Supreme Court of India
FERRODOUS ESTATES (PVT.) LTD.versusP. GOPIRATHNAM (DEAD) & ORS.
- Citation
- 2020 INSC 586
- Decided
- 12 October 2020
- Disposal
- Appeal(s) allowed
- Bench
- R F NARIMAN
Holding
The agreement is not void ab initio; specific performance can be decreed because the contract obliges the vendor to obtain the required permission, and the repeal of the 1978 Act removes any statutory impediment, with the court’s discretion under Section 20 to be exercised reasonably.
Summary
Ferro... Ltd. entered into a 1980 agreement to sell land to the defendants, which required the vendor to obtain permission under the Tamil Nadu Urban Land (Ceiling & Regulation) Act, 1978. The defendants failed to secure the permission, prompting the appellant to sue for specific performance. The High Court initially granted specific performance, but the Division Bench reversed it, relying on a Full Bench decision that Section 6 of the 1978 Act prohibited any agreement to sell excess land and that the Full Bench judgment was inter‑parties and binding. The Supreme Court held that the contract contained a specific clause obligating the vendor to obtain the exemption, so the Full Bench decision did not render the agreement void, and the repeal of the 1978 Act removed any statutory bar. It further clarified that Section 20 of the Specific Relief Act gives courts discretionary but non‑arbitrary power to grant specific performance, and that mere delay or price escalation cannot alone defeat the relief. Consequently, the Supreme Court set aside the Division Bench judgment, restored the Single Judge’s decree for specific performance, and ordered the appellant to pay Rs 1.25 crore to the respondents.
Issues considered
- The agreement to sell is void under Section 6 of the Tamil Nadu Urban Land (Ceiling & Regulation) Act, 1978.
- Whether the Full Bench inter‑parties judgment is binding on the parties and precludes enforcement of the contract.
- The effect of the repeal of the 1978 Act on the enforceability of the agreement.
- Whether specific performance can be granted despite the statutory prohibition and the presence of a clause requiring the vendor to obtain permission.
- Whether delay, laches, or escalation in property value can defeat a suit for specific performance under Section 20 of the Specific Relief Act, 1963.
Legislation cited
Subjects
specific performanceTamil Nadu Urban Land Ceiling Actrepeal of statuteSection 6 prohibitionSection 20 Specific Relief Actdiscretionary reliefdelay and lachesres judicatainter‑parties judgmentcontractual clause for exemption
Judgment
[2020] 13 S.C.R. 673 673
FERRODOUS ESTATES (PVT.) LTD. A
v.
P. GOPIRATHNAM (DEAD) & ORS.
(Civil Appeal No. 13516 of 2015)
OCTOBER 12, 2020 B
[R. F. NARIMAN AND NAVIN SINHA, JJ.]
Specific Relief Act, 1963 – Agreement to sell entered into
between appellant and defendants (represented by respondents) in
1980 – Necessary permissions from the competent authority under
C
the 1978 Act (later repealed by 1999 Repeal Act) not obtained by
the defendants – Appellant filed suit for specific performance –
Decreed by Single Judge – In first appeal, Division Bench referred
the matter to a Full Bench on various questions – Full Bench inter
alia holding that s.6, 1978 Act prohibited even agreements to sell,
declared law inter-parties and the matter went back to Division D
Bench – Division Bench remanded the matter to Single Judge who
inter alia recorded a finding that the suit property stood as excess
lands within the meaning of the 1978 Act before it was repealed –
Matter returned to the Division Bench, which by applying the Full
Bench decision relating to the matter inter-parties vide the impugned
E
judgment has reversed the judgment of the Single Judge – On
appeal, held: Agreement contained a specific clause in which it
was for the vendor to obtain permission from the competent authority
under the 1978 Act – Thus, the agreement cannot be said to be hit
by the decision of Full Bench judgment as the Full Bench itself
recognised that there may be agreements with such clauses, in which F
case it is the Court’s duty to enforce such clause – Agreement to sell
cannot be said to be void ab initio, as a result of which the basis of
the Division Bench judgment under appeal goes – Further, on the
date on which the appellate decree was passed, the 1978 Act having
been repealed would not stand in the way of a decree for specific
G
performance – There is no vested right under the 1978 Act in favour
of the respondents – Division Bench incorrect in stating that since
the court process took 27 years to decide the specific performance
suit, it being a discretionary relief ought not to be granted – A suit
for specific performance filed within limitation cannot be dismissed
on the sole ground of delay or laches – Appellant was ready and H
673
674 SUPREME COURT REPORTS [2020] 13 S.C.R.
A willing throughout to perform its part of the bargain – Defendants
took up dishonest pleas and were in breach of a solemn agreement
in which they were to obtain the Urban Land Ceiling permission
which, if not obtained, would, under the agreement itself, not stand
in the way of specific performance of the agreement between the
parties – Division Bench judgment set aside – Decree passed by
B
Single Judge restored – Tamil Nadu Urban Land (Ceiling &
Regulation) Act, 1978 – ss.4, 5(3), 6 – Tamil Nadu Urban Land
(Ceiling & Regulation) Repeal Act, 1999.
Specific Relief Act, 1963 – s.20 – Scope of – Held: s.20 prior
to its substitution by the 2018 Amendment Act makes it clear that
C the jurisdiction to decree specific performance is discretionary –
This discretion is not arbitrary but has to be exercised soundly and
reasonably, guided by judicial principles, and capable of correction
by a court of appeal – Specific Relief (Amendment) Act, 2018.
Allowing the appeal, the Court
D
HELD: 1.1 It is not open to the appellant to go behind the
Full Bench judgment as it is inter-parties, as a result of which the
law laid down by the Full Bench judgment must apply to the parties,
res judicata clearly attaching even to issues of law based on the
same cause of action. This being the case, it is important now to
E analyse what was held by the Full Bench. The Full Bench
judgment, while stating that section 6 of the Tamil Nadu Urban
Land Ceiling Act prohibited even agreements to sell, as a result
of which there would be no transaction at all in the eyes of law, ,
was careful thereafter to point out:
F “40. …… While considering suit for specific performance,
Court is only concerned whether purchaser has come to
Court for enforcing the agreement in terms thereof.
Asking vendor to get exemption and then to execute the
agreement will be deviating from the terms of contract and
G the Court will not enforce such a contract. That will mean
that purchaser is not willing to purchase the land as per
agreement, but only with deviation, i.e., vendor must get
exemption and execute the sale deed.”
H
FERRODOUS ESTATES (PVT.) LTD. v. 675
P. GOPIRATHNAM (DEAD)
In paragraph 41, the Full Bench also went on to state that A
it is possible to obtain exemption under the Tamil Nadu Urban
Land Ceiling Act, over which the Court has no control, but despite
that, the relief of specific performance is not usually granted as it
would be going beyond the contract. Equally, after holding that
section 6 prohibits a proposed transfer, the Full Bench went on
B
to hold that a decree for specific performance cannot be granted
conditionally upon the vendor satisfying certain conditions if it is
not part of the agreement. [Paras 14-16][696-A-F]
Mathura Prasad Bajoo Jaiswal v. Dossibai N.B.
Jeejeebhoy (1970) 3 SCR 830 – relied on.
C
1.2 When these portions of the Full Bench judgment are
applied to the agreement in question, it is clear that the agreement
itself contains a specific clause, namely, clause 4, in which it is for
the vendor to obtain permission from the competent authority
under the Tamil Nadu Urban Land Ceiling Act. This agreement,
therefore, cannot be said to be hit by the decision of the Full D
Bench judgment as the Full Bench itself recognises that there
may be agreements with such clauses, in which case it is the
Court’s duty to enforce such clause. That is all that the learned
Single Judge has done in the facts of this case – he has correctly
held that it was for the defendants to obtain exemption from the E
authorities under the Tamil Nadu Urban Land Ceiling Act which
they did not, as a result of which they were in breach of the
agreement. Viewed slightly differently, it is clear that the Full
Bench judgment cannot stand in the way of the appellant for
another reason. There can be no doubt that the suit property,
admeasuring roughly 2002 sq. metres, was part of a larger F
property of 30 grounds, and that the defendants, being four in
number, were entitled to retain 2000 sq. metres of the land owned
by them. It was for this reason that it was incumbent upon the
defendants to have obtained the Urban Land Ceiling permission
to sell the land that was within their ceiling limit, which they failed G
to do. It is clear, therefore, that the agreement to sell cannot be
said to be void ab initio, as a result of which the basis of the
Division Bench judgment under appeal goes. Resultantly, the
judgments in Jacques v. Withy, 1 H. Bl. 65, Hitchcock v. Way,
H
676 SUPREME COURT REPORTS [2020] 13 S.C.R.
A (1837) 6 A & E 943 : 112 ER 360, and Ram Kristo Mandal v.
Dhankisto Mandal, (1969) 1 SCR 342 (at p. 349) cited in support
of the proposition that the repeal of a statute which makes void
an agreement cannot revive such void agreement have no
application on the facts of this case. In view of this, it is
unnecessary to go into whether section 5(3) of the Tamil Nadu
B
Urban Land Ceiling Act, together with its proviso, applies to the
facts of this case. [Paras 17-19][696-F-H; 697-A-C; 698-G-H]
Jacques v. Withy 1 H. Bl. 65; Hitchcock v. Way (1837)
6 A & E 943 : 112 ER 360; Ram Kristo Mandal v.
Dhankisto Mandal (1969) 1 SCR 342 - held
C inapplicable.
1.3 However, the other contention on behalf of the
respondents is that even if this were so, the appellant was not
entitled to more than 500 sq. metres, which was the ceiling limit
so far as the appellant was concerned. This being the case, no
D decree for specific performance could be made in favour of the
appellant. That conditional decrees for specific performance have
been passed and upheld by this Court cannot be denied. [Paras
20, 21][699-B-C]
1.4 Even otherwise, the Repeal Act makes it clear that the
E Tamil Nadu Urban Land Ceiling Act is repealed. As no steps
whatsoever were taken under the Tamil Nadu Urban Land Ceiling
Act, the savings clause will not apply. [Para 22][701-F; 702-C-D]
1.5 It is settled law that an appeal is a continuation of a suit,
as a result of which a change in law will become applicable on the
F date of the appellate decree, provided that no vested right is
taken away thereby. This being the case, on the date on which
the appellate decree was passed, in any case, the Tamil Nadu
Urban Land Ceiling Act having been repealed would not stand in
the way of a decree for specific performance. It must be
G remembered that there is no vested right under the Tamil Nadu
Urban Land Ceiling Act in favour of the respondents. Any right,
if at all, is in favour of the State Government, which, like Pontius
Pilate, has washed its hands off this matter by a report submitted
to this Court on 17.08.2015. The Division Bench judgment is
H
FERRODOUS ESTATES (PVT.) LTD. v. 677
P. GOPIRATHNAM (DEAD)
also wholly incorrect in stating that for no fault of the appellant, A
since the court process has taken 27 years to decide the specific
performance suit, specific performance being a discretionary relief
ought not to be granted. Section 20 of the Specific Relief Act,
1963, prior to its substitution by the Specific Relief (Amendment)
Act, 2018, as it then stood, makes it clear that the jurisdiction to
B
decree specific performance is discretionary; but that this
discretion is not arbitrary but has to be exercised soundly and
reasonably, guided by judicial principles, and capable of correction
by a court of appeal – see section 20(1). Section 20(2) speaks of
cases in which the court may properly exercise discretion not to
decree specific performance. Significantly, under clause (a) of sub- C
section (2), what is to be seen is the terms of the contract or the
conduct of the parties at the time of entering into the contract.
Even “other circumstances under which the contract was entered
into” refers only to circumstances that prevailed at the time of
entering into the contract. It is only then that this exception kicks
D
in – and this is when the plaintiff gets an unfair advantage over
the defendant. Equally, under clause (b) of sub-section (2), the
hardship involved is again at the time of entering into the contract
which is clear from the expression “which he did not foresee”.
This is made clear beyond doubt by Explanation II of section 20
which states that the only exception to the hardship principle E
contained in clause (b) of sub-section (2) is where hardship results
from an act of the plaintiff subsequent to the contract. In this
case also, the act cannot be an act of a third party or of the court
– the act must only be the act of the plaintiff. Clause (c) of sub-
section (2) again refers to the defendant entering into the contract
F
under circumstances which makes it inequitable to enforce
specific performance. Here again, the point of time at which this
is to be judged is the time of entering into the contract. [Paras
24, 27, 28][703-G-H; 710-D-F; 711-G-H; 712-A-D]
1.6 Given section 20, the courts have uniformly held that
the mere escalation of land prices after the date of the filing of G
the suit cannot be the sole ground to deny specific performance.
It is settled law that mere delay by itself, without more, cannot
be the sole factor to deny specific performance – See Mademsetty
H
678 SUPREME COURT REPORTS [2020] 13 S.C.R.
A Satyanarayana v. G. Yelloji Rao, (1965) 2 SCR 221 at pp. 229-230.
Thus, in K.S. Vidyanadam v. Vairavan, (1997) 3 SCC 1, this Court
made it clear that if property prices have risen dramatically within
a period of two and a half years before filing of the suit for specific
performance, and it is coupled with violation of the agreement by
the plaintiff, specific performance will not be decreed. Likewise,
B
this Court, in Saradamani Kandappan v. S. Rajalakshmi, (2011)
12 SCC 18, made it clear that given the steep rise in urban land
prices, it may not be correct now to say that time is not of essence
in performance of a contract of sale of immovable property. Thus,
where time can be said to be of the essence in the facts of a given
C case, and the purchaser does not take steps to complete the sale
within the stipulated period and the vendor is not responsible for
any delay, the steep rise in price within the stipulated time would
be a circumstance which would make it inequitable to grant the
relief of specific performance. [Paras 29, 30][712-D-E; 722-G;
725-F-H]
D
Nirmala Anand v. Advent Corporation (P) Ltd. (2002)
8 SCC 146: [2002] 2 Suppl. SCR 706; Mademsetty
Satyanarayana v. G. Yelloji Rao (1965) 2 SCR 221;
K.S. Vidyanadam v. Vairavan (1997) 3 SCC 1: [ 1997]
1 SCR 993; Saradamani Kandappan v. S. Rajalakshmi
E (2011) 12 SCC 18: [2011] 8 SCR 874 – relied on.
