Holding

The Court held that where time is not the essence of a contract for sale of immovable property, the plaintiff must still perform within a reasonable time, and a total inaction of over two years together with a substantial rise in property prices justifies refusal of specific performance.

Summary

The plaintiff K.S. Vidyanadam entered into a sale agreement on 15‑December‑1978 to purchase a house for Rs.60,000, paying only Rs.5,000 as earnest money and agreeing to complete the purchase within six months. He failed to purchase stamp papers, pay the balance or demand execution of the sale deed for more than two and a half years, only issuing a notice on 11‑July‑1981 claiming readiness and willingness to perform. The defendants argued that the plaintiff’s prolonged inaction, coupled with a three‑fold rise in property values, rendered specific performance inequitable, while the plaintiff contended that time was not the essence of the contract and the suit was filed within the three‑year limitation period. The Supreme Court held that even where time is not expressly made the essence, the plaintiff must perform within a reasonable time, and a total inaction of over two years in an urban property with sharp price escalation justifies refusal of specific performance. Consequently, the Court restored the trial court’s decree refusing specific performance and ordered the refund of earnest money. The appeal was allowed, overturning the Madras High Court’s decision.

Issues considered

Whether specific performance can be granted when time is not the essence but the plaintiff has delayed performance beyond a reasonable period.
Whether a prolonged inaction of the plaintiff, coupled with a sharp rise in urban property values, bars specific performance under the Specific Relief Act.
Whether the three‑year limitation period under Article 54 of the Limitation Act suffices to override considerations of delay and equity.
Whether the purchase of the suit property by a third party after the trial decree affects the equities in granting specific performance.

Legislation cited

Indian Contract Act, 1872s. 55
Limitation Act, 1963s. Article 54
Specific Relief Act, 1963s. 10, s. 16(c), s. 20

Subjects

specific performanceagreement of saleimmovable propertytime not essencedelayrise in property valuesdiscretionlimitation periodcontract lawSpecific Relief Act

Judgment

K.S. VIDYANADAM AND ORS. A
"- v.

... VAIRAVAN

FEBRUARY 6, 1997
B
[B.P. JEEVAN REDDY AND S.B. MAJMUDAR, JJ.]

.. Specific Relief Act, 1963: Sections 10, 16(c) and 20.

Agreement of Sale-Immovable property-Specific performance
of-Discretionary power of cowt to grant-Circumstances to be considered in c
exercise of-Readiness and willingness of plaintiff to perfonn his part of the
conttact-lnference against-Agreement specified period of six months within
which pl~int!ff Jas 'to purchase stamp papers, tender balance amount of
consideration and require defendants to execute sale deed-Plaintiff took no
action for 2-112 years after initial payment of a small amount earnest D
J. money-Suit filed within a period of 3 years under Art. 54 of Limitation
Act-Held : Even though time was not the essence of contract, it should be
perfonned within a reasonable time having regard to tenns of contract
prescribing time limit and nature of property-If property was located in an
urban area, continuing sharp rise in price in thereof would be a relevant factor
for the court to decide whether delay on part of plaintiff would dis entitle him E
the relief of specific perfonnance--Total inaction of plaintiff for 2-112 years
was a circumstance which weighed against exercise of discretion for grant of
specific peifonnance of agreement in favour of plaintiff-Contract Act, 1872,
S. 55---Limitation Act, 1963, Art. 54.
... -I F
The appellants-Defendants 1 to 3 and the respondent- plaintiff
entered into an agreement on 15.12.1978 for sale of house and in terms of
the agreement the plaintiff paid a small amount of earnest money. The
agreement stipulated that within a period of six months the plaintiff has
to puchase stamp papers, tender the balance amount and call upon the
defendants to execute the sale deed and deliver possession of the property.
G
It also stipulated that in case of plaintilPs failure in performing his part
of the contract the defendants would be entitled to forfeit the earnest
money and that in case of defendants' failure to perform their part of the
contract, they would be liable to pay double the earnest money. After a
lapse of 2-1/2 years, on 11.7.1981 the plaintiff issued a notice through his H
993
994 SUPREME COURT REPORTS [1997] 1 S.C.R.

