performance - Grant of decree
  and plea of seller that time was essence of contract rejected -
  However, High Court setting aside the decree - Validity of -
  Held: Recital in the agreement that earnest money would be .
  forfeited upon failure to execute agreement within stipulated
D period makes it clear that parties never intended time to be
  essence of contract - More so, seller did not prove his plea -
  Thus, decree granted by trial court upheld - Buyer directed to
  deposit balance consideration amount and seller would
  execute sale deed.
E        The respondent-defendant entered into an
    agreement for sale of agricultural lands to the appellant-
    plaintiffs for a consideration amount. The sale deed was
    to be executed by the defendant within six months and
    the possession of lands was to be delivered at the time of
F execution of sale deed. The plaintiffs paid the earnest
    money and balance amount was to be paid at the time of
    execution of sale deed. However, the defendant did not
    execute the agreement. The plaintiffs filed suit for specific
    performance of agreement. The trial court decreed the suit
G holding that the defendant failed to prove that time was
    the essence of contract and the plaintiffs were and are
    ready and willing to perform their ·part of contract. The
    High Court set aside the orcier of trial court. Hence the ·
  · present appeal.
H                              1169
        BALASAHEB D. NAIK (DEAD) THROUGH LRS & ORS.           1170
                   v. APPASAHEB D. PAWAR

    1        Allowing the appeal, the Court                          A
             HELD: 1.1 In the case of sale of immoveable property,
        there is no presumption as to time being the essence of
        the contract. Even where the parties have expressly
        provided that time is the essence of the contract, such a
        stipulation will have to be read along with other provisions B
        of the contract. [Para 1OJ [1176-E]
              1.2 The defendant in his written statement made a
        bald claim that the time was the essence of contract. Even
        if the recital in the agreement of sale is accepted that the c
        sale deed has to be executed within a period of six
        months, there is an express provision in the agreement
        itself that failure to adhere the time, the earnest money
        will be forfeited. In such circumstances and in view of
        recital pertaining to forfeiture of the earnest money makes
                                                                     D
        it clear that time was never intended by the parties to be
        of essence. [Para 13] [1178-E & F]
             1.3 The appellants/plaintiffs clearly established their
        claim to secure specific performance of the agreement
        by leading cogent evidence whereas the respondenU E
        defendant having pleaded that time was the essence of
        the contract neither entered the witness box nor led any
        evidence whatsoever. The defendant did not bother to
        prove his claim on oath before the Court to the effect that
        it was the plaintiffs who avoided performing their part of F
        contract. Neither the terms of agreement nor the intention
        of the parties indicate that the time is an essence of the
        agreement. All the above-mentioned material aspects were
        correctly appreciated by the trial court and unfortunately
        the High Court lost sight of the above material aspect and
                                                                     G
        the conduct of the defendant in not strengthening his plea
r
'
        by placing acceptable evidence. In such circumstances,
        the High Court should have upheld the decree of specific
        performance granted by the trial Court. [Paras 12 and 13]
        [1177-G; 1178-A, D, H; 1179-A]
                                                                     H
    1171       SUPREME COURT REPORTS               [2008] 1 S.C.R.