1.7 The resultant position in law is that a suit for specific
performance filed within limitation cannot be dismissed on the
sole ground of delay or laches. However, an exception to this
rule is where immovable property is to be sold within a certain
F period, time being of the essence, and it is found that owing to
some default on the part of the plaintiff, the sale could not take
place within the stipulated time. Once a suit for specific
performance has been filed, any delay as a result of the court
process cannot be put against the plaintiff as a matter of law in
G decreeing specific performance. However, it is within the
discretion of the Court, regard being had to the facts of each
case, as to whether some additional amount ought or ought not
to be paid by the plaintiff once a decree of specific performance
is passed in its favour, even at the appellate stage. Fervent appeal
H
FERRODOUS ESTATES (PVT.) LTD. v. 679
P. GOPIRATHNAM (DEAD)
on behalf of the respondents that this Court should not exercise A
its discretionary jurisdiction under Article 136, given the fact that
Rs.2 crores plus interest is to be paid almost by way of solatium
to the appellant, has also to be rejected. As has been found earlier
in this judgment, the defendants were held to have taken up
dishonest pleas and also held to have been in breach of a solemn
B
agreement in which they were to obtain the Urban Land Ceiling
permission which, if not obtained, would, under the agreement
itself, not stand in the way of the specific performance of the
agreement between the parties. He who asks for equity must do
equity. Given the conduct of the defendants in this case, as
contrasted with the conduct of the appellant who is ready and C
willing throughout to perform its part of the bargain, this is a fit
case in which the Division Bench judgment should be set
aside. As a result, the decree passed by the Single Judge is
restored. Since the appellant itself offered a sum of Rs.1.25 crores
to the Division Bench, it must be made to pay this amount to the
D
respondents within a period of eight weeks from the date of this
judgment. [Paras 31, 32][730-E-H; 731-A-C]
Keshavan Madhava Menon v. State of Bombay 1951
SCR 228 – distinguished.
Immani Appa Rao v. Gollapalli Ramalingamurthi (1962) E
3 SCR 739; Narayanamma v. Govindappa 2019 SCC
OnLine SC 1260 – held inapplicable.
Vishwa Nath Sharma v. Shyam Shanker Goela (2007)
10 SCC 595: [2007] 3 SCR 268; Van Vibhag
Karamchari Griha Nirman Sahkari Sanstha Maryadit F
v. Ramesh Chander (2010) 14 SCC 596: [2010 12
SCR 1045; Gajraj Singh v. State Transport Appellate
Tribunal (1997) 1 SCC 650; Rameshwar v. Jot Ram
(1976) 1 SCR 847; Dayawati v. Inderjit (1966) 3 SCR
275; Amarjit Kaur v. Pritam Singh (1974) 2 SCC 363;
Lakshmi Narayan Guin v. Niranjan Modak (1985) 1 G
SCC 270; P. D’Souza v. Shondrilo Naidu (2004) 6 SCC
649:[2004] 3 Suppl. SCR 186; P.S. Ranakrishna Reddy
v. M.K. Bhagyalakshmi (2007) 10 SCC 231: [2007] 2
SCR 876; Narinderjit Singh v. North Star Estate
Promoters Ltd. (2012) 5 SCC 712; Satya Jain v. Anis H
680 SUPREME COURT REPORTS [2020] 13 S.C.R.
A Ahmed Rushdie (2013) 8 SCC 131:[ 2013] 3 SCR 319;
K. Prakash v. B.R. Sampath Kumar (2015) 1 SCC 597:
[2014] 13 SCR 702; Zarina Siddiqui v. A. Ramalingam
(2015) 1 SCC 705: [2014] 14 SCR 456; Ramathal v.
Maruthathal (2018) 18 SCC 303: [2017] 8 SCR 613;
Sunkara Lakshminarasamma v. Sagi Subba Raju (2019)
B
11 SCC 787: [2018] 14 SCR 222; Nanjappan v.
Ramasamy (2015) 14 SCC 341: [2015] 2 SCR 606 –
relied on.
Sushila v. Nihalchand Nahata AIR 2004 Mad 18 –
referred to.
C
Lachmeshwar Prasad Shukul v. Keshwar Lal Chaudhuri
AIR 1941 FC 5; John Lemm v. Thomas Alexander
Mitchell [1912] A.C. 400; Kay v. Goodwin 130 E.R.
1403 [1830] – referred to.
D Case Law Reference
[1970] 3 SCR 830 relied on Para 14
[1969] 1 SCR 342 held inapplicable Para 19
[2007] 3 SCR 268 relied on Para 21
[2010] 12 SCR 1045 relied on Para 21
E [1962] 3 SCR 739 held inapplicable Para 21
(1997) 1 SCC 650 relied on Para 23
(1976) 1 SCR 847 relied on Para 24
(1966) 3 SCR 275 relied on Para 25
(1974) 2 SCC 363 relied on Para 25
F
(1985) 1 SCC 270 relied on Para 25
1951 SCR 228 distinguished Para 26
[2002] 2 Suppl. SCR 706 relied on Para 29
[2004] 3 Suppl. SCR 186 relied on Para 29
G [2007] 2 SCR 876 relied on Para 29
(2012) 5 SCC 712 relied on Para 29
[2013] 3 SCR 319 relied on Para 29
[2014] 13 SCR 702 relied on Para 29
[2014] 14 SCR 456 relied on Para 29
H
FERRODOUS ESTATES (PVT.) LTD. v. 681
P. GOPIRATHNAM (DEAD)
[2017] 8 SCR 613 relied on Para 29 A
[2018] 14 SCR 222 relied on Para 29
[1965] 2 SCR 221 relied on Para 30
[1997] 1 SCR 993 relied on Para 30
[2011] 8 SCR 874 relied on Para 30
B
[2015] 2 SCR 606 relied on Para 30
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 13516
of 2015.
From the Judgment and Order dated 29.01.2007 of the High Court
of Madras in O.S.A. No. 93 Of 1991. C
Balaji Srinivasan, AAG, Guru Krishnakumar, V. Giri, Sr. Adv., P.R.
Kovilan Poongkuntran, Mrs. Geetha Kovilan, A.J. Jawad, Kannan, Vijay
Anand, Vikas Mehta, Ms. Anushree Menon, M. Gireesh Kumar, Vijay
Kumar, T. R. B. Sivakumar, Advs. for the appearing parties.
The Judgment of the Court was delivered by D
R. F. NARIMAN, J.
1. This appeal arises from a suit for specific performance that
was filed by the appellant against four defendants who are today
represented by the respondents. By an agreement to sell dated 12.06.1980
E
entered into between the appellant company and P. Nagarathina Mudaliar,
P. Gopirathnam, P. Lavakumar, and P. Basantkumar, the agreement
recites:
“Whereas the property more particularly described in the Schedule
hereunder and hereinafter referred to as the said property, originally
belonged to the Hindu Undivided Family consisting of Sri P. F
Nagarathina Mudaliar and his father Sri P. Thiruvengada Mudaliar;
Whereas there was a partial partition in the said family as a result
of which, the first vendor has become the owner of the said
property, said deed of partition having been registered with the
Sub-Registrar, Madras-Chingleput, as Document No. 1268 of 1944; G
Whereas the vendors have mortgaged the said property along
with the other properties owned by them at Haddows Road,
Madras-1, for a sum of Rs.5,65,000/- (Rupees Five Lakh Sixty-
Five Thousand Only) by way of a deed of mortgage registered
H
682 SUPREME COURT REPORTS [2020] 13 S.C.R.
A with the Sub-Registrar, T. Nagar, Madras, as Document No. 3429
of 1967;
Whereas the vendors have offered to sell the said property to the
purchasers, free from all encumbrances, including the mortgage
created in favour of Syndicate Bank, Madras-1;
B Whereas the vendors are making necessary arrangements for
discharging the said loan due to Syndicate Bank, Madras-1, and
also to get a letter from Syndicate Bank, releasing their interest, if
any, in the said property offered to be sold;
xxx xxx xxx”
C
The material clauses of the agreement are as follows:
“3. It is agreed that the sale consideration should be paid as follows:
(a) A sum of Rs.1,00,000/- (Rupees One Lakh Only) deposited
by the purchasers with M/s Venkataraman & Co. on behalf of
D the vendors as advance for the said sale consideration;
(b) The purchasers hereby agree to pay the balance of the
price of Rs.4,40,000/- (Rupees Four Lakhs And Forty Thousand
Only) to Syndicate Bank in discharge of the loan borrowed by
the vendors on the mortgage of the said property subject to the
E bankers giving the certificate of discharge in respect of the
said property.
4. The vendor shall arrange to secure (a) Income-tax Clearance
Certificate, (b) Permission from the Competent Authority under
the Urban Land Ceiling Act, and (c) such other orders of permits
and the like as may be necessary for completing the sale
F
transaction at the cost of the vendors.
5. The purchaser shall complete the transaction within six months
from the date of this agreement. This period shall be subject to
the vendors obtaining the necessary clearance certificate from
the appropriate authorities as stated above and giving vacant
G possession of the said property.”
xxx xxx xxx
“8. The vendors hereby confirm that the said property is subject
to a mortgage loan taken by them from Syndicate Bank, Armenian
H Street, Madras-1, and that necessary provision has been made to
FERRODOUS ESTATES (PVT.) LTD. v. 683
P. GOPIRATHNAM (DEAD) [R.F. NARIMAN, J.]
discharge the loan, in the sale agreement itself and excepting the A
above, the said property to be conveyed is not subject to any
claim, attachment, lien, charge, mortgage, lis pendens or any other
encumbrance, whatsoever.
9. The vendors undertake to deliver vacant possession of the
property, before the execution of the sale deed. B
10. In the event of the vendors commit default or acts in breach
of this agreement the purchasers shall be entitled without prejudice
to the right of specific performance, to the refund of the advance
of Rs.1,00,000/- (Rupees One Lakh Only) and damages.”
The suit property admeasured 8 grounds and 2354 sq. feet. C
2. Given the fact that the necessary permissions were not obtained
by the defendants, in particular, the permission from the competent
authority under the Tamil Nadu Urban Land (Ceiling & Regulation) Act,
1978 [“Tamil Nadu Urban Land Ceiling Act”], the appellant filed a
suit for specific performance on 24.02.1981, in which it was specifically D
pleaded as follows:
“5. The plaintiff which is a private limited company has agreed to
purchase the schedule mentioned property with a view to construct
the multi-storeyed building and the plaintiffs are always ready
and willing to perform their part of the obligation under the E
agreement for completion of the sale transaction. Further the
plaintiffs are ready and willing to deposit the balance of the sale
price agreed to be paid under the agreement in question before
this Hon’ble Court to show their bonafide in purchasing the
property and to show their readiness to perform their part of the F
contract in accordance with the agreement. The plaintiff submits
that the defendants are bound to secure income tax clearance
certificate and permission from the competent authority etc. which
are prerequisite for the completion of the sale transaction and to
complete the transactions within 6 months from the date of the
agreement. G
6. The plaintiff submits that the defendants have not so far
arranged to get income tax clearance certificate and permission
from the competent authority and such other formalities to the be
observed for the completion of the sale transaction and they have
not shown any interest in concluding the transactions. In the H
684 SUPREME COURT REPORTS [2020] 13 S.C.R.
A circumstances the plaintiff submits that they are willing to perform
their part of the contract and it is the defendants who are evading
to completing the sale transactions within the agreed time. The
plaintiff understands and believes the same to be true that the
defendants are not willing to complete the sale transaction and
they reliably understand that the defendants are trying to alienate
B
the property to third parties for higher price taking advantage of
the rise in price of the landed properties ignoring the agreement to
sell. The plaintiff submits that the conduct and attitude of the
defendants in evading and postponing the execution of the sale
deed is unjust and wanton and it is only with a view to get higher
C price for the property ignoring the lawful claims of the plaintiff
under the agreement, the defendants do not show any inclination
to complete the sale transaction.”
A written statement filed by P. Nagarathina Mudaliar and his two
sons, namely, P. Gopirathnam and P. Lavakumar, who were defendants
D no.1, 2, and 3 respectively, denied that the total consideration for the
agreement was Rs.5,40,000/- as is stated therein. Apart from other denials
made on the merits of the case, it is important to note that no defence
was taken on any plea that the Tamil Nadu Urban Land Ceiling Act
would be infracted if the suit for specific performance were to be decreed.
This was only done, almost by way of an afterthought, by an additional
E written statement filed by the self-same defendants on 16.07.1986, in
which it was pleaded:
“2. In any event, these defendants submit that the plaintiff is not
entitled to any decree since the plaintiff is not entitled to purchase
more than the prescribed limit of 500 sq. metres under the provisions
F of Tamil Nadu Urban Land Ceiling Act and hence the agreement
is void as violating the provisions of statues.”
3. As many as eight issues were framed in the suit. Issue no. 5
reads as follows:
G “5. Whether the plaintiff is not entitled to purchase more than 500
sq. metres under the Tamil Nadu Urban Land Ceiling Act and
whether the suit agreement is void on that account?”
4. By a judgment dated 15.03.1991, delivered by a learned Single
Judge of the Madras High Court, the learned Single Judge held that the
fixation of the sale price of Rs.1,02,000/- per ground was because the
H
FERRODOUS ESTATES (PVT.) LTD. v. 685
P. GOPIRATHNAM (DEAD) [R.F. NARIMAN, J.]
land was low-lying and requires to be levelled. It was also held that a A
layout plan had been sanctioned for the purpose of putting up flats in the
suit property. The Single Judge further held that there were circumstances
to show that there was necessity on the part of the defendants to sell the
suit property, given that a loan from Syndicate Bank was taken by
mortgaging a larger piece of land of 30 grounds, and that money was
B
required for the defendant no.1’s son’s marriage, which was celebrated
on 23.06.1980. It was further found that M/s Venkataraman & Co., the
auditor of the defendants, negotiated the sale of the suit property, the
first defendant admitting that a sum of Rs.65,000/- was received by him
for the marriage of his son out of the advance money of Rs.1,00,000/-
paid to the aforesaid auditor, M/s Venkataraman & Co. It was also held C
that the first defendant was the karta and manager of the joint family,
and that even though the fourth defendant was not present at the time of
execution of the sale agreement and did not actually sign the sale
agreement, the fourth defendant had given a letter of authorisation,
authorising the first defendant to sell the property on his behalf. It was D
further held:
“Having signed Ex.P.2 and received Rs.65,000/- as per Ex.P.4, it
would not be fair on the part of the first defendant to come forward
and surprise the plaintiff during trial that he does not know the
contents thereof. The inconsistent stand taken by the first defendant
E
during the trial, quite different from the plea in the written
statement, would lead to presume the lack of truth in his version.”
5. Importantly, so far as obtaining of permission from the Urban
Land Ceiling authorities was concerned, it was held that the defendants
did not comply with this condition, as a result of which there would be no
F
legal obstacles standing in the way of the plaintiff suing for specific
performance, given the fact that the defendants were in breach of the
agreement. Insofar as the plea in the additional written statement was
concerned, issue no. 5 was answered by the learned Single Judge as
follows:
G
“The plea of the defendants in their additional written statement
that they will not be competent to sell anything beyond 500 sq.
metres prescribed as ceiling under the Urban Land Ceiling Act
and that because Ex.P.2 envisages the sale of 8 grounds and 2354
sq. ft. exceeding the ceiling area, Ex.P.2 must be deemed to be
invalid and unenforceable, is not sound. There is no term in Ex.P.2 H
686 SUPREME COURT REPORTS [2020] 13 S.C.R.
A that the agreement of sale is subject to the grant of permission by
the competent authority under the Urban Land Ceiling Act and
that in the event of refusal of the permission by the competent
authority, the agreement of sale shall fail. It has to be pointed out
here, that even if there is a clause in Ex.P.2 stating that the
defendant should arrange for securing the permission of the
B
competent authority and if the same has not been obtained by the
defendants, it cannot be a ground for the defendants to refuse the
sale of the suit property. It is open to the plaintiff (the purchaser)
to get a sale of the entire suit property measuring 8 grounds and
2354 sq.ft. even if it exceeds 500 sq. metres. The plaintiff may
C get the sale with that risk.”