A advocate to the defendants stating that he had always been ready and
willing to perform his part of the contract, that he was sufficiently rich and

-
was able to pay the balance amount of consideration as and when required,
that although period of six months was specified in the agreement, time
was not the essence of the contract and that ll.uring 15.12.1978 to 11.7.1981,
B the plaintiff had been requesting the defendants to execute the sale deed
but the defendants had been seeking time representing that the tenant who
was in occupation of the house had not vacated. The plaintiff then stated
that though as per the agreement of sale the defendants were under an
obligation to deliver vacant possession of the premises but because the
tenant had not so far vacated the building, the plaintiff was prepared to
C purchase the building with the tenant. Accordingly, the plaintiff called
upon Defendants 1 to 3 to execute the sale deed on an agreed date. To this
notice Defendants 1 to 3 sent a reply stating that time was the essence of the
contract, that the prices of the property were sharply increasing day-by-day,
that the tenant was their relation who was always willing and ready to vacate
D the property and that it was the plaintiff who was not ready and willing to
complete the transaction and that only when the plaintiff noticed that the
prices in the locality had gone up three times, had he come forward with the
suit notici The defendants stated that the plaintiff never approached them
for anything and that they never made any representation as alleged in the
IJUit notice. The respondent-plaintiff instituted tl1e suit on 23.8.1981
E wherein,' while asking for specific performance of the agreement under
Section 10 of the Specific Relief Act, 1963 he also prayed alternatively for
refund· of the amount paid by him with interest. The trial court rejected
the plaintiff's case which was supported only by oral evidence and also
found that after the suit agreement, the plaintiff had purchased two other
F properties in the years 1979 and 1981 and that he had no ready money to
pay the balance consideration under the suit agreement. After the decree ,
of the trial court the house was sold by Defendants 1 to 3 to Defendant 4
(Appellant 4) on 19.11.1982. However, on the plaintiff's appeal the High
Court reversed the judgment of the trial court. Hence this appeal.

G On behalf of the appellants it was contended that the respondent was
disentitled to specific performance on account of the delay on his part, that
the respondent was not ready and willing to perform his part of the
contract, and that the respondent came forward with a false case that the
appellants had been putting off the execution of the sale deed on the
H ground of existence of the tenant.
(

K.S. VIDYANADAMv. VAIRAVAN 995
On behalf of the respondent it was contended that time was not the A
)- essence of the contract and since the suit had been filed within the period
of limitation prescribed in Article 54 of the Limitation Act, 1963 there was
no reason for not decreeing specific performance, that mere rise in prices
during the period between the date of agreement and the date of suit was
no ground for denying specific performance; that the fourth appellant
B
alone was fighting the litigation, that the fourth appellant had purchased
the suit property after the decree of the trial court which meant that he
had consciously purchased litigation and that, therefore, there were no
r equities in his favour.

Allowing the appeal, this Court c
HELD : 1.1. 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 the essence of the contract
unless specifically provided to that effect. The period of limitation D
ri#-
,.. prescribed by the J,,imitation Act, 1963 for filing a suit is three years. From
these two circumstances, it does not follow that any suit for specific
performance of the agreement (which does not provide specifically that
time is the essence of the contract) should be decreed provided it is filed
within the period of limitation notwithstanding the time limit stipulated
in the agreement.for doing one or the other thing by one or the other party. E
That would amount to saying that the time limit prescribed by the parties
in the agreement have no significance or value and that they mean nothing.
Even where time is not the essence of the contract, the plaintiff must
perform his part of the contract within a reasonable time which should be
. determined by looking at all the surrounding circumstances including the
express terms of the contract and the nature of the property. [1001-D-F]
F

1.2. 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-par-
ticularly after 1973. The Court cannot be oblivious to this reality. It is.not
possible to agree with the decision of the Madi:as High Court in S. V. G
Sankaralinga Nadar's case that the said factor is not at all to be taken into
account while exercising the discretion vested in the court by law. The
_.., rigour of the rule evolved by courts that time is not the essence of tbe
contract in the case of immovable properties-evolved in times when prices
and values were stable and inflation was unknown-requires to be relaxed, H
996 SUPREME COURT REPORTS (1997] 1 S.C.R.
A if not modified, particularly in the case of urban immovable properties. It
is high,time, the courts do so. [1002-B-F]

S. V. Sankaralinga Nadar v. P. T.S. Ratnaswarny Nadar, AIR (1952)
Mad. 389, overruled.

B Chand Rani v. Kamal Rani, [1993] 1 SCC 519, followed.