A      1.4 When the third plaintiff deposed before the Court
  explaining their case with reference to the recitals in the
  agreement of sale including the reference to the legal
  notice to the defendant, in the absence of contra evidence
  on the side of the defendant, the conclusion arrived at by
B the High Court in non-suiting the plaintiff cannot be agreed.
  [Para 13] [1179-A & B]
        1.5 The claim for refund of earnest money by the
  plaintiffs is only their alternative claim. It is not in dispute
  that in all suits for specific performance, the plaintiff is
C entitled to seek· alternative relief in the event the decree
  for specific performance cannot be granted for any
  reason, hence there is no infirmity in the alternative plea
  of refund. [Para 13] [1179-C & D]
        1.6 The judgment and decree of the High Court is set
D aside and the decree granted by the trial Court is upheld.
  The appellants/plaintiffs are directed to deposit the
  balance amount of sale consideration whereupon the
  respondent/defendant would execute the sale deed of the
  suit lands. In case of failure of the defendant to execute
E the sale deed, the plaintiffs would be entitled to get the
  sale deed executed through Court. (Para 14] (1179-E & F]
           K. S. Vidyanadam and Others vs. Vairavan 1997 (3) SCC
    1 - distinguished.
F        Chand Rani (Smt.) (dead) by LRs. Vs. Kamal Rani (Smt.)
    (dead) by LRs, (1993) 1 SCC 519; Swarnam Ramachandran
    (Smt.) and Another vs. Aravacode Chakungal Jayapa/an, 2004
    (8) sec 689 - relied on.
       CIVIL APPELLATE JURISDICTION: Civil Appeal No. 647
G of 2008.
         From the Judgment and final Order dated 11.1.2005 of
    the High Court of Judicature at Bombay in F.A. No. 743/'1993.
       Makarand D. Adkar, Vijay Kumar and Vishwajit Singh for
H the Appellants.
                 BALASAHEB D. NAIK (DEAD) THROUGH LRS & ORS.                 1172
                    v. APPASAHEB D. PAWAR [P. SATHASIVAM, J.]
                    V.N. Ganpule, S.B. Meitei, Naresh Kumar Gaur and Ashck A
             1
                 Kumar Singh for the Respondent.
                      The Judgment of the Court was delivered by
                      P. SATHASIVAM, J. 1) Leave granted.
                                                                                    B
                       2) This appeal is directed against the judgment and order
                 dated 11.01.2005 passed by the High Court of Judicature at
                 Bombay in First Appeal No. 743 of 1993 in and by which the
         '       High Court set aside the decree for specific performance
                 granted by the trial Court and consequently dismissed the suit
                 of the plaintiffs.                                                 c
                      3) Brief facts in a nutshell are:
                       The appellants/plaintiffs in special civil suit No. 320of1988
                 filed the same for specific performance of agreement dated
                 31.07.1985. According to the plaintiffs, the respondent herein/ D
                 defendant is the owner of land Block No. 208 and Block No.
                 209 respectively admeasuring Area H. 0.60 Rand H. 0.40 R of
                 Village Nagaon in Hatkanangale Tahsil. The defendant had
                 entered into an agreement for sale of the said lands to the
                 plaintiffs for a consideration of Rs.85,000/- per acre. The E
                 agreement was reduced into writing and according to the terms
                 of the agreement, the sale deed was to be executed by the
                 defendant within a period of six months. It was agreed that
                 possession of the lands was to be delivered at the time of
                 execution of sale deed. The defendant has also undertaken the F
                 responsibility of obtaining necessary permission for sale of the
                 lands, if required. On the date of execution of the agreement,
                 an amount of Rs.20,000/- was paid by the plaintiffs to the
                 defendant as earnest money and balance amount of the
                 consideration was to be paid at the time of execution of the
                                                                                     G
                 sale deed. The plaintiffs were always ready and willing to perform
     ... "       their part of the contract but the defendant avoided to receive
                 the balance amount of consideration and neglected to execute
                 the sale deed. The plaintiffs sent a legal notice on 16.07.1988
                 to the defendant through their advocate calling upon him to
..                                                                                   H
    1173      SUPREME COURT REPORTS                   [2008] 1 S.C.R.


A   perform his part of the obligation under the contract. In spite of
    the notice, the defendant did not comply with the requirements       •
    which necessitated the plaintiffs to file the suit for specific
    performance or in the alternative refund of earnest money with
    interest thereon@ 15% per annum.
B       4) The defendant filed a written statement wherein he
  denied the plaintiffs claim. It was further stated that though
  agreement for sale of the suit lands was entered into between
  him and the plaintiffs on 31.07.1985, the sale deed was to be
  executed within a period of six months from the date of contract
C as he was in dire need of money for construction of his house
  and, therefore, the time was the essence of the contract. He
  had called upon the plaintiffs to pay the balance amount of
  consideration and get the sale deed executed. But the plaintiffs
  were not in a position to arrange the balance amount of
D consideration and complete the contract. As the market price
  of the agricultural lands have now gor.e up, the plaintiffs by
  purchasing the suit lands are intending to dispose of the same
  to others at a higher price. In view of the same, the plaintiffs are
  not entitled to discretionary relief of specific performance of
E contract.