6. Thereafter, the appellant-plaintiff established that it had been
ready and willing to perform its part of the contract continuously, the
balance sum of Rs.4,40,000/- being deposited in the Court on the
directions of the Court. The result, therefore, was as follows:
D
“23. From the foregoing discussions, my findings on the issues
are that the suit agreement of sale dated 12.06.1980 is true, valid
and enforceable, that it does not suffer from any material alteration,
that it is a concluded contract, that the agreement of sale is binding
on the 4th defendant, that the defendants have committed breach
E of the agreement, that the plaintiff is entitled to purchase the suit
property and to get a decree for specific performance of the
agreement as prayed for.
24. In the result, the suit is decreed directing defendants 2 to 6 to
execute the sale deed in respect of the suit property in favour of
F the plaintiff within a period of two months, in default the sale deed
shall be executed by Court and got registered.”
7. A first appeal was filed to a Division Bench of the High Court,
which then referred the matter to a Full Bench on various questions that
were submitted by it. The Full Bench, by a judgment dated 03.03.1999,
G set out the reference order as follows:
“Section 4 of the Act states that no person shall be entitled to hold
vacant land in excess of the ceiling limit, except as otherwise
provided in the Act. Section 7 of the Act makes it obligatory on
the person holding excess land to file statement. Under section 11
H of the Act, excess land could be acquired.
FERRODOUS ESTATES (PVT.) LTD. v. 687
P. GOPIRATHNAM (DEAD) [R.F. NARIMAN, J.]
Section 17 of the Act places ceiling limit on future acquisition by A
inheritance, bequest or by the sale in execution of decrees etc.
Section 19 of the Act provides for penalty for concealment etc.,
of particulars of vacant land. Even under section 6 of the Act,
there is a prohibition to transfer the excess vacant land unless
such person has filed a statement, and notification regarding the
B
excess vacant land held by him has been published under sub-
section (1) of section 11 of the Act. The said section further
declares that any transfer made in contravention of the provisions
of the Act, shall be deemed to be null and void. As can be seen
from the various provisions contained in the Act, section 21 deals
with power of exemption. A plain reading of section 6 goes to C
show that what is prohibited is a transfer of excess vacant land
and the consequence of such transfer in contravention of the
provision contained in the said section viz., such transfer shall be
deemed to be null and void. In other words, it speaks of a completed
transaction of transfer. It does not refer to the agreements at all.
D
We are not able to read any prohibition in the said provision
prohibiting the parties from entering into agreement of sale. In the
decision of the Division Bench of this Court aforementioned, a
view is taken that courts in passing a decree for specific
performance, cannot lend support to the parties to enforce the
agreement so as to defeat the provisions of the Act, in particular E
section 6 of the Act. We are unable to agree with this view. There
may be a decree for specific performance subject to certain
conditions, to be complied with provisions of section 6 itself or
subject to grant of exemption and in the light of the judgment of
the Supreme Court in the case of Jambu Rao Satappa Kocheri
F
v. Neminath Appayya Hanamannayyar, AIR 1968 SC 1358 :
[1968] 3 SCR 706, it cannot be said that such an agreement is hit
by section 23 of the Act. Under the circumstances, we are of the
view that this question is required to be decided by a larger Bench.
Hence we refer this case for hearing and disposal by a larger
Bench including the question as we have stated above.” G
The Full Bench then referred to the Tamil Nadu Urban Land
(Ceiling & Regulation) Act, 1978, which came into force w.e.f.
03.08.1976. After referring to a number of decisions, the Full Bench
then concluded:
H
688 SUPREME COURT REPORTS [2020] 13 S.C.R.
A “24. From these decisions, it is clear that even if the contract by
itself may not be illegal but its enforcement if violates any law
that will be a ground to hold that the agreement cannot be enforced.
We have already extracted preamble of state Act and also the
decision reported in AIR 1979 SC 1415 : [1979] 3 SCR 802 , why
the Act was enacted. It is to prevent concentration of Urban Land
B
in the hands of few persons and speculation in profiteering therein.
It is to implement this provision of the Act, this provision under
section 6 and 11(4) of the Act are enacted. If the seller is having
land in excess than the ceiling limits and if it is ultimately found
that the Act also applies permitting such persons to execute sale
C deed pursuant to the agreement of sale, it will be defeating or
circumventing the provisions of the Act. Equitable distribution of
land, which is contemplated under the provisions may not be
possible if the sale is allowed to take place. The intention is also
very clear that third party right should not be created, which is
likely to affect him also. If by enforcement of contract, if it amounts
D
to subvert or circumvent law, court cannot be party to such
enforcement, Court will have to discountenance the practice and
it will have to safeguard the foundation of Society.
25. The question whether only completed transactions are
contemplated under section 6 of the Act and therefore enforcement
E of agreement for sale is not a bar is also an argument without any
merit. It is true that under the Act, no person is entitled to hold
more than the ceiling limit as prescribed under section 4 of the
Act. Argument is that purchaser is not holding any land on the
basis of an agreement unless he gets some title. It still continues
F only with vendor. Therefore, there is no prohibition in enforcement
of contract. Section 6 prohibits transfer by a person holding land
in excess of ceiling limits. The matter will have to be considered
taking into consideration the rights of seller and if that person
holds more land than prescribed under section 5, such transfer
shall be deemed to be null and void. The prohibition under section
G 6 is for transferring the land and consequently declares that any
violation of law shall be deemed to be null and void. Section 6
contemplates both proposed transfer and completed transfer. An
agreement of sale is also affected by section 6 of the Act.”
xxx xxx xxx
H
FERRODOUS ESTATES (PVT.) LTD. v. 689
P. GOPIRATHNAM (DEAD) [R.F. NARIMAN, J.]
“38. It is true that the Act is a self-contained Code with regard to A
urban lands and ceiling provisions. It is also true that there are
authorities to decide as to whether transaction is valid or invalid.
Question of valid or invalid transaction will apply only regarding
completed transaction. When section 6 prohibits even proposed
transfer, question of considering validity or invalidity does not arise
B
and the consequences are also already declared by the Act as
null and void. It takes as if there is no transaction at all in the eye
of law.
39. In the decision reported in Shah Jitendra Nanalal v. Patel
Lallubhai Ishverbhai, AIR 1984 Guj 145 (FB), one of the
questions that was raised before the Full Bench was whether a C
decree for specific performance could be given condition. What
is the effect of section 5(3) read with section 20 of the Central
Act in the agreement of transfer was the matter in issue. Once it
is held that section 6 is an absolute bar, question of granting
conditional decree also will not arise. The said argument pre- D
supposes that agreement and sale are valid and is invalid only as
against Government.
40. We do not think that the decision therein could be applied so
far as Tamil Nadu Act is concerned. Exemption under section 21
can be applied only by vendor and it is for him exemption is granted. E
While considering suit for specific performance, Court is only
concerned whether purchaser has come to Court for enforcing
the agreement in terms thereof. Asking vendor to get exemption
and then to execute the agreement will be deviating from the
terms of contract and the Court will not enforce such a contract.
That will mean that purchaser is not willing to purchase the land F
as per agreement, but only with deviation, i.e., Vendor must get
exemption and execute the sale deed.
41. In paragraph 11 of the Full Bench judgment, it is said that,
“So long as provision declaring the transfer under s. 5(3) as G
void is subject to the right to move for exemption, obtain
exemption and transfer the property, the power of an owner is
vacant land in excess of the ceiling limit to “alienate” such
land is dormant in him and such power could be exercised by
him in case he seeks exemption, satisfies the Government that
the grounds for exemption exist and obtains such exemption. H
690 SUPREME COURT REPORTS [2020] 13 S.C.R.
A That being the case, a decree cannot be defeated on the ground
that “transfer” inter-parties would not be possible...”
We cannot subscribe the said view, for, granting decree for specific
performance of contract itself being discretionary. Apart from
the sale, when a transaction is only after obtaining exemption or
B permission from another authority, over which Court has no control,
the relief of specific performance usually is not granted. While
giving such direction, it will be going beyond contract and if
ultimately exemption is refused, in effect, the decree will become
waste paper. While exercising discretion, the Court will have to
see whether it could pass executable decree and while exercising
C discretion, these factors are also considered for granting relief.
The decision reported in Shoba Viswanathan v. D.P. Kinggley,
1996 (1) LW 721 of the judgment supports the view, which we
have taken.
42. Therefore, we answer the reference as follows:
D
Since provisions of Bombay Tenancy and Agricultural Lands Act
are entirely different from that of Tamil Nadu Urban Land (Ceiling
and Regulation) Act, 1978, various Bench decisions of this Court,
wherein it was held that a decree for specific performance of
contract cannot be granted, if it violates section 6 of Tamil Nadu
E Urban Land (Ceiling and Regulation) Act, 1978 do not require
reconsideration.
We also hold that section 6 of the Act not only prohibits a
completed transfer but also a proposed transfer.
F We also hold that a decree for specific performance of contract
cannot be granted conditionally upon vendor satisfying certain
conditions, if it is not part of the agreement.”
8. Given this declaration of law inter-parties, the matter went back
to the Division Bench. The Division Bench then referred to paragraph
22 of the judgment of the learned Single Judge and remanded the matter
G
to the learned Single Judge to record a finding as follows:
“4. We have, therefore, felt it necessary to direct the learned trial
Judge to record a finding on the question as to whether the extent
of 8 grounds and 2354 sq.ft. which is the subject matter of the
agreement to sell was held by the defendants in excess of the
H ceiling limit applicable to them, and as to whether that extent could
FERRODOUS ESTATES (PVT.) LTD. v. 691
P. GOPIRATHNAM (DEAD) [R.F. NARIMAN, J.]
have been sold if at all only with the permission of the authorities A
under the Act.”
9. The learned Single Judge, by a judgment dated 30.09.2003,
ultimately recorded:
“9. However, I am to point out that the material questions whether
the plaintiff is entitled to claim the relief of specific performance B
or not and the question, whether sub-section 3 of section 5 and
proviso to section 5(3) and section 6 are applicable to this case or
not, whether after repeal of the Tamil Nadu Urban Land (Ceiling
and Regulation) Act the claim of the defendants under the repealed
Act is no longer available or not, whether permission was C
necessary to effect alienation in pursuance of agreement of sale
involved in this case and like matters can be decided only by the
Division Bench of this court which has called for the finding as
indicated above.
10. However, the finding is recorded to the effect that the subject D
matter of the suit viz., 8 grounds and 2354 sq.ft. factually stands
as excess lands within the meaning of the Tamil Nadu Urban
Land (Ceiling and Regulation) Act before it was repealed.
Accordingly, the finding is submitted to that effect for kind
consideration of the Hon’ble Division Bench of this Court.”
E
10. The matter then returned to the Division Bench, which by the
impugned judgment dated 29.01.2007, reversed the judgment of the
learned Single Judge by applying the Full Bench decision relating to the
matter inter-parties. Dealing with section 5(3) and its proviso of the
Tamil Nadu Urban Land Ceiling Act, the Division Bench first held:
F
“28. In the present case, the land proposed to be transferred under
the agreement is 8 grounds and 2354 sq.ft. The entire land is
admittedly a vacant land. For the purpose of this case it is assumed
that the plaintiff did not have any dwelling unit or any vacant land.
If, instead of the agreement, the sale itself could have been affected
in respect of 8 grounds 2354 sq.ft., the plaintiff would have become G
the owner of the said vacant land. In other words, the land
transferred would have exceeded the ceiling limit of the transferee.
The main provision contained in section 5(3) enables the person
holding land in excess to continue to hold such land because the
sanctioned layout is available. However, the proviso indicates that
H
692 SUPREME COURT REPORTS [2020] 13 S.C.R.
A he cannot sell such land if ultimately the lands in the hands of the
transferee would exceed the ceiling limit of such transferee. It
does not mean that wherever transferee is without any dwelling
unit or does not own any vacant land, any extent of land could be
sold to such person. The clear intention is that the person intending
to purchase such property should not in the process acquire land
B
in excess of his own ceiling limit. Any other interpretation would
obviously defeat the very purpose of the proviso.
29. Therefore, in our opinion, even assuming that the intended
purchaser did not have dwelling unit or vacant land, since the
agreement of sale was in respect of vacant land, which would
C have in the aggregate exceeded the ceiling limit of the proposed
transferee, the embargo contained in section 5(3) proviso read
with section 6 was equally applicable.”
11. Referring to the argument of the appellant that the Tamil Nadu
Urban Land Ceiling Act had been repealed vide the Tamil Nadu Urban
D Land (Ceiling & Regulation) Repeal Act, 1999 [“Repeal Act”] w.e.f.
16.06.1999, the Division Bench then held:
“31. We have already extracted in extenso the different
observations made by the Full Bench, which is the opinion
rendered in a matter arising out of the present dispute. In such
E Full Bench decision, the earlier views expressed by several Division
Bench decisions of this Court holding the agreement in
contravention of the provisions of the Act to be invalid is obviously
binding on us. At several places it has been indicated that such
agreement is void. If the agreement was void at the inception, the
F subsequent repeal of the Act possibly may not have the effect of
reviving such void agreement. Since such agreement has been
considered to be against the Public Policy and void by the Full
Bench, which opinion is obviously binding on us and also on the
parties at least for the time being, we are unable to hold otherwise.”
G Thus holding, the Division Bench then found:
“34. If this contention is accepted it would mean that during
duration of the Act, i.e., till 1999, the agreement was not
enforceable and such agreement could be specifically performed
after 1999, when the Act was repealed. In other words, the court
would be called upon to enforce the agreement after 19 years on
H
FERRODOUS ESTATES (PVT.) LTD. v. 693
P. GOPIRATHNAM (DEAD) [R.F. NARIMAN, J.]
the basis of a consideration which was fixed almost two decades A
back. It is of course true that there are many instances where
such matters are pending before the Court for a long period and
thereafter the Court passes a decree at trial stage or appellate
stage for enforcement of the contract. But, such a position cannot
be compared to the present case, wherein as per the opinion of
B
the Full Bench such agreement was contrary to the Public Policy
under section 23 of the Indian Contract Act and was not
enforceable, if not void. To enforce such an agreement after long
lapse of time because of the subsequent event, namely, repeal of
the Act, would not be equitable.