1.3. The parties knew that prices are rising but it cannot be stated
as a rule of law or rule of prudence that where time is not made 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.
C 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 party, it must have some significance and that the said
time-Iimits(s) cannot be ignored altogether on the ground that time has
not been made the essence of the contract (relating to immovable
D properties), [1004-D-E]
2. In the present case, the case of the defendants is acceptable. In
agreement of sale, there is no reference to the existence of any tenant in
the building. No letter or notice was issued by the plaintiff to the defen-
dants calling upon them to get the tenant vacated and get the sale deed
E executed until he issued the suit notice on 11.7 .1981. From 15. 12.1978
till 11.7.19Sl, i.e., for a period of more than 2-1/2 years, the plaintiff was
sitting quiet without taking any steps to perform his part of the contract
under the agreement. It is thus not a case of mere delay. It is a case of
total inaction on the 11art of the plaintiff for 2-1/2 years in clear violation
F of the term of agreement which required him to pay the balance, pur-
chase the stamp papers and then ask for execution for sale d.eed within
six months. Further, the delay is coupled with substantial rise in prices
- according to the defendants, three times - between the date of agree-
ment 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
G the plaintiff. [1002-H, 1003-D, 1005-F-G]
. ,. :; . t,.,::.._c !
Satyanarayana v. Yellagi Rao, [1965] 2 SCR 221 and Dr. Jiwan Lal &
Ors. v. Brij Mohan & Anr., [1973] 2 SCR 230, held inapplicable.

3. It is not possible to accept the contention that Defendant 4
H (Appellant 4) to whom the house was sold by Defendants 1 to 3 on
KS. VIDYANADAMv. VAIRAVAN[B.P.JEEVANREDDY.J.] 997

19.11.1982 and who alone was contesting the litigation that he had pur- A
>· chased the property after the decree of the trial court which meant that he
had consciously purchased litigation and that, therefore, there were no
equities in his favour. [1006-C]

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 7467 of
~ B
From the Judgment and Order dated 21.2.95 of the Madras High
t Court in AS. No.198 of 1984.

J. Ramamurthy, (K.K. Mani) N.P., S. Nand Kumar and L.K. Pandey
for the Appellants no. 1-4. c
S. Sivasubramaniam and K.V. Vijaykumar for the Respondent.

The Judgment of the Court was delivered by

B.P. JEEVAN REDDY, J.: Defendants 1to4 are the appellants. The D
respondent's suit for specific performance has been decreed in appeal by
the Madras High Court. The Trial Court had denied specific performance
but had directed refund of the earnest money paid by the plaintiff. The
fourth defendant is the purchaser of the suit property from Defendants 1
to 3 after the decree of the Trial Court. He was impleaded as a respondent E
in the appeal.

On 15th December, 1978, an agreement of ·sale was entered into
between defendants 1 to 3 and the plaintiff whereunder they agreed to sell
and purchase the suit house for a consideration of Rs. 60,000. The relevant
-> recitals of the agreement read as follows : F
"...... has been agreed to be sold by the first party in favour of the
second party for the sale consideration of Rs. 60,000 (Rupees Sixty
thousand only) within a period of six months from this date and
in this regard from and out of the aforesaid sale amount a portion G
of the same being Rs. 5,000 has been obtained this day as advance
amount with interest, by the first party from the second party.
Further it had been stipulated that within the aforesaid period of
six months the second party should purchase the stamp papers at
his own expense and after adjusting the aforesaid advance amount
should pay the balance amount either in person or in the presence H
998 SUPREME COURT REPORTS [1997] 1 S.C.R.
A of the Registrar and the first party should affix his signature and
execute the same in favour of the second party; that further prior
to Registration of the aforesaid sale deed, the first party should
vacate and deliver possession in favour of the second party together
with the keys and if the second party fails to complete the purchase
as aforesaid the advance amount without interest and paid first
B
party should not be demanded to be returned and likewise, if the
second party were to be ready to complete the purchase and the
first party fails to execute the aforesaid sale, the first party will be
liable to pay the aforesaid advance amount of Rs. 5,000 together
with compensation of Rs. 5,000 in all totalling Rs. 10,000 to the
c second party, without resorting to any litigation and with the
aforesaid condition both the parties have wholeheartedly executed
this sale agreement with consent... ...."