           5) The learned Civil Judge (Senior Division), on
    23.02.1993, after finding that the defendant has failed to prove
  that time was the essence of contract and the plaintiffs were
  and are ready and willing to perform their part of contract
r cecreed the suit as prayed fcL. Aggrieved by the aforesaid
  judgment of the trial Court, the defendant filed First Appeal No.
  743 of 1993 before the High Court of Judicature at Bombay.
  The learned Single Judge of the High Court not in agreement
  with the conclusion of the trial Court and finding that plaintiffs
G failed to substantiate their plea allowed the appeal of the
  defendant and dismissed the suit. Questioning the judgment
  and order of the High Court, the plaint!ffs have filed the present
  appeal by way of special leave. During the pendency of the
  appeal before this Court, Balasat1eb Daya;-1deo Naik/first plaintiff
H died and his legal representatives were brought on record as
           BALASAHEB D. NAIK (DEAD) THROUGH LRS & ORS.                1174
              v. APPASAHEB D. PAWAR [P. SATHASIVAM, J.]
           per order dated 19.09.2006 in I.A. No. 3 of 2005.                  A
                6) We heard Mr. Makarand D. Adkar, learned counsel
           appearing for the appellants and Mr. V.N. Ganpule, learned
           senior counsel appearing for the respondent, perused the entire
           annexures and other relevant materials filed before this Court.
                                                                              8
                 7) Having regard to the terms of agreement of sale dated
           31.07.1985, reasonings of the trial Court as well as the High
           Court and submissions before this Court, only two points arise
           for consideration of this Court, namely, (a) whether time is the
           essence of the contract? and (b) whether the plaintiffs were       c
           ready and willing to perform the contract?
                 8) In order to find an answer to the above questions, it
           would be useful to referthe relevant recitals from the agreement
           of sale. Para 3 of the agreement specifically mentions the details
           of the land sought to be sold such as extent and boundaries. It D
    j
           also refers the easement rights and the period in which the sale
           has to be completed. The recital reads as under:-
                "From the total consideration I have received Rs.20,000/
                - as an earnest money of which no independent receipt is
                necessary. Rest of the amount is to be paid by you at the E
                time of sale deed of the said lands. It is agreed between
                the parties that the sale deed is to be executed within 6
                months from today. Possession of the land is to be handed
                over at the time of sale deed."
                                                                              F
                It is also relevant to mention the default clause which reads
           as under:-
                "For completion of the sale deed the permission is
                required to be obtained by me. If I fail to execute the said
                deed within stipulated period then you have to get it G
    --,.
•               executed on the basis of this agreement. On the contrary
                if you fail to get execute the sale deed then this agreement
                is supposed to be cancelled and the earnest amount will
                be forfeited. The land is free from all sorts of
                encumbrances. This agreement is binding on myself and H
    1175       SUPREME COURT REPORTS                   [2008] 1 S.C.R.


A          my legal heirs etc. dated 31/7/1985."
        The above-~entioned details in the agreement of sale
  clearly show a) that the subject-matter of the property i~ an
  agricultural land/immoveable properties b) the sale deed 1s to
  be executed within six months frcm the date of sale agreement
B i.e. 31.07 .1985. c) possession of the land to be handed over at
  the time of execution of sale deed d) failure to get execute the
  sale deed, the earnest money will be forfeited. With these factual
  details, let us consider the legal principles enunciated by this
  Court.
c
        9) In Chand Rani (Smt.) (dead) by LRs. Vs. Kamal Rani
  (Smt.) (dead) by LRs, (1993) 1 SCC 519, a Constitution Bench
  of this Court has held that in the sale of immoveable property,
  time is not the essence of the contract. It is worthwhile to refer
D the following conclusion:
           "19. 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
E          principle is not in any way different from that obtainable in
           England. U~der 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
F          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."
G
           "21. In Govind Prasad Chaturvedi v. Hari Dutt Shastri
           (1977) 2 sec 539 following the above ruling it was held
           at pages 543-544: (SCC para 5)
           "... It is settled law that the fixation of the period within
H
    BALASAHEB D. NAIK (DEAD) THROUGH LRS & ORS.                 1176
       v. APPASAHEB D. PAWAR [P. SATHASIVAM, J.]