35. In this context, it would be more appropriate to indicate that C
during course of hearing, the learned Senior Counsel on the basis
of the specific instructions of and in the presence of counsel on
record had submitted that apart from Rs.4,40,000/-, which has
been deposited in court and which has been invested in fixed
deposit earning interest, the plaintiff/respondent is prepared to pay D
a further sum of Rs.1.25 Crore for completing the transaction.
On the other hand, the learned Senior Counsel appearing for the
defendants/appellants submitted that since the agreement itself
contemplated payment of compensation/damages in case of
default by the defendants, the court should instead of specifically
enforcing the agreement, direct payment of compensation/damages E
to the plaintiff. Learned Senior Counsel on the basis of specific
instructions and in the presence of counsel on record made a
submission that the defendants/appellants are prepared to pay a
consolidated compensation/damages of Rs. 2 crores.
36. It may be that the plaintiff, if permitted to purchase the property, F
it would develop the same and earn more profit than Rs.2 crores
offered by the defendants/appellants. However, keeping in view
the fact that the defendants are the original owners and weighing
both the options, we feel interest of justice would be served by
directing the defendants/appellants, on the basis of concession of G
the counsels that the defendants/appellants shall be liable to pay a
consolidated sum of Rs. 2 crores as compensation/damages to
the plaintiff, which would discharge their liability in full.
37. In view of the above conclusions, it is not necessary for us to
go into other questions raised by the appellants to the effect that H
694 SUPREME COURT REPORTS [2020] 13 S.C.R.
A the plaintiff was not ready and willing to perform its part of the
contract.
38. In the result, the appeal is allowed in part. The judgment and
decree of the learned single Judge is modified and instead of decree
for specific performance of the agreement, we direct that the
B defendants/appellants shall be liable to pay a sum of Rs.2 crores
to the plaintiff, in discharge of their entire liability. Such amount
should be paid or deposited in court on or before 31.3.2007, failing
which such amount shall carry interest at the rate of 10% per
annum thereafter. The amount deposited by the plaintiff is permitted
to be withdrawn by the plaintiff along with the accrued interest.
C The parties shall bear their own costs throughout.”
12. Shri Guru Krishnakumar, learned Senior Advocate appearing
on behalf of the appellant, has argued that every single factual finding
found by the learned Single Judge, including findings as to the dishonesty
of the defendants, had not been reversed by the Division Bench in appeal.
D He argued that on a wrong application of the Full Bench judgment, the
bar contained in section 6 of the Tamil Nadu Urban Land Ceiling Act
was applied against the appellant, as a result of which the agreement
would have to be held to be void ab initio, which was incorrect, given
the fact that in this agreement, it was the defendants who were to obtain
E permission from the competent authority under the Tamil Nadu Urban
Land Ceiling Act, which permission could have been obtained. He
referred to the Repeal Act and said that in any case, given the fact that
a first appeal is in the nature of a rehearing of a suit, on the date that the
Division Bench passed its decree, the Tamil Nadu Urban Land Ceiling
Act stood repealed, as a result of which none of its provisions could be
F used in order to hit the agreement in the present case. He then referred
to section 5(3) and its proviso, and cited judgments to show that the
Division Bench’s construction of the proviso would render the main part
of section 5(3) redundant. He argued that on balance, it was found that
the appellant-plaintiff had been ready and willing throughout to perform
G its part of the agreement, whereas the defendants were correctly found
to be in breach, neither of which findings has been set aside by the
Division Bench. To, therefore, arrive at the conclusion that the agreement
is null and void ab initio, as a result of which specific performance
cannot be decreed, is wholly incorrect in the facts of the present case.
He also stressed the fact that it was open to the defendants to have
H
FERRODOUS ESTATES (PVT.) LTD. v. 695
P. GOPIRATHNAM (DEAD) [R.F. NARIMAN, J.]
applied for exemption of the suit property out of the larger property that A
was owned by them, and had they done so, the suit property, being within
the ceiling limit of the original four defendants in the suit, the suit for
specific performance was correctly decreed in the appellant’s favour.
The fact that the appellant, in turn, could only purchase up to 500 sq.
metres, the same being the ceiling limit, would not render the agreement
B
null and void ab initio, but on the contrary, would be at the risk of the
appellant, as correctly held by the learned Single Judge. In any case, the
Tamil Nadu Urban Land Ceiling Act having been repealed in 1999, by
the time the Division Bench passed its judgment, there was no impediment
in decreeing specific performance of the suit property, consequent upon
the repeal of the said Act. He cited a number of judgments to buttress C
his submissions. He also attacked the Division Bench judgment stating
that the fact that litigation took 27 years by the time the Division Bench
passed its judgment could not be put against the appellant, as has been
held by a series of judgments of this Court.
13. Shri V. Giri, learned Senior Advocate appearing on behalf of D
the respondents, argued that the Full Bench judgment was inter-parties
and bound the parties. Being res judicata between the parties, it is not
now possible to reopen what was held therein, the appellant not having
appealed from the said Full Bench judgment which, therefore, became
final between the parties. If the Full Bench judgment is to be seen, the
Division Bench was absolutely correct in its conclusion that the agreement E
being void ab initio, and therefore stillborn, could not be resuscitated at
any future point of time, given the repeal of the Tamil Nadu Urban Land
Ceiling Act. Further, he cited judgments to show that where a vested
right accrues on the date of the filing of the suit, that cannot be taken
away later, and the suit must be decided as on the date the plaint is filed F
and not on the date of the state of the law when the appellate decree is
passed. He also argued that in any event, this Court should not interfere
under Article 136 as the judgment under appeal is equitable – the appellant
has been awarded Rs.2 crores with interest, which would come to a
sum of over Rs.3 crores today, despite the fact that specific performance
could not be granted of a void agreement. He also added that the Division G
Bench was right in stating that after so many years, grant of specific
performance, being discretionary, was correctly refused.
14. Having heard learned counsel for the parties, it is first important
to deal with Shri Giri’s basic contention that the Full Bench judgment
H
696 SUPREME COURT REPORTS [2020] 13 S.C.R.
A stands as a roadblock to the decreeing of a suit for specific performance
in the present case. Shri Giri is right in arguing that it is not open to the
appellant to go behind the Full Bench judgment as it is inter-parties, as a
result of which the law laid down by the Full Bench judgment must apply
to the parties, res judicata clearly attaching even to issues of law based
on the same cause of action – see Mathura Prasad Bajoo Jaiswal v.
B
Dossibai N.B. Jeejeebhoy, (1970) 3 SCR 830 at p. 836. This being
the case, it is important now to analyse what was held by the Full Bench.
15. The Full Bench judgment, while stating that section 6 of the
Tamil Nadu Urban Land Ceiling Act prohibited even agreements to sell,
as a result of which there would be no transaction at all in the eyes of
C law, was careful thereafter to point out:
“40. …… While considering suit for specific performance, Court
is only concerned whether purchaser has come to Court for
enforcing the agreement in terms thereof. Asking vendor to get
exemption and then to execute the agreement will be deviating
D from the terms of contract and the Court will not enforce such a
contract. That will mean that purchaser is not willing to purchase
the land as per agreement, but only with deviation, i.e., vendor
must get exemption and execute the sale deed.”
16. In paragraph 41, the Full Bench also went on to state that it is
E possible to obtain exemption under the Tamil Nadu Urban Land Ceiling
Act, over which the Court has no control, but despite that, the relief of
specific performance is not usually granted as it would be going beyond
the contract. Equally, after holding that section 6 prohibits a proposed
transfer, the Full Bench went on to hold that a decree for specific
F performance cannot be granted conditionally upon the vendor satisfying
certain conditions if it is not part of the agreement.
17. When these portions of the Full Bench judgment are applied
to the agreement in question, it is clear that the agreement itself contains
a specific clause, namely, clause 4, in which it is for the vendor to obtain
G permission from the competent authority under the Tamil Nadu Urban
Land Ceiling Act. This agreement, therefore, cannot be said to be hit by
the decision of the Full Bench judgment as the Full Bench itself recognises
that there may be agreements with such clauses, in which case it is the
Court’s duty to enforce such clause. That is all that the learned Single
Judge has done in the facts of this case – he has correctly held that it
H
FERRODOUS ESTATES (PVT.) LTD. v. 697
P. GOPIRATHNAM (DEAD) [R.F. NARIMAN, J.]
was for the defendants to obtain exemption from the authorities under A
the Tamil Nadu Urban Land Ceiling Act which they did not, as a result
of which they were in breach of the agreement.
18. Viewed slightly differently, it is clear that the Full Bench
judgment cannot stand in the way of the appellant for another reason.
There can be no doubt that the suit property, admeasuring roughly 2002 B
sq. metres, was part of a larger property of 30 grounds, and that the
defendants, being four in number, were entitled to retain 2000 sq. metres
of the land owned by them. It was for this reason that it was incumbent
upon the defendants to have obtained the Urban Land Ceiling permission
to sell the land that was within their ceiling limit, which they failed to do.
As a matter of fact, a later Single Judge of the Madras High Court, in C
Sushila v. Nihalchand Nahata, AIR 2004 Mad 18, understood the Full
Bench judgment of his own High Court as follows:
“11. With respect to the ratio laid down in the decision of the Full
Bench of this Court, (1999) 2 CTC 181, cited supra and the decision
of the Division Bench of this Court, (2003) 1 Mad LW 696, cited D
supra, there cannot be any dispute. The ratio decidendi in both the
decisions is that any transfer by a person holding land in excess of
ceiling limit is invalid. Even proposed transfers of excess land is
invalid. The agreement for sale of excess land also is null and
void and therefore, no suit for specific performance would lie to E
enforce an agreement for sale of “excess land”. That is, what is
prohibited or what is illegal and hence null and void is, an agreement
to sell any “excess land” under the Urban Land Ceiling Act. If
the agreement is with respect to the “exempted” land or with
reference to the land that is likely to be exempted, such an
agreement is not invalid; such agreements are valid and F
enforceable by a suit for specific performance.
12. Learned counsel for the plaintiff submitted that the agreement
itself is only for sale of the land after getting exemption from the
appropriate authorities. The terms of the agreement make it clear
that the parties never intended to sell or purchase the land in G
possession of the defendant in excess of ceiling limit, unless
exemption is granted by the authorities. Therefore, the agreement
is not in contravention of the provisions of the Urban Land Ceiling
Act. Therefore, the decisions relied upon by the counsel for the
defendant is not applicable to the facts of this case. There is no H
698 SUPREME COURT REPORTS [2020] 13 S.C.R.
A intention among the parties to violate the provisions of the Urban
Land Ceiling Act. Therefore, the agreement is valid and can be
specifically enforced.
13. This argument of the counsel for the plaintiff is acceptable.
The decisions relied upon by the counsel for the defendant are
B with respect to agreements of intended transaction of excess land,
whereas this agreement Ex.P. 5 had been entered specifically to
transfer the land only after getting exemption. When the Act itself
provides for grant of exemption, any person can reasonably expect
that he may get the exemption, as provided under the Act. When
it is possible and permissible for the authorities to grant exemption
C under the Urban Land Ceiling Act, nothing prohibits a person from
entering into a contract for sale of such land after getting exemption.
Such an agreement is not intended to violate the provisions of the
Act. It is only in accordance with the provisions of the Act and
therefore, such an agreement cannot be said to be invalid or void
D ab initio. Therefore, such an agreement is valid and enforceable
in a suit for specific performance of the agreement.
14. A perusal of Ex.P. 5 shows that what is agreed by the
petitioner is that land shall be sold/purchased after getting exemption
from the Urban Land Ceiling Authority. That is, this agreement is
E not for sale/purchase of the “excess” land under the Land Ceiling
Act, but only after getting exemption under the Urban Land Ceiling
Act. Nowhere in the agreement is it stated that the parties intended
to purchase or sell the land without getting exemption under the
Act. Therefore, the judgments relied on by the defendants are not
applicable to the facts of the present case and hence, this agreement
F cannot be said to be invalid as it does not contemplate either parties
to act in a manner contrary to the Urban Land Ceiling Act.
Therefore, the agreement is not invalid and hence, it is valid and
enforceable. Issue No. 1 is answered in favour of the plaintiff.”
19. It is clear, therefore, that the agreement to sell cannot be said
G to be void ab initio, as a result of which the basis of the Division Bench
judgment under appeal goes. Resultantly, the judgments in Jacques v.
Withy, 1 H. Bl. 65, Hitchcock v. Way, (1837) 6 A & E 943 : 112 ER
360, and Ram Kristo Mandal v. Dhankisto Mandal, (1969) 1 SCR
342 (at p. 349) cited by Shri Giri in support of the proposition that the
H repeal of a statute which makes void an agreement cannot revive such
FERRODOUS ESTATES (PVT.) LTD. v. 699
P. GOPIRATHNAM (DEAD) [R.F. NARIMAN, J.]
void agreement have no application on the facts of this case. In view of A
this, it is unnecessary to go into whether section 5(3) of the Tamil Nadu
Urban Land Ceiling Act, together with its proviso, applies to the facts of
this case.
20. However, the other contention on behalf of the respondents is
that even if this were so, the appellant was not entitled to more than 500 B
sq. metres, which was the ceiling limit so far as the appellant was
concerned. This being the case, no decree for specific performance
could be made in favour of the appellant.
21. That conditional decrees for specific performance have been
passed and upheld by this Court cannot be denied. Thus, in Vishwa C
Nath Sharma v. Shyam Shanker Goela, (2007) 10 SCC 595 [“Vishwa
Nath Sharma”], this Court held:
“12. The Privy Council in Motilal v. Nanhelal [(1929-30) 57 IA
333 : AIR 1930 PC 287] laid down that if the vendor had agreed
to sell the property which can be transferred only with the sanction D
of some government authority, the court has jurisdiction to order
the vendor to apply to the authority within a specified period, and
if the sanction is forthcoming, to convey to the purchaser within a
certain time. This proposition of law was followed in Chandnee
Widya Vati Madden v. Dr. C.L. Katial [AIR 1964 SC 978] and
R.C. Chandiok v. Chuni Lal Sabharwal [(1970) 3 SCC 140 : E
AIR 1971 SC 1238]. The Privy Council in Motilal case [(1929-
30) 57 IA 333 : AIR 1930 PC 287] also laid down that there is
always an implied covenant on the part of the vendor to do all
things necessary to effect transfer of the property regarding which
he has agreed to sell the same to the vendee. Permission from the F
Land and Development Officer is not a condition precedent for
grant of decree for specific performance. The High Court relied
upon the decisions in Chandnee Widya Vati Madden v. Dr. C.L.
Katial [AIR 1964 SC 978] and Bhim Singhji v. Union of
India [(1981) 1 SCC 166 : AIR 1981 SC 234] to substantiate the
conclusion. In Chandnee Widya [AIR 1964 SC 978] this Court G
confirmed the decision of the Punjab and Haryana High Court
holding that if the Chief Commissioner ultimately refused to grant
the sanction to the sale, the plaintiff may not be able to enforce
the decree for specific performance of the contract but that was
not a bar to the court passing a decree for that relief. The same is H
700 SUPREME COURT REPORTS [2020] 13 S.C.R.
A the position in the recent case. If after the grant of the decree of
specific performance of the contract, the Land and Development
Officer refused to grant permission for sale, the decree-holder
may not be in a position to enforce the decree but it cannot be
held that such a permission is a condition precedent for passing a
decree for specific performance of the contract.