On July 11, 1981 i.e., more than 2-1/2 years later, the plaintiff issued
D a notice through his advocate to Defendants 1 to 3 Stating that he has
always been ready and willing to perform his part of the contract, that he
is sufficiently rich and is able to pay the amount of Rs. 50,000 as and when
required. He alleged further,: " (4) Though as per'the agreement of sale,
six months' time had been stati;:d, as you know time was not agreed as the
essence of the contract. In fact tenant is in .occupation of the property
E agreed to be sold to my client. Whenever my client was approaching one
or other of you, you have been stating that the tenant had not vacated and
was asking for time and that as soon as the tenant vacates you would
execute the sale deed. Days are passing by". The plaintiff then stated that
though as per agreement of sale, the defendants were under an obligation
F to deliver vacant possession but because the tenant has not so far vacated
the building, the plaintiff is prepared to purchase the building with the
tenant. Accordingly, the plaintiff called upon Defendants 1 to 3 to execute
the sale deed on an agreed date.

To this notice, Defendants 1 to 3 sent a reply stating that time was
G the essence of the contract,, that the prices of the property are sharply
increasing day-by-day, that the tenant is their relation who is always willing
and ready to vacate the property and that it was the plaintiff who was not
ready willing to complete the tran~action. Only when the plaintiff noticed
that the prices .tii the lo~ality have gone up three times, has he come
H forward with the suit notice. The defendants stated that the plaintiff never
KS. VIDYANADAMv. VAIRAVAN[B.P.JEEVANREDDY,J.J 999
approached them for anything and that they never made any representation A
as alleged in the suit notice.

On August 23, 1981, the plaintiff instituted the suit wherein, while
asking for specific performance of the agreement, he also prayed alterna-
tively for refund of the amount paid by him with interest. The dt;fendants
contested the suit. The pleadings of the parties arc in line with the
B
respective case set up in the suit notice and in the reply notice. The Trial
-. Court dismissed the suit for specific performance holding that the plaintiff
was ready but not willing to perform his part of the contract but directed
that the earnest money be refunded to him with interest. The Trial Court
rejected the plaintiffs case, supported only by oral evidence, that during c
the period December 15, 1978 to July 11, 1981, the plaintiff has been
requesting the defendants to execute the sale deed and that the defendants
have been seeking time representing that the tenant had not vacated. The
Trial Court also found that after the suit agreement, the plaintiff has
purchased two other properties, in the years 1979 and 1981, for Rs. 35,000 o,
and Rs. 30,000 respectively and that he had no ready money to pay the
balance consideration under the suit agreement. On plaintiffs appeal,_ a
Division Bench of the High Court reversed the judgment of the Trial Coul:t,
The High Court accepted the plaintiffs case that he has been asking the.
;;.;_ defendants for execution of the sale deed and that the defendants had been
seeking time representing that the tenant has not vacated. The High Court E
affirmed the finding of the Trial Court that time was not the essence of the
contract but reversed the Trial Court's finding with respect to plaintiffs
readiness and willingness to perform his part of the contract.

--· In this appeal, Sri J. Ramamurthy, learned counsel for the defen- F
dants, took us through the oral and documentary evidence on record and
submitted that the plaintiff is disentitled to specific performance on ac-
count of the delay on his part and also because he was not ready and willing
to perform his part of the contract. Counsel submitted that the plaintiff has
in fact come forward with a false case that though he was demanding
repeatedly, the defendants had been putting off the execution of the sale G
deed on the ground of existence of the tenant. On the other hand, Sri
Sivasubramanium, learned counsel for the plaintiff, submitted that once it
is held that time is not the essence of the contract and when the suit has
been filed within the period of limitation prescribed by law, there is no
reason for not decreeing specific performance. He submitted that the H
lOOO SUPREME COURT REPORTS [1997] 1 S.C.R.
A plaintiff is a man of means and is in a position to produce the requisite
amount at any time. Mere rise in prices during the period between the date
of agreement and the date of suit is no ground for denying specific
performance. Counsel submitted that the High Court has rightly exercised
its discretion which should not be interfered with by this Court.

B Section lO of the Specific Relief Act, 1963 says that "(E)xcept as
otherwise provided in this Chapter, the specific performance of any con-
tract may, in the discretion of the court, be enforced- (a) when there exists
no standard for ascertaining the actual damage caused by the non-perfor-
mance of the act agreed to be done; or (b) when the act agreed to be done
C is such that compensation in money for its non-performance would not
afford adequate relief'. Clause (1) of the Explanation appended to the
section says that "unless and until the contrary is proved, the court shall
presume (i) that the breach of a contract to transfer immovable property
cannot be adequately relieved by compensation in money". Sub-section (1)
D of Section 20 says that "the jurisdiction to decree specific performance is
discretionary, and the court is not bound to grant such relief merely
because it is 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". Sub-section (2) sets out the situations in
which the court may refuse specific performance. Sub-section (3) of Sec-
E tion 20 says that "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 specific
performance". Section 21 sets out the circumstances in which the court may
award compensation in lieu of or in addition to specific performance.
F Section 23 says that merely because an agreement mentions a particular
sum payable by the defaulting party to the other, that shall not be a ground
for refusing the specific performance.