1
         which the contract has to be performed does not make A
         the stipulation as to time the esf>ence of the contract.
         When a contract relates to sale of immovable property it
         will normally be presumed that the time is not the essence
         of the contract. [Vide Gomathinayagam Pillai v.
         Pal/aniswami Nadar 1 (at p. 233).] It may also be B
         mentioned that the language used in the agreement is not
         such as to indicate in unmistakable terms that the time is
         of the essence of the contract. The intention to treat time
         as the essence of the contract may be evidenced by
         circumstances which are sufficiently strong to displace c
         the normal presumption that in a contract of sale of land
         stipulation as to time is not the essence of the contract."
         "23. In Indira Kaur (Smt) v. Sheo Lal Kapoor (1988) 2
         sec 488 in paragraph 6 it was ,held as under:
                                                                        D
         "... The law is well-settled that in transactions of sale of
         immovable properties, time is not the essence of the
         contract."
           10) It is clear that in the case of sale of immoveable
    property, there is no presumption as to time being the essence E
    of the contract. Even where the parties have expressly provided
    that time is the essence of the contract, such a stipulation will
    have to be read along with other provisions of the contract. For
    instance, if the contract was to include clauses providing for
    extension of time in certain contingencies or for payment of fine F
    or penalty for every day or week, the work undertaken remains
    unfinished on the expiry of the time provided in the contract, ·
    such clauses would be construed as rendering ineffective the
    express provision relating to the time being of the essence of
    contract. In the case on hand, though the parties agreed that the
                                                                         G
    sale deed is to be executed within six months, in the last
    paragraph they made it clear that in the event of failure to execute
    the sale deed, the earnest money will be forfeited. In such
    circumstances, the above-mentioned claµses in the last three
    paragraphs of the agreement of sale would render ineffective
                                                                         H
    1177       SUPREME COURT REPORTS                    [2008) 1 S.C.R.


A   the specific provision relating to the time being the essence of
    contract.

        11) This Court in Swarnam Ramachandran (Smt.) and
    Another vs. Aravacode Chakungal Jayapalan, (2004) 8 SCC
    689 has once again reiterated tr.at time is not the essence of
8
    contract relating to immoveable property. The following
    statement of law in para 12 are rightly applicable to the case on
    hand:

           "12. That time is presumed not to be of essence of the
c          contract relating to immovable property, but it is of essence
           in contracts of reconveyance or renewal of lease. The
           onus to plead and prove that time was the essence of the
           contract is on the person alleging it, thus giving an
           opportunity to the other side to adduce rebuttal evidence
           that time was not of essence. That when the plaintiff pleads
D
           that time was not of essence and the defendant does not
           deny it by evidence, the court is bound to accept the plea
           of the plaintiff. In cases where notice is given making time
           of the essence, it is duty of the court to examine the real
           intention of the party giving such r.otice by looking at the
E          facts and circumstances of each case. That a vendor has
           no right to make time of the essence, unless he is ready
           and willing to proceed to completion and secondly, when
           the vendor purports to make time of the essence, the
           purchaser must be guilty of such gross default as to entitle
F          the vendor to rescind the contract."
        12) As observed in the said decision, in the case on hand
  the appellants/plaintiffs clearly established their claim to secure
  specific performance of the agreement by leading cogent
G evidence whereas the respondent/defendant having pleaded
  that time was the essence of the contract neither entered the
  witness box nor led any evidence whatsoever. The High Court
  lost sight of the above material aspect and the conduct of the
  defendant in not strengthening his plea by placing acceptable
H evidence. In such circumstances, as rightly argued by learned
BALASAHEB D. NAIK (DEAD) THROUGH LRS & ORS.                  1178
   v. APPASAHEB D. PAWAR [P. SATHASIVAM, J.]
counsel for the appellants, the High Court should have confirmed A
the decree of specific performance granted by the trial Court.
On the other hand, the High Court wrongly placed reliance on
the decision of this Court in K.S. Vidyanadam and Others vs.
Vairavan, (1997) 3 sec 1 as in the facts of that case, this Court
found that granting for specific performance was inequitable, B
however such aspect of the matter was totally absent in the case
on hand. Even otherwise, para 11 of the judgment shows that
the subject matter of the property was an urban immoveable
property and in such special circumstance relaxed the general
rule that time is not the essence of the contract in the case of c
immoveable properties. In the case on hand, the details
furnished in the agreement clearly show that the subject-matter
of the property is an agricultural land situated in Kolhapur Dist.,
Maharastra. In such circumstances, the decision in K.S.
Vidyanadam and Ors. (supra) is not applicable to the facts on
                                                                    0
hand. In the facts of the present case, which we have already
adverted to, neither the terms of agreement nor the intention of
the parties indicate that the time is an essence of the agreement.
We have already pointed that having raised such a plea the
respondent even did not bother to lead any evidence.
                                                                     E
       13) It is true that the defendant in his written statement has
made a bald claim that the time was the essence of contract.
Even if we accept the recital in the agreement of sale (Exh. 18)
that the sale deed has to be executed within a period of six
months, there is an express provision in the agreement itself F
that failure to adhere the time, the earnest money will be forfeited.
In such circumstances and in view of recital pertaining to
forfeiture of the earnest money makes it clear that time was
never intended by the parties to be of essence. The Constitution
Bench decision in Chand Rani vs. Kamal Rani (supra) also
makes it clear that mere fixation of time within which contract is G
to be performed does not make the stipulation as to the time as
the essence of contract. Further, we have already pointed out
that the defendant has not bothered to prove his claim on oath
before the Court to the effect that it was the plaintiffs who avoided
                                                                      H
    1179      SUPREME COURT REPORTS                      [2008] 1 S.C.R.


A performing their part of contract. All the above-mentioned                 I'
  material aspects were correctly appreciated by the trial Court
  and unfortunately the High Court failed to adhere to the well
  known principles and the conduct of the defendant. When the
  third plaintiff deposed before the Court explaining their case
B with reference to the recitals in the agreement of sale including
  the reference to the legal notice to the defendant, in the absence
  of contra evidence on the side of the defendant, we are unable
  to agree with the conclusion arrived at by the High Court in non-
  suiting the plaintiff. The High Court commented the conduct of
c the plaintiffs in praying for refund of the earnest money, namely,
  Rs.20,000/- paid as advance. As rightly pointed out, the claim
  for refund of earnest money is only their alternative claim. It is
  not in dispute that in all suits for specific performance, the plaintiff
  is entitled to seek alternative relief in the event the decree for
  specific performance cannot be granted for any reason, hence
D
  there is no infirmity in the alternative plea of refund.
        14) In the light of what has been stated above, we set aside
  the judgment and decree of the High Court and confirm the
  decree granted by the trial Court. In view of the said conclusion,
E the appellants/plaintiffs are directed to deposit the balance
  amount of sale consideration i.e., Rs.1,92,500/- in the trial Court
  within a period of eight weeks whereupon the respondent/
  defendant shall execute the sale deed of the suit lands Block
  No. 208 admeasuring 0.60 R and Block No. 209 admeasuring
F 0.40 R of Village Nagaon, Tahsil Hatkanangale as per the
  agreement dated 31.07.1985. In case of failure of the defendant
  to execute the sale deed, the plaintiffs shall be entitled to get
  the sale deed executed through Court.
           15) The civil appeal is allowed on the above terms.
G However, in the facts and circumstances of the case, there shall
    be no order as to costs.                                                  ,, ...
    N.J.                                               Appeal allowed.


H