B
13. In R.C. Chandiok v. Chuni Lal Sabharwal [(1970) 3 SCC
140 : AIR 1971 SC 1238] it was held that proper form of decree
in a case like the instant one would be to direct specific
performance of the contract between the defendant and the
plaintiff and to direct the subsequent transferee to join in the
C conveyance so as to pass on the title residing in him. This is
because Defendant 2, son of Defendant 1 cannot take the stand
that he was a transferee without notice. Admittedly, he is the son
of Defendant 1. The view in R.C. Chandiok [(1970) 3 SCC 140
: AIR 1971 SC 1238] was a reiteration of earlier view in Durga
D Prasad v. Deep Chand [AIR 1954 SC 75] . This Court has
repeatedly held that the decree can be passed and the sanction
can be obtained for transfer of immovable property and the decree
in such a case would be in the way the High Court has directed.
(See Motilal Jain v. Ramdasi Devi [(2000) 6 SCC 420], Nirmala
Anand v. Advent Corpn. (P) Ltd. [(2002) 5 SCC 481], HPA
E International v. Bhagwandas Fateh Chand Daswani [(2004)
6 SCC 537] and Aniglase Yohannan v. Ramlatha [(2005) 7 SCC
534].)”
In Van Vibhag Karamchari Griha Nirman Sahkari Sanstha
Maryadit v. Ramesh Chander, (2010) 14 SCC 596 [“Van Vibhag”],
F this Court referred to a suit in which specific performance was not
claimed on the ground that in view of the Urban Land (Ceiling &
Regulation) Act, 1976, the appellant could not have made such claim.
This was turned down specifically by this Court, stating:
“26. The appellant, on noticing the same, filed a suit on 11-2-1991
G but he did not include the plea of specific performance. The
appellant wanted to defend this action by referring to two facts
(i) there was an acquisition proceeding over the said land under
the Land Acquisition Act, and (ii) in view of the provisions of the
Ceiling Act, the appellant could not have made the prayer for
H specific performance.
FERRODOUS ESTATES (PVT.) LTD. v. 701
P. GOPIRATHNAM (DEAD) [R.F. NARIMAN, J.]
27. The aforesaid purported justification of the appellant is not A
tenable in law. If the alleged statutory bar referred to by the
appellant stood in its way to file a suit for specific performance,
the same would also be a bar to the suit which it had filed claiming
declaration of title and injunction. In fact, a suit for specific
performance could have been easily filed subject to the provision
B
of section 20 of the Ceiling Act.
28. Similar questions came up for consideration before a Full Bench
of the Gujarat High Court in Shah Jitendra Nanalal v. Patel
Lallubhai Ishverbhai [AIR 1984 Guj 145]. The Full Bench held
that a suit for specific performance could be filed despite the
provisions of the Ceiling Act. A suit for specific performance in C
respect of vacant land in excess of ceiling limit can be filed and a
conditional decree can be passed for specific performance, subject
to exemption being obtained under section 20 of the Act (AIR
paras 11-13).
29. We are in respectful agreement with the views of the Full D
Bench in the abovementioned decision and the principles decided
therein are attracted here.”
The judgments of Immani Appa Rao v. Gollapalli
Ramalingamurthi, (1962) 3 SCR 739 and Narayanamma v.
Govindappa, 2019 SCC OnLine SC 1260 cited by Shri Giri in support E
of the proposition that no court will lend its aid to a man who founds his
cause of action upon an illegal act has no application in a situation covered
by the judgments contained in Vishwa Nath Sharma (supra) and Van
Vibhag (supra).
22. Even otherwise, the Repeal Act makes it clear that the Tamil F
Nadu Urban Land Ceiling Act is repealed as follows:
“2. Repeal of Tamil Nadu Act 24 of 1978.–The Tamil Nadu
Urban Land (Ceiling and Regulation) Act, 1978 (Tamil Nadu Act
24 of 1978) (hereinafter referred to as the principal Act), is hereby
repealed. G
3. Savings.–(1) The repeal of the principal Act shall not affect–
(a) the vesting of any vacant land under sub-section (3) of
section 11, possession of which has been taken over by the
State Government or any person duly authorised by the State
Government in this behalf or by the competent authority; H
702 SUPREME COURT REPORTS [2020] 13 S.C.R.
A (b) the validity of any order granting exemption under sub-
section (1) of section 21 or any action taken thereunder.
(2) Where -
(a) any land is deemed to have vested in the State Government
under sub-section (3) of section 11 of the principal Act but
B possession of which has not been taken over by the State
Government or any person duly authorised by the State
Government in this behalf or by the competent authority; and
(b) any amount has been paid by the State Government with
respect to such land,
C
then, such land shall not be restored unless the amount paid, if
any, has been refunded to the State Government.”
It is clear that as no steps whatsoever were taken under the Tamil
Nadu Urban Land Ceiling Act, the savings clause will not apply.
D 23. In Gajraj Singh v. State Transport Appellate Tribunal,
(1997) 1 SCC 650, this Court spoke of the effect of an Act that is repealed
as follows:
“22. Whenever an Act is repealed it must be considered, except
as to transactions past and closed, as if it had never existed. The
E effect thereof is to obliterate the Act completely from the record
of Parliament as if it had never been passed; it never existed
except for the purpose of those actions which were commenced,
prosecuted and concluded while it was an existing law. Legal
fiction is one which is not an actual reality and which the law
recognises and the court accepts as a reality. Therefore, in case
F
of legal fiction the court believes something to exist which in reality
does not exist. It is nothing but a presumption of the existence of
the state of affairs which in actuality is non-existent. The effect
of such a legal fiction is that a position which otherwise would not
obtain is deemed to obtain under the circumstances. Therefore,
G when Section 217(1) of the Act repealed Act 4 of 1939 w.e.f. 1-
7-1989, the law in Act 4 of 1939 in effect came to be non-existent
except as regards the transactions, past and closed or saved.
23. In Crawford’s Interpretation of Law (1989) at p. 626, it is
stated that:
H
FERRODOUS ESTATES (PVT.) LTD. v. 703
P. GOPIRATHNAM (DEAD) [R.F. NARIMAN, J.]
“[A]n express repeal will operate to abrogate an existing law, A
unless there is some indication to the contrary, such as a saving
clause. Even existing rights and pending litigation, both civil
and criminal, may be affected although it is not an uncommon
practice to use the saving clause in order to preserve existing
rights and to exempt pending litigation.”
B
At p. 627, it is stated that:
“[M]oreover, where a repealing clause expressly refers to a
portion of a prior Act, the remainder of such Act will not usually
be repealed, as a presumption is raised that no further repeal is
necessary, unless there is irreconcilable inconsistency between C
them. In like manner, if the repealing clause is by its terms
confined to a particular Act, quoted by title, it will not be extended
to an act upon a different subject.”
Section 6 of the GC Act enumerates, inter alia, that where the
Act repeals any enactment, unless a different intention appears, D
the repeal shall not (a) revive anything not in force or existing at
the time at which the repeal takes effect; or (b) affect the previous
operation of any enactment so repealed or anything duly done or
suffered thereunder; or (c) affect any right, privilege, obligation
or liability acquired, accrued or incurred under any enactment so
repealed, and any such investigation, legal proceeding or remedy E
may be instituted, continued or enforced. In India Tobacco Co.
Ltd. v. CTO [(1975) 3 SCC 512 : 1975 SCC (Tax) 49] (SCC at p.
517) in paras 6 and 11, a Bench of three Judges had held that
repeal connotes abrogation and obliteration of one statute by
another from the statute-book as completely as if it had never F
been passed. When an Act is repealed, it must be considered,
except as to transactions past and closed, as if it had never existed.
Repeal is not a matter of mere form but is of substance, depending
on the intention of the legislature. If the intention indicated either
expressly or by necessary implication in the subsequent statute
was to abrogate or wipe off the former enactment wholly or in G
part, then it would be a case of total or pro tanto repeal.”
24. It is settled law that an appeal is a continuation of a suit, as a
result of which a change in law will become applicable on the date of the
appellate decree, provided that no vested right is taken away thereby.
H
704 SUPREME COURT REPORTS [2020] 13 S.C.R.
A This was felicitously put in Rameshwar v. Jot Ram, (1976) 1 SCR 847
as follows:
“In P. Venkateswarlu v. Motor & General Traders [(1975) 1
SCC 770, 772 : AIR 1975 SC 1409, 1410] this Court dealt with the
adjectival activism relating to post-institution circumstances. Two
B propositions were laid down. Firstly, it was held that ‘it is basic to
our processual jurisprudence that the right to relief must be judged
to exist as on the date a suitor institutes the legal proceeding.’
This is an emphatic statement that the right of a party is
determined by the facts as they exist on the date the action is
instituted. Granting the presence of such facts, then he is entitled
C to its enforcement. Later developments cannot defeat his right
because, as explained earlier, had the court found his facts to be
true the day he sued he would have got his decree. The Court’s
procedural delays cannot deprive him of legal justice or right
crystallised in the initial cause of action. This position finds support
D in Bhajan Lal v. State of Punjab [(1971) 1 SCC 34].
(emphasis in original)
The impact of subsequent happenings may now be spelt out. First,
its bearing on the right of action, second, on the nature of
the relief and third, on its impotence to create or destroy substantive
E rights. Where the nature of the relief, as originally sought, has
become obsolete or unserviceable or a new form of relief will be
more efficacious on account of developments subsequent to the
suit or even during the appellate stage, it is but fair that the relief
is moulded, varied or reshaped in the light of updated facts.
Patterson [Patterson v. State of Alabama, (1934) 294 US 600,
F 607] illustrates this position. It is important that the party claiming
the relief or change of relief must have the same right from which
either the first or the modified remedy may flow. Subsequent events
in the course of the case cannot be constitutive of substantive
rights enforceable in that very litigation except in a narrow
category (later spelt out) but may influence the equitable jurisdiction
G
to mould reliefs. Conversely, where rights have already vested in
a party, they cannot be nullified or negated by subsequent events
save where there is a change in the law and it is made applicable
at any stage. Lachmeshwar Prasad Shukul v. Keshwar Lal
Chaudhuri [1940 FCR 84 : AIR 1941 FC 5] falls in this category.
H Courts of justice may, when the compelling equities of a case
FERRODOUS ESTATES (PVT.) LTD. v. 705
P. GOPIRATHNAM (DEAD) [R.F. NARIMAN, J.]
oblige them, shape reliefs — cannot deny rights — to make them A
justly relevant in the updated circumstances. Where the relief is
discretionary, courts may exercise this jurisdiction to avoid injustice.
Likewise, where the right to the remedy depends, under the statute
itself, on the presence or absence of certain basic facts at the
time the relief is to be ultimately granted, the Court, even in
appeal, can take note of such supervening facts with fundamental B
impact. Venkateswarlu [P. Venkateswarlu v. Motor & General
Traders, (1975) 1 SCC 770 : AIR 1975 SC 1409], read in its
statutory setting, falls in this category. Where a cause of action is
deficient but later events have made up the deficiency, the Court
may, in order to avoid multiplicity of litigation, permit amendment
C
and continue the proceeding, provided no prejudice is caused to
the other side. All these are done only in exceptional situations
and just cannot be done if the statute, on which the legal proceeding
is based, inhibits, by its scheme or otherwise, such change in cause
of action or relief. The primary concern of the Court is to
implement the justice of the legislation. Rights vested by virtue of D
a statute cannot be divested by this equitable doctrine
(See Chokalingam Chetty [54 MLJ 88 (PC)]). The law stated
in Ramji Lal v. State of Punjab [AIR 1966 Punj 374 : ILR (1966)
2 Punj 125] is sound:
“Courts, do very often take notice of events that happen
E
subsequent to the filing of suits and at times even those that
have occurred during the appellate stage and permit pleadings
to be amended for including a prayer for relief on the basis of
such events but this is ordinarily done to avoid multiplicity of
proceedings or when the original relief claimed has, by reason
of change in the circumstances, become inappropriate and not F
when the plaintiff’s suit would be wholly displaced by the
proposed amendment (see Steward v. North Metropolitan
Tramways Company [(1885) 16 QBD 178] ) and a fresh suit
by him would be so barred by limitation.”
One may as well add that while taking cautious judicial cognisance
G
of “post-natal” events, even for the limited and exceptional
purposes explained earlier, no court will countenance a party
altering, by his own manipulation, a change in situation and plead
for relief on the altered basis.”
(emphasis in original)
(at pp. 851-852) H
706 SUPREME COURT REPORTS [2020] 13 S.C.R.
A 25. This judgment follows the hallowed principle that an appellate
proceeding is in continuation of an original proceeding, as laid down in
Lachmeshwar Prasad Shukul v. Keshwar Lal Chaudhuri, AIR 1941
FC 5, also followed in later judgments of this Court. In Dayawati v.
Inderjit, (1966) 3 SCR 275, this Court held:
B “Now as a general proposition, it may be admitted that
ordinarily a court of appeal cannot take into account a new law,
brought into existence after the judgment appealed from has been
rendered, because the rights of the litigants in an appeal are
determined under the law in force at the date of the suit. Even
before the days of Coke, whose maxim — a new law ought to be
C prospective, not retrospective in its operation — is oft-quoted,
courts have looked with disfavour upon laws which take away
vested rights or affect pending cases. Matters of procedure are,
however, different and the law affecting procedure is always
retrospective. But it does not mean that there is an absolute rule
D of inviolability of substantive rights. If the new law speaks in
language, which, expressly or by clear intendment, takes in even
pending matters, the court of trial as well as the court of appeal
must have regard to an intention so expressed, and the court of
appeal may give effect to such a law even after the judgment of
the court of first instance. The distinction between laws affecting
E procedure and those affecting vested rights does not matter when
the court is invited by law to take away from a successful plaintiff,
what he has obtained under judgment. See Quilter v. Maple son
[(1882) 9 QBD 672] and Stovin v. Fairbrass [(1919) 88 LJ KB
1004] which are instances of new laws being applied. In the former
F the vested rights of the landlord to recover possession and in the
latter the vested right of the statutory tenant to remain in possession
were taken away after judgment. See also Maxwell’s
Interpretation of Statutes (11th Edn. pp. 211 and 213,
and Mukerjee (K.C.) v. Mst. Ramaraton [63 IA 47] where no
saving in respect of pending suits was implied when Section 26(N)
G and (O) of the Bihar Tenancy Act (as amended by Bihar Tenancy
Amendment Act, 1934) were clearly applicable to all cases without
exception.
Section 6 of the Relief of Indebtedness Act is clearly
retrospective. Indeed, the heading of the section shows that it
H lays down the retrospective effect. This being so, the core of the
FERRODOUS ESTATES (PVT.) LTD. v. 707
P. GOPIRATHNAM (DEAD) [R.F. NARIMAN, J.]
problem really is whether the suit could be said to be pending on A
June 8, 1956 when only an appeal from the judgment in the suit
was pending. This requires the consideration whether the word
‘suit’ includes an appeal from the judgment in the suit. An appeal
has been said to be “the right of entering a superior court, and
invoking its aid and interposition to redress the error of the court
B
below”. (Per Lord Westbury in Attorney-General v. Sillem [11
ER 1200 at 1209]. The only difference between a suit and an
appeal is this that an appeal “only reviews and corrects the
proceedings in a cause already constituted but does not create
the cause”. As it is intended to interfere in the cause by its means,
it is a part of it, and in connection with some matters and some C
statutes it is said that an appeal is a continuation of a suit. In the
present Act the intention is to give relief in respect of excessive
interest in a suit which is pending and a preliminary decree in a
suit of this kind does not terminate the suit. The appeal is a part of
the cause because the preliminary decree which emerges from
D
the appeal will be the decree, which can become a final decree.
Such an appeal cannot have an independent existence. If this be
not accepted for the purpose of the application of Section 3 of the
Usurious Loans Act (as amended) curious results will follow. The
appeal court in the appeal is not able to resort to the section but if
the suit were remanded the trial court would be compelled to E
apply it. For although, in the appeal proper, that judgment must be
rendered which could be rendered by the court of trial, but if the
suit is to be reheard, then the judgment must be given on the
existing state of the law and that must include Section 5 by reason
of Section 6 of the Punjab Relief of Indebtedness Act. It is hardly
F
to be suggested that this obvious anomaly was allowed to exist. It
would, therefore, appear that in speaking of a pending suit, the
legislature was thinking not only in terms of the suit proper but
also of those stages in the life of the suit which ordinarily take
place before a final executable document comes into existence.
The words of the section we are concerned with, speak of a suit G
pending on the commencement of the Act and it means a live suit
whether in the court of first instance or in an appeal court where
the judgment of the court of first instance is being considered. It
only excludes those suits in which nothing further needs to be
done in relation to the rights or claims litigated, because an
executable decree which may not be reopened is already in H
708 SUPREME COURT REPORTS [2020] 13 S.C.R.
A existence. The decision of the High Court was right in applying
Section 3 of the Usurious Loans Act (as amended) to the case.”
(at pp. 281-283)
Similarly, in Amarjit Kaur v. Pritam Singh, (1974) 2 SCC 363,
this Court held:
B
“4. In Lachmeshwar Prasad Shukul v. Keshwar Lal
Chaudhuri [1940 FCR 84] it was held that once the decree passed
by a court had been appealed against, the matter became sub-
judice again and thereafter the appellate court has seisin of the
whole case, though for certain purposes, e.g., execution, the decree
C was regarded as final and the courts below retained jurisdiction.
The Court further said that it has been a principle of legislation in
British India at least from 1861 that a court of appeal shall have
the same powers and shall perform as nearly as may be the same
duties as are conferred and imposed by the Civil Procedure Code
D on courts of original jurisdiction, that even before the enactment
of that Code, the position was explained by Bhashyam Iyengar, J.
in Kristnama Chariar v. Mangammal [ILR (1903) 26 Mad 91,
at p. 95-96.] in language which makes it clear that the hearing of
an appeal is under the processual law of this country in the nature
of a re-hearing, and that it is on the theory of an appeal being in
E the nature of a re-hearing that the courts in this country have in
numerous cases recognized that in moulding the relief to be granted
in a case on appeal, the court of appeal is entitled to take into
account even facts and events which have come into existence
after the decree appealed against.
F 5. As an appeal is a re-hearing, it would follow that if the High
Court were to dismiss the appeal, it would be passing a decree in
a suit for pre-emption. Therefore, the only course open to the
High Court was to allow the appeal and that is what the High
Court has done. In other words, if the High Court were to confirm
G the decree allowing the suit for pre-emption, it would be passing a
decree in a suit for pre-emption, for, when the appellate court
confirms a decree, it passes a decree of its own, and therefore,
the High Court was right in allowing the appeal.”
In Lakshmi Narayan Guin v. Niranjan Modak, (1985) 1 SCC
270, this Court held:
H
FERRODOUS ESTATES (PVT.) LTD. v. 709
P. GOPIRATHNAM (DEAD) [R.F. NARIMAN, J.]
“9. That a change in the law during the pendency of an appeal A
has to be taken into account and will govern the rights of the
parties was laid down by this Court in Ram
Swarup v. Munshi [AIR 1963 SC 553 : (1963) 3 SCR 858] which
was followed by this Court in Mula v. Godhu [(1969) 2 SCC 653
: AIR 1971 SC 89 : (1970) 2 SCR 129]. We may point out that
B
in Dayawati v. Inderjit [AIR 1966 SC 1423 : (1966) 3 SCR 275
: (1966) 2 SCJ 784] this Court observed:
“If the new law speaks in language, which, expressly or by
clear intendment, takes in even pending matters, the Court of
trial as well as the Court of appeal must have regard to an
intention so expressed, and the Court of appeal may give effect C
to such a law even after the judgment of the Court of first
instance.”
Reference may also be made to the decision of this Court
in Amarjit Kaur v. Pritam Singh [(1974) 2 SCC 363 : AIR 1974
SC 2068 : (1975) 1 SCR 605] where effect was given to a change D
in the law during the pendency of an appeal, relying on the
proposition formulated as long ago as Kristnama
Chariar v. Mangammal [ILR (1902) 26 Mad 91 (FB)] by
Bhashyam Ayyangar, J., that the hearing of an appeal was, under
the processual law of this country, in the nature of a re-hearing of E
the suit. In Amarjit Kaur [(1974) 2 SCC 363 : AIR 1974 SC 2068
: (1975) 1 SCR 605] this Court referred also to Lachmeshwar
Prasad Shukul v. Keshwar Lal Chaudhuri [AIR 1941 FC 5 :
1940 FCR 84 : 191 1C 659] in which the Federal Court had laid
down that once a decree passed by a court had been appealed
against the matter became sub judice again and thereafter the F
appellate court acquired seisin of the whole case, except that for
certain purposes, for example, execution, the decree was regarded
as final and the court below retained jurisdiction.”
26. However, Shri Giri referred to the judgment in Keshavan
Madhava Menon v. State of Bombay, 1951 SCR 228 in order to G
buttress the proposition that a repealing Act cannot be retrospectively
applied so as to destroy a fundamental right. For this purpose, he relied
upon Mahajan J.’s concurring judgment at pp. 249-250. This judgment is
wholly distinguishable given the fact that there is no fundamental right
involved of the defendants in the present case and the fact that no vested
H
710 SUPREME COURT REPORTS [2020] 13 S.C.R.
A right of the defendants has been affected by the Repeal Act. Equally,
the judgment in John Lemm v. Thomas Alexander Mitchell, [1912]
A.C. 400 correctly lays down the principle stated by Tindal, C.J. in Kay
v. Goodwin, 130 E.R. 1403 [1830] as follows:
“I take the effect of repealing a statute to be to obliterate it as
B completely from the records of the Parliament as if it had never
been passed; and it must be considered as a law that never existed,
except for the purpose of those actions which were commenced,
prosecuted, and concluded whilst it was an existing law.”
(at p. 406)
C In that case, since it was held on facts that persons had vested
rights acquired by them in actions duly determined under the repealed
law, these could not be affected. This is wholly distinguishable from the
fact situation in the present case.
27. This being the case, on the date on which the appellate decree
D was passed, in any case, the Tamil Nadu Urban Land Ceiling Act having
been repealed would not stand in the way of a decree for specific
performance. It must be remembered that there is no vested right under
the Tamil Nadu Urban Land Ceiling Act in favour of the respondents.
Any right, if at all, is in favour of the State Government, which, like
E Pontius Pilate, has washed its hands off this matter by a report submitted
to this Court on 17.08.2015.
28. The Division Bench judgment is also wholly incorrect in stating
that for no fault of the appellant, since the court process has taken 27
years to decide the specific performance suit, specific performance being
F a discretionary relief ought not to be granted. Section 20 of the Specific
Relief Act, 1963, prior to its substitution by the Specific Relief
(Amendment) Act, 2018, read as follows:
“20. Discretion as to decreeing specific performance.—(1)
The jurisdiction to decree specific performance is discretionary,
and the court is not bound to grant such relief merely because it is
G
lawful to do so; but the discretion of the court is not arbitrary but
sound and reasonable, guided by judicial principles and capable of
correction by a court of appeal.
(2) The following are cases in which the court may properly
exercise discretion not to decree specific performance—
H
FERRODOUS ESTATES (PVT.) LTD. v. 711
P. GOPIRATHNAM (DEAD) [R.F. NARIMAN, J.]
(a) where the terms of the contract or the conduct of the parties A
at the time of entering into the contract or the other
circumstances under which the contract was entered into are
such that the contract, though not voidable, gives the plaintiff
an unfair advantage over the defendant; or
(b) where the performance of the contract would involve some B
hardship on the defendant which he did not foresee, whereas
its non-performance would involve no such hardship on the
plaintiff; or
(c) where the defendant entered into the contract under
circumstances which though not rendering the contract voidable, C
makes it inequitable to enforce specific performance.
Explanation I.—Mere inadequacy of consideration, or the mere
fact that the contract is onerous to the defendant or improvident
in its nature, shall not be deemed to constitute an unfair advantage
within the meaning of clause (a) or hardship within the meaning D
of clause (b).
Explanation II.—The question whether the performance of a
contract would involve hardship on the defendant within the
meaning of clause (b) shall, except in cases where the hardship
has resulted from any act of the plaintiff, subsequent to the E
contract, be determined with reference to the circumstances
existing at the time of the contract.
(3) The court may properly exercise discretion to decree specific
performance in any case where the plaintiff has done substantial
acts or suffered losses in consequence of a contract capable of F
specific performance.
(4) The court shall not refuse to any party specific performance
of a contract merely on the ground that the contract is not
enforceable at the instance of the other party.”
Section 20, as it then stood, makes it clear that the jurisdiction to G
decree specific performance is discretionary; but that this discretion is
not arbitrary but has to be exercised soundly and reasonably, guided by
judicial principles, and capable of correction by a court of appeal – see
section 20(1). Section 20(2) speaks of cases in which the court may
properly exercise discretion not to decree specific performance. H
712 SUPREME COURT REPORTS [2020] 13 S.C.R.
A Significantly, under clause (a) of sub-section (2), what is to be seen is
the terms of the contract or the conduct of the parties at the time of
entering into the contract. Even “other circumstances under which the
contract was entered into” refers only to circumstances that prevailed
at the time of entering into the contract. It is only then that this exception
kicks in – and this is when the plaintiff gets an unfair advantage over the
B
defendant. Equally, under clause (b) of sub-section (2), the hardship
involved is again at the time of entering into the contract which is clear
from the expression “which he did not foresee”. This is made clear
beyond doubt by Explanation II of section 20 which states that the only
exception to the hardship principle contained in clause (b) of sub-section
C (2) is where hardship results from an act of the plaintiff subsequent to
the contract. In this case also, the act cannot be an act of a third party or
of the court – the act must only be the act of the plaintiff. Clause (c) of
sub-section (2) again refers to the defendant entering into the contract
under circumstances which makes it inequitable to enforce specific
performance. Here again, the point of time at which this is to be judged
D
is the time of entering into the contract.
29. Given section 20, the courts have uniformly held that the
mere escalation of land prices after the date of the filing of the suit
cannot be the sole ground to deny specific performance. Thus, in Nirmala
Anand v. Advent Corporation (P) Ltd., (2002) 8 SCC 146, a three-
E Judge bench of this Court held:
“3. The appeal was heard by a two-Judge Bench. The learned
Judges have concurred that the appellant is entitled to specific
performance of the agreement dated 8-9-1966. There has,
however, been difference of opinion between learned Judges on
F the condition in respect of additional amount that may be paid by
the appellant to Respondents 1 and 2 and, therefore, the matter
has been placed before this three-Judge Bench. The opinions of
the learned Judges are reported in Nirmala Anand v. Advent
Corpn. (P) Ltd. [(2002) 5 SCC 481] In the opinion expressed by
G Brother Justice Doraiswamy Raju, the appellant has been directed
to pay a sum of Rs 40,00,000 in addition to the sum already paid to
Respondents 1 and 2 and in the view of Brother Justice Ashok
Bhan, it would be unfair to impose the condition of payment of Rs
40,00,000 and the appellant is entitled to specific performance of
agreement to sell on the price mentioned in the agreement.”
H
FERRODOUS ESTATES (PVT.) LTD. v. 713
P. GOPIRATHNAM (DEAD) [R.F. NARIMAN, J.]
xxx xxx xxx A
“5. The appellant is prepared and willing to take possession of the
incomplete flat without claiming any reduction in the purchase
price and would not hold Respondents 1 and 2 responsible for
anything incomplete in the building. It has been concurrently held
that she did not commit breach of the agreement to sell. She has B
always been ready and willing to perform her part of the
agreement. The appellant is ready and willing to pay to
Respondents 1 and 2 interest on the sum of Rs 25,000. The breach
was committed by Respondents 1 and 2 as noticed hereinbefore.
It is evident that the appellant is ready to take incomplete flat and
pay further sum as noticed, most likely on account of phenomenal C
increase in the market price of the flat during the pendency of this
litigation for over three decades. We see no reason why the
appellant cannot be allowed to have, for her alone, the entire benefit
of manifold mega increase of the value of real estate property in
the locality. In our view, it would not be unreasonable and D
inequitable to make the appellant the sole beneficiary of the
escalation of real estate prices and the enhanced value of the flat
in question. There is no reason why the appellant, who is not a
defaulting party, should not be allowed to reap to herself the fruits
of increase in value.
E
6. It is true that grant of decree of specific performance lies in
the discretion of the court and it is also well settled that it is not
always necessary to grant specific performance simply for the
reason that it is legal to do so. It is further well settled that the
court in its discretion can impose any reasonable condition including
payment of an additional amount by one party to the other while F
granting or refusing decree of specific performance. Whether
the purchaser shall be directed to pay an additional amount to the
seller or converse would depend upon the facts and circumstances
of a case. Ordinarily, the plaintiff is not to be denied the relief of
specific performance only on account of the phenomenal increase G
of price during the pendency of litigation. That may be, in a given
case, one of the considerations besides many others to be taken
into consideration for refusing the decree of specific performance.
As a general rule, it cannot be held that ordinarily the plaintiff
cannot be allowed to have, for her alone, the entire benefit of
phenomenal increase of the value of the property during the H
714 SUPREME COURT REPORTS [2020] 13 S.C.R.
A pendency of the litigation. While balancing the equities, one of the
considerations to be kept in view is as to who is the defaulting
party. It is also to be borne in mind whether a party is trying to
take undue advantage over the other as also the hardship that
may be caused to the defendant by directing specific performance.
There may be other circumstances on which parties may not have
B
any control. The totality of the circumstances is required to be
seen.”
xxx xxx xxx
“8. Having regard to the totality of the circumstances, we would
C direct the appellant to pay to Respondents 1 and 2 a sum of Rs
6,25,000 instead of Rs 25,000. The amount of Rs 40,00,000
wherever it appears in the opinion of Justice Doraiswamy Raju,
would be read as Rs 6,25,000. All other conditions will remain.”
In P. D’Souza v. Shondrilo Naidu, (2004) 6 SCC 649, this Court
D held:
“39. It is not a case where the defendant did not foresee the
hardship. It is furthermore not a case that non-performance of
the agreement would not cause any hardship to the plaintiff. The
defendant was the landlord of the plaintiff. He had accepted part-
E payments from the plaintiff from time to time without any demur
whatsoever. He redeemed the mortgage only upon receipt of
requisite payment from the plaintiff. Even in August 1981 i.e. just
two months prior to the institution of suit, he had accepted Rs
20,000 from the plaintiff. It is, therefore, too late for the appellant
now to suggest that having regard to the escalation in price, the
F respondent should be denied the benefit of the decree passed in
his favour. Explanation I appended to Section 20 clearly stipulates
that merely inadequacy of consideration, or the mere fact that the
contract is onerous to the defendant or improvident in its nature
would not constitute an unfair advantage within the meaning of
G sub-section (2) of Section 20.
40. The decision of this Court in Nirmala Anand [(2002) 5 SCC
481] may be considered in the aforementioned context.
41. Raju, J. in the facts and circumstances of the matter obtaining
therein held that it would not only be unreasonable but too
H inequitable for courts to make the appellant the sole beneficiary
FERRODOUS ESTATES (PVT.) LTD. v. 715
P. GOPIRATHNAM (DEAD) [R.F. NARIMAN, J.]
of the escalation of real estate prices and the enhanced value of A
the flat in question, preserved all along by Respondents 1 and 2 by
keeping alive the issues pending with the authorities of the
Government and the municipal body. It was in the facts and
circumstances of the case held: (SCC p. 501, para 23)
“23. … Specific performance being an equitable relief, balance B
of equities have also to be struck taking into account all these
relevant aspects of the matter, including the lapses which
occurred and parties respectively responsible therefor. Before
decreeing specific performance, it is obligatory for courts to
consider whether by doing so any unfair advantage would result
for the plaintiff over the defendant, the extent of hardship that C
may be caused to the defendant and if it would render such
enforcement inequitable, besides taking into (sic consideration)
the totality of circumstances of each case.”
43. Bhan, J., however, while expressing his dissension in part
observed: (SCC pp. 506 & 507, paras 38 & 40) D
“38. It is well settled that in cases of contract for sale of
immovable property the grant of relief of specific performance
is a rule and its refusal an exception based on valid and cogent
grounds. Further, the defendant cannot take advantage of his
own wrong and then plead that decree for specific performance E
would be an unfair advantage to the plaintiff.
***
40. Escalation of price during the period may be a relevant
consideration under certain circumstances for either refusing F
to grant the decree of specific performance or for decreeing
the specific performance with a direction to the plaintiff to pay
an additional amount to the defendant and compensate him. It
would depend on the facts and circumstances of each case.”
44. The learned Judge further observed that delay in performance
G
of the contract due to pendency of proceedings in court cannot by
itself be a ground to refuse relief of specific performance in
absence of any compelling circumstances to take a contrary view.
……
xxx xxx xxx
H
716 SUPREME COURT REPORTS [2020] 13 S.C.R.
A 45. The said decision cannot be said to constitute a binding
precedent to the effect that in all cases where there had been an
escalation of prices, the court should either refuse to pass a decree
on specific performance of contract or direct the plaintiff to pay a
higher sum. No law in absolute terms to that effect has been laid
down by this Court nor is discernible from the aforementioned
B
decision.”
In P.S. Ranakrishna Reddy v. M.K. Bhagyalakshmi, (2007)
10 SCC 231, this Court held:
“19. Submission of Mr Chandrashekhar to the effect that having
C regard to the rise in price of an immovable property in Bangalore,
the Court ought not to have exercised its discretionary jurisdiction
under Section 20 of the Specific Relief Act is stated to be rejected.
We have noticed hereinbefore that the appellant had entered into
an agreement for sale with others also. He had, even after 11-5-
1979, received a sum of Rs 5000 from the respondent. He with a
D view to defeat the lawful claim of Respondent 1 had raised a plea
of having executed a prior agreement for sale in respect of self-
same property in favour of his son-in-law who had never claimed
any right thereunder or filed a suit for specific performance of
contract. The courts below have categorically arrived at a finding
E that the said contention of the appellant was not acceptable. Rise
in the price of an immovable property by itself is not a ground for
refusal to enforce a lawful agreement of sale. (See P.
D’Souza [(2004) 6 SCC 649] and Jai Narain
Parasrampuria [(2006) 7 SCC 756].)”
F In Narinderjit Singh v. North Star Estate Promoters Ltd.,
(2012) 5 SCC 712, this Court held:
“25. We are also inclined to agree with the lower appellate court
that escalation in the price of the land cannot, by itself, be a ground
for denying relief of specific performance. In K. Narendra v.
G Riviera Apartments (P) Ltd. [(1999) 5 SCC 77] this Court
interpreted Section 20 of the Act and laid down the following
propositions: (SCC p. 91, para 29)
“29. Section 20 of the Specific Relief Act, 1963 provides that
the jurisdiction to decree specific performance is discretionary
and the court is not bound to grant such relief merely because
H
it is lawful to do so; the discretion of the court is not arbitrary
FERRODOUS ESTATES (PVT.) LTD. v. 717
P. GOPIRATHNAM (DEAD) [R.F. NARIMAN, J.]
but sound and reasonable, guided by judicial principles and A
capable of correction by a court of appeal. Performance of
the contract involving some hardship on the defendant which
he did not foresee while non-performance involving no such
hardship on the plaintiff, is one of the circumstances in which
the court may properly exercise discretion not to decree specific
B
performance. The doctrine of comparative hardship has been
thus statutorily recognised in India. However, mere inadequacy
of consideration or the mere fact that the contract is onerous
to the defendant or improvident in its nature, shall not
constitute an unfair advantage to the plaintiff over the
defendant or unforeseeable hardship on the defendant.” C
(emphasis in original)
26. In the present case, the appellant had neither pleaded hardship
nor produced any evidence to show that it will be inequitable to
order specific performance of the agreement. Rather, the important
plea taken by the appellant was that the agreement was fictitious D
and fabricated and his father had neither executed the same nor
received the earnest money and, as mentioned above, all the courts
have found this plea to be wholly untenable.
27. In the result, the appeals are dismissed and the following
directions are given: E
(i) Within three months from today the respondent shall pay
Rs 5 crores to the appellant. This direction is being given keeping
in view the statement made by Shri Dushyant Dave, learned
Senior Counsel for the respondent on 3-5-2012 that his client
would be willing to pay Rs 5 crores in all to the appellant as the F
price of the land.
xxx xxx xxx”
In Satya Jain v. Anis Ahmed Rushdie, (2013) 8 SCC 131, this
Court held:
G
“40. 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 H
718 SUPREME COURT REPORTS [2020] 13 S.C.R.
A 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 emphasised
that efflux of time and escalation of price of property, by itself,
B
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. Bhagyalakshmi [(2007) 10 SCC 231] and more
recently in Narinderjit Singh v. North Star Estate Promoters
C Ltd. [(2012) 5 SCC 712 : (2012) 3 SCC (Civ) 379] may be usefully
recapitulated.
41. 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 penalising the plaintiffs for no fault on their part; to
D 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
E 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.
42. Having given our anxious consideration to all the relevant
aspects of the case we are of the view that the ends of justice
F would require this Court to intervene and set aside the findings
and conclusions recorded by the High Court of Delhi in Anis
Ahmed Rushdie v. Bhiku Ram Jain [Anis Ahmed Rushdie v.
Bhiku Ram Jain, RFA (OS) No. 11 of 1984, decided on 31-10-
2011 (Del)] and to decree the suit of the plaintiffs for specific
G 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
H request the learned trial Judge of the High Court of Delhi to
FERRODOUS ESTATES (PVT.) LTD. v. 719
P. GOPIRATHNAM (DEAD) [R.F. NARIMAN, J.]
undertake the said exercise with such expedition as may be possible A
in the prevailing facts and circumstances.”
In K. Prakash v. B.R. Sampath Kumar, (2015) 1 SCC 597, this
Court held:
“18. Subsequent rise in the price will not be treated as a hardship
entailing refusal of the decree for specific performance. Rise in B
price is a normal change of circumstances and, therefore, on that
ground a decree for specific performance cannot be reversed.
19. However, the court may take notice of the fact that there has
been an increase in the price of the property and considering the
other facts and circumstances of the case, this Court while granting C
decree for specific performance can impose such condition which
may to some extent compensate the defendant owner of the
property. This aspect of the matter is considered by a three-Judge
Bench of this Court in Nirmala Anand v. Advent Corpn. (P)
Ltd. [(2002) 8 SCC 146], wherein this Court held: (SCC p. 150, D
para 6)
“6. It is true that grant of decree of specific performance lies
in the discretion of the court and it is also well settled that it is
not always necessary to grant specific performance simply
for the reason that it is legal to do so. It is further well settled E
that the court in its discretion can impose any reasonable
condition including payment of an additional amount by one
party to the other while granting or refusing decree of specific
performance. Whether the purchaser shall be directed to pay
an additional amount to the seller or converse would depend
upon the facts and circumstances of a case. Ordinarily, the F
plaintiff is not to be denied the relief of specific performance
only on account of the phenomenal increase of price during
the pendency of litigation. That may be, in a given case, one of
the considerations besides many others to be taken into
consideration for refusing the decree of specific performance. G
As a general rule, it cannot be held that ordinarily the plaintiff
cannot be allowed to have, for her alone, the entire benefit of
phenomenal increase of the value of the property during the
pendency of the litigation. While balancing the equities, one of
the considerations to be kept in view is as to who is the defaulting
party. It is also to be borne in mind whether a party is trying to H
720 SUPREME COURT REPORTS [2020] 13 S.C.R.
A take undue advantage over the other as also the hardship that
may be caused to the defendant by directing specific
performance. There may be other circumstances on which
parties may not have any control. The totality of the
circumstances is required to be seen.”
B 20. As discussed above the agreement was entered into between
the parties in 2003 for sale of the property for a total consideration
of Rs 16,10,000. Ten years have passed by and now the price of
the property in that area where it situates has increased by not
less than five times. Keeping in mind the factual position we are
of the view that the appellant should pay a total consideration of
C Rs 25 lakhs, being the price for the said property.”
In Zarina Siddiqui v. A. Ramalingam, (2015) 1 SCC 705, this
Court held:
“33. The equitable discretion to grant or not to grant a relief for
D specific performance also depends upon the conduct of the parties.
The necessary ingredient has to be proved and established by the
plaintiff so that discretion would be exercised judiciously in favour
of the plaintiff. At the same time, if the defendant does not come
with clean hands and suppresses material facts and evidence and
misleads the court then such discretion should not be exercised
E by refusing to grant specific performance.”
xxx xxx xxx
“36. As held by this Court time and again, efflux of time and
escalation of price of the property by itself cannot be a valid ground
to deny the relief of specific performance. But the Court in its
F
discretion may impose reasonable conditions including payment
of additional amount to the vendor. It is equally well settled that
the plaintiff is not to be denied specific performance only on account
of phenomenal increase of price during the pendency of litigation.”
xxx xxx xxx
G
“38. … [I]n the facts and circumstances of the case and
considering the phenomenal increase in price during the period
the matter remained pending in different courts, we are of the
considered opinion that the impugned order [A. Ramalingam v. H.
Siddiqui, RFA No. 265 of 1999, decided on 1-3-2012 (KAR)]
H under appeal be set aside but with a condition imposed upon the
FERRODOUS ESTATES (PVT.) LTD. v. 721
P. GOPIRATHNAM (DEAD) [R.F. NARIMAN, J.]
appellant-plaintiff to pay a sum of Rs 15,00,000 (Rupees fifteen A
lakhs) in addition to the amount already paid by the appellant to
the respondent.”
In Ramathal v. Maruthathal, (2018) 18 SCC 303, this Court
held:
“22. The buyer has taken prompt steps to file a suit for specific B
performance as soon as the execution of the sale was stalled by
the seller. From this discussion, it is clear that the buyer has always
been ready and willing to perform his part of the contract at all
stages. Moreover, it is the seller who had always been trying to
wriggle out of the contract. Now the seller cannot take advantage C
of their own wrong and then plead that the grant of decree of
specific performance would be inequitable. Escalation of prices
cannot be a ground for denying the relief of specific performance.
Specific performance is an equitable relief and granting the relief
is the discretion of the court. The discretion has to be exercised
D
by the court judicially and within the settled principles of law.
Absolutely there is no illegality or infirmity in the judgments of the
courts below, which has judicially exercised its discretion and the
High Court ought not to have interfered with the same. ……”
In Sunkara Lakshminarasamma v. Sagi Subba Raju, (2019)
11 SCC 787, this Court held: E
“9. Shri A. Subba Rao, learned counsel for the appellants was
however forceful in his arguments, insofar as the suit for specific
performance is concerned. According to him, the appellants herein
(defendants in the suit for specific performance) would be put to
hardship if the decree for specific performance is confirmed, F
inasmuch as there has been a huge escalation in the price of the
properties since the agreement of sale. Such plea of escalation in
price cannot be accepted in view of the fact that the appellants in
the first instance do not have the right to question the agreement
of sale. As mentioned supra, since Veeraswamy was the absolute G
owner of the properties including the property involved in the suit
for specific performance, he had the right to enter into an
agreement of sale also. This property was bequeathed to
Veeraswamy under Ext. B-4 will by Padmanabhudu. Hence,
Veeraswamy was the sole owner of the property. Consequently,
he had entered into an agreement of sale with Sagi Subba Raju, H
722 SUPREME COURT REPORTS [2020] 13 S.C.R.
A as far back as on 19-9-1974. The suit was filed in the year 1978,
which was later transferred to another court and the same was
re-numbered as OS No. 72 of 1983. Since 1978, this litigation is
being fought by the prospective vendee. The property of about
three-and-a-half acres was agreed to be sold by Veeraswamy in
favour of the prospective vendee in the year 1974 for a sum of Rs
B
51,000. Such price was agreed to between the vendor as well as
the prospective vendee.
10. This Court cannot imagine the value of the property as it stood
in the year 1974 in the said area i.e. at Bhimavaram Village in
Andhra Pradesh. Be that as it may, we find that hardship was
C neither pleaded nor proved by the appellants herein before the
trial court. No issue was raised relating to hardship before the
trial court. A plea which was not urged before the trial court cannot
be allowed to be raised for the first time before the appellate
courts. Moreover, mere escalation of price is no ground for
D interference at this stage (see the judgment of this Court in
Narinderjit Singh v. North Star Estate Promoters Ltd.
[Narinderjit Singh v. North Star Estate Promoters Ltd., (2012)
5 SCC 712 : (2012) 3 SCC (Civ) 379]). Added to it, as mentioned
supra, the appellants do not have the locus standi to question the
judgment of the Division Bench since they are not the owners of
E the property. As a matter of fact, Veeraswamy, the vendor of the
properties, had entered the witness box before the trial court and
supported all his alienations in favour of the defendants. Therefore,
in our considered opinion, the Division Bench has rightly concluded
in favour of Sagi Subba Raju and against the appellants and granted
F the decree for specific performance.”
30. It is settled law that mere delay by itself, without more, cannot
be the sole factor to deny specific performance – See Mademsetty
Satyanarayana v. G. Yelloji Rao, (1965) 2 SCR 221 at pp. 229-230.
Thus, in K.S. Vidyanadam v. Vairavan, (1997) 3 SCC 1, this Court
G made it clear that if property prices have risen dramatically within a
period of two and a half years before filing of the suit for specific
performance, and it is coupled with violation of the agreement by the
plaintiff, specific performance will not be decreed. The Court held:
“10. … In other words, the court should look at all the relevant
circumstances including the time-limit(s) specified in the agreement
H
FERRODOUS ESTATES (PVT.) LTD. v. 723
P. GOPIRATHNAM (DEAD) [R.F. NARIMAN, J.]
and determine whether its discretion to grant specific performance A
should be exercised. Now 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 [It is a well-known
fact that the steep rise in the price of oil following the 1973 Arab-
Israeli war set in inflationary trends all over the world. Particularly
B
affected were countries like who import bulk of their requirement
of oil]. In this case, the suit property is the house property situated
in Madurai, which is one of the major cities of Tamil Nadu. The
suit agreement was in December 1978 and the six months’ period
specified therein for completing the sale expired with 15-6-1979.
The suit notice was issued by the plaintiff only on 11-7-1981, i.e., C
more than two years after the expiry of six months’ period. The
question is what was the plaintiff doing in this interval of more
than two years? … The defendants’ consistent refrain has been
that the prices of house properties in Madurai have been rising
fast, that within the said interval of 2 1/2 years, the prices went up
three times and that only because of the said circumstance has D
the plaintiff (who had earlier abandoned any idea of going forward
with the purchase of the suit property) turned round and demanded
specific performance. Having regard to the above circumstances
and the oral evidence of the parties, we are inclined to accept the
case put forward by Defendants 1 to 3. We reject the story put E
forward by the plaintiff that during the said period of 2 1/2 years,
he has been repeatedly asking the defendants to get the tenant
vacated and execute the sale deed and that they were asking for
time on the ground that tenant was not vacating. The above finding
means that from 15-12-1978 till 11-7-1981, i.e., for a period of
more than 2 1/2 years, the plaintiff was sitting quiet without taking F
any steps to perform his part of the contract under the agreement
though the agreement specified a period of six months within which
he was expected to purchase stamp papers, tender the balance
amount and call upon the defendants to execute the sale deed and
deliver possession of the property. We are inclined to accept the G
defendants’ case that the values of the house property in Madurai
town were rising fast and this must have induced the plaintiff to
wake up after 2 1/2 years and demand specific performance.
11. Shri Sivasubramaniam cited the decision of the Madras High
Court in S.V. Sankaralinga Nadar v. P.T.S. Ratnaswami Nadar H
724 SUPREME COURT REPORTS [2020] 13 S.C.R.
A [AIR 1952 Mad 389 : (1952) 1 MLJ 44] holding that mere rise in
prices is no ground for denying the specific performance. With
great respect, we are unable to agree if the said decision is
understood as saying that the said factor is not at all to be taken
into account while exercising the discretion vested in the court by
law. We cannot be oblivious to the reality — and the reality is
B
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. Take this very case. The plaintiff had
agreed to pay the balance consideration, purchase the stamp papers
and ask for the execution of sale deed and delivery of possession
C within six months. He did nothing of the sort. The agreement
expressly provides that if the plaintiff fails in performing his part
of the contract, the defendants are entitled to forfeit the earnest
money of Rs 5000 and that if the defendants fail to perform their
part of the contract, they are liable to pay double the said amount.
Except paying the small amount of Rs 5000 (as against the total
D
consideration of Rs 60,000) the plaintiff did nothing until he issued
the suit notice 2 1/2 years after the agreement. 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
E 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. The learned counsel for the plaintiff says
that when the parties entered into the contract, they knew that
prices are rising; hence, he says, rise in prices cannot be a ground
for denying specific performance. May be, the parties knew of
F
the said circumstance but they have also specified six months as
the period within which the transaction should be completed. The
said time-limit may not amount to making time the essence of the
contract but it must yet have some meaning. Not for nothing could
such time-limit would have been prescribed. Can it be stated as a
G rule of law or rule of prudence that where time is not made the
essence of the contract, all stipulations of time provided in the
contract have no significance or meaning or that they are as good
as non-existent? All this only means that while exercising its
discretion, the court should also bear in mind that when the parties
prescribe certain time-limit(s) for taking steps by one or the other
H
FERRODOUS ESTATES (PVT.) LTD. v. 725
P. GOPIRATHNAM (DEAD) [R.F. NARIMAN, J.]
party, it must have some significance and that the said time-limit(s) A
cannot be ignored altogether on the ground that time has not been
made the essence of the contract (relating to immovable
properties).”
xxx xxx xxx
“13. In the case before us, it is not mere delay. It is a case of total B
inaction on the part of the plaintiff for 2 1/2 years in clear violation
of the terms of agreement which required him to pay the balance,
purchase the stamp papers and then ask for execution of sale
deed within six months. Further, the delay is coupled with substantial
rise in prices — according to the defendants, three times — C
between the date of agreement and the date of suit notice. The
delay has brought about a situation where it would be inequitable
to give the relief of specific performance to the plaintiff.
14. Shri Sivasubramaniam then relied upon the decision in Jiwan
Lal (Dr) v. Brij Mohan Mehra [(1972) 2 SCC 757 : (1973) 2 D
SCR 230] to show that the delay of two years is not a ground to
deny specific performance. But a perusal of the judgment shows
that there were good reasons for the plaintiff to wait in that case
because of the pendency of an appeal against the order of
requisition of the suit property. We may reiterate that the true
principle is the one stated by the Constitution Bench in Chand E
Rani [(1993) 1 SCC 519]. Even where time is not of the essence
of the contract, the plaintiffs must perform his part of the contract
within a reasonable time and reasonable time should be determined
by looking at all the surrounding circumstances including the
express terms of the contract and the nature of the property.” F
Likewise, this Court, in Saradamani Kandappan v. S.
Rajalakshmi, (2011) 12 SCC 18, made it clear that given the steep rise
in urban land prices, it may not be correct now to say that time is not of
essence in performance of a contract of sale of immovable property.
Thus, where time can be said to be of the essence in the facts of a given G
case, and the purchaser does not take steps to complete the sale within
the stipulated period and the vendor is not responsible for any delay, the
steep rise in price within the stipulated time would be a circumstance
which would make it inequitable to grant the relief of specific
performance. This Court held:
H
726 SUPREME COURT REPORTS [2020] 13 S.C.R.
A “36. The principle that time is not of the essence of contracts
relating to immovable properties took shape in an era when market
values 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
B
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
C 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
D 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 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
E 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.
37. The reality arising from this economic change cannot continue
to be ignored in deciding cases relating to specific performance.
F 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
G 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
H is unsound or erroneous, but the circumstances that existed when
the said principle was evolved, no longer exist. In these days of
FERRODOUS ESTATES (PVT.) LTD. v. 727
P. GOPIRATHNAM (DEAD) [R.F. NARIMAN, J.]
galloping increases in prices of immovable properties, to hold that A
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
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
B
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 rupees one lakh and received rupees
ten thousand as advance may be required to execute a sale deed
a quarter century later by receiving the remaining rupees ninety
thousand, when the property value has risen to a crore of rupees. C
xxx xxx xxx
41. 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 v. Vairavan
[(1997) 3 SCC 1] (by Jeevan Reddy, J. who incidentally was a D
member of the Constitution Bench in Chand Rani [(1993) 1 SCC
519] ). This Court observed: (SCC pp. 7 & 9, paras 10-11)
“10. 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 E
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. …
11. … We cannot be oblivious to the reality—and the reality F
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 G
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 in original) H
728 SUPREME COURT REPORTS [2020] 13 S.C.R.
A 42. 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
B
in this case, nor referring the matter to a larger Bench as we have
held on facts in this case that time is the essence of the contract,
even with reference to the principles in Chand Rani [(1993) 1
SCC 519] and other cases. Be that as it may.
43. Till the issue is considered in an appropriate case, we can
C only reiterate what has been suggested in K.S.
Vidyanadam [(1997) 3 SCC 1]:
(i) The 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
D of the transaction, that must have some significance and
therefore time/period prescribed cannot be ignored.
(ii) The courts will apply greater scrutiny and strictness when
considering whether the purchaser was “ready and willing” to
perform his part of the contract.
E
(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. The courts
will also “frown” upon suits which are not filed immediately
after the breach/refusal. The fact that limitation is three years
F does not mean that 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 the 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-
G performance, where equity shifts in favour of the purchaser.”
In Nanjappan v. Ramasamy, (2015) 14 SCC 341, the suit for
specific performance was filed many years after the agreement dated
30.09.1987, which agreement was extended by three years twice and
thereafter, by another two years. It was only after these extensions and
exchange of legal notices between the parties that the respondents filed
H
FERRODOUS ESTATES (PVT.) LTD. v. 729
P. GOPIRATHNAM (DEAD) [R.F. NARIMAN, J.]
a suit for specific performance. It was in this factual background that A
the Court held:
“10. In a suit for specific performance, the plaintiff has to aver
and prove with satisfactory evidence that he was always ready
and willing to perform his part of contract at all material time as
mandatorily required under Section 16(c) of the Specific Relief B
Act, 1963. The first appellate court and the High Court recorded
findings that the plaintiff was always ready and willing to perform
his part of the contract. By a careful reading of the recitals in the
agreement, the concurrent findings so recorded do not seem to
reflect the conduct of the parties. As per recitals in Ext. P-1
agreement dated 30-9-1987, an amount of Rs 25,000 was paid by C
the respondent-plaintiffs to the appellant-defendant. Balance
amount of Rs 20,000 was to be paid within 2½ years thereafter
and get the sale executed. In the second agreement of sale (Ext.
P-2 dated 21-3-1990) it is stated that the plaintiffs were unable to
pay the balance amount within the stipulated period and get the D
sale deed executed and therefore the second sale agreement was
executed extending the period for execution of sale deed for a
further period of three years. As could be seen from the recitals
from Ext. P-2, the respondents were unable to pay the balance
sale consideration and get the sale deed executed. It is pertinent
to note that the time for performance of contract was extended E
again and again totalling period of eight years. Even though the
first appellate court and the High Court recorded findings that the
respondent-plaintiffs were ready and willing to perform their part
of contract, the fact that time was extended for eight years is to
be kept in view while considering the question whether discretion F
is to be exercised in favour of the respondent-plaintiffs.”
xxx xxx xxx
“13. The first sale agreement was executed on 30-9-1987 about
twenty-seven years ago. The property is situated in Coimbatore
City and over these years, value of property in Coimbatore City G
would have considerably increased. In Saradamani
Kandappan v. S. Rajalakshmi [(2011) 12 SCC 18 : (2012) 2 SCC
(Civ) 104] , this Court has held that the value of the property
escalates in the urban areas very fast and it would not be equitable
to grant specific performance after a lapse of long period of time. H
730 SUPREME COURT REPORTS [2020] 13 S.C.R.
A In the instant case, the first agreement was executed on 30-9-
1987 i.e. twenty-seven years ago. In view of passage of time and
escalation of value of the property, grant of specific relief of
performance would give an unfair advantage to the respondent-
plaintiffs whereas the performance of the contract would involve
great hardship to the appellant-defendant and his family members.
B
14. Considering the totality and the facts and circumstances, in
our view, it is not appropriate to grant discretionary relief of specific
performance to the respondent-plaintiffs for more than one reason.
Admittedly, the suit property is the only property of the appellant-
defendant and the appellant is said to have constructed a house
C
and where he is currently residing with the family. As compared
to the respondents, the appellant will suffer significant hardship if
a decree for specific performance is granted against the appellant.
Considering the circumstances, such as the construction of the
residential house over the suit property, sale consideration, passage
D of time and hardship caused to the appellant, makes it inequitable
to exercise the discretionary relief of specific performance and
the concurrent finding of the first appellate court and the High
Court decreeing the suit for specific performance is to be set
aside.”
E 31. The resultant position in law is that a suit for specific
performance filed within limitation cannot be dismissed on the sole ground
of delay or laches. However, an exception to this rule is where immovable
property is to be sold within a certain period, time being of the essence,
and it is found that owing to some default on the part of the plaintiff, the
sale could not take place within the stipulated time. Once a suit for
F
specific performance has been filed, any delay as a result of the court
process cannot be put against the plaintiff as a matter of law in decreeing
specific performance. However, it is within the discretion of the Court,
regard being had to the facts of each case, as to whether some additional
amount ought or ought not to be paid by the plaintiff once a decree of
G specific performance is passed in its favour, even at the appellate stage.
32. Shri Giri’s fervent appeal that we should not exercise our
discretionary jurisdiction under Article 136, given the fact that Rs.2 crores
plus interest is to be paid almost by way of solatium to the appellant, has
also to be rejected. As has been found earlier in this judgment, the
H defendants were held to have taken up dishonest pleas and also held to
FERRODOUS ESTATES (PVT.) LTD. v. 731
P. GOPIRATHNAM (DEAD) [R.F. NARIMAN, J.]
have been in breach of a solemn agreement in which they were to obtain A
the Urban Land Ceiling permission which, if not obtained, would, under
the agreement itself, not stand in the way of the specific performance of
the agreement between the parties. He who asks for equity must do
equity. Given the conduct of the defendants in this case, as contrasted
with the conduct of the appellant who is ready and willing throughout to
B
perform its part of the bargain, we think this is a fit case in which the
Division Bench judgment should be set aside. As a result, the decree
passed by the Single Judge is restored. Since the appellant itself offered
a sum of Rs.1.25 crores to the Division Bench, it must be made to pay
this amount to the respondents within a period of eight weeks from the
date of this judgment. C
33. The Civil Appeal is allowed in the aforesaid terms with no
order as to costs.
Divya Pandey Appeal allowed
D
E
F
G
H
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