Section 55 of the Contract Act is in three parts. For our purposes, it
is enough to notice the first two parts, which reads :
G
· "55. Effect offailure to pe1fonn at fixed time, in contract in which
time is essential. -- When a party to a contract promises to do a
certain thing at or before a specified time, or certain things at or
before specified times, and fails to do any such thing at or before
H the specified time, the contract or so much of as it has not been
K.S. VIDYANADAMv. VAIRAVAN[B.P.JEEVANREDDY,J.] 1001

performed, becomes voidable at the option of the promisee, if the A
> intention of the parties was that time should be of the essence of
the contract.

Effect of such failure when time is not essential. -- If it was not the
intention of the parties that time should be of the essence of the
contract, the contract does not become voidable by the failure to B
do such thing at or before the specified time; but the promisee is
entitled to compensation from the promiser for any loss occasioned
to him by such failure".

Article 54 of the Limitation Act prescribes three years as the period c
within which a suit for specific performance can be filed. The period of
three years is to be calculated from the date specified in the agreement for
performance or in the absence of any such stipulation, within three years
from the date the performance was refused.

_ I It has been consistently held by the courts in India, following certain D
early English decisions, that in the case of agreement of sale relating to
immovable property, time is not of the essence of the contract unless
.
l
specifically provided to that effect. The period of limitation prescribed by
the Limitation Act for filing a suit is three years. From these two cir-
cumstances, it does not follow that any and every suit for specific perfor- E
mance of the agreement (which does not provide specifically that time is
of the essence of the contract) should be decreed provided it is filed within
the period of limitation notwithstanding the time limits stipulated in the
agreement for doing one or the other thing by one or the other party. That
would amount to saying that the time-limits prescribed by the parties in the p
agreement have no significance or value and that they mean nothing.
Would it be reasonable to say that because time is not made the essence
of the contract, the time-limit(s) specified in the agreement have no
relevance and can be ignored with impunity? It would also mean denying
the discretion vested in the court by both Sections 10 and 20. As held by
a Constitution Bench of this court in Chand Rani v. Kamal Rani, [1993] 1 G
S.C.C. 519, "it is clear that in the case of sale of immovable property there
is no presumption as to time being the essence of the contract. Even if it
is not of the essence of the contract, the court may infer that it is to be
performed in a reasonable time if the conditions are (evident)? : (1) from
the express terms of the contract; (2) from the nature of the property; and H
1002 SUPREME COURT REPORTS [1997] 1 S.C.R.
A (3) from the surrounding circumstances, for example, the object of making
· the contract". It other words, the court should look at all the relevant
circumstances including the time-limit(s) specified in the agreement and
determine whether its discretion to grant specific performance should be
B 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*. In this case, the suit property is the hous9 property
situated in Madurai, which is one of the major cities of Tamil. Nadu. The
C suit agreement was in December 1978 and the six months' period specified
therein for completing the sale expired with 15th of June, 1979. The suit
notice was issued by the plaintiff only on 11.7.1981, i.e., more than two years
after the expiry of six months, period. The question is what was the plaintiff
D doing in this interval of more than two years? The plaintiff says that he has
been calling upon Defendants 1 to 3 to get the tenant vacated and execute
the sale deed and that the defendants were postponing the same repre-
senting that the tenant is not vacating the building. The defendants have
E denied this story. According to them, the plaintiff never moved in the
matter and never called upon them to execute the sale deed. The Trial
Court has accepted the defendants' story whereas the High Court has
• accepted the plaintiff's story. Let us first consider whose story is more
F probable and acceptable. For this purpose. we may first turn to the terms
of the agreement.· In the agreement of sale, there is no reference to the
existence of any tenant in the building. What it stays is that within the
period of six months, the plaintiff should purchase the stamp papers and
G pay the balance consideration whereupon the defendants will execute the
sale deed and that prior to the registration of the sale deed, the defendants
shall vacate and deliver possession of the suit house to the plaintiff. There
is not a single letter or notice from the plaintiff to the defendants calling
..( ""
H upon them to get the tenant vacated and get the sale deed executed until
he issued the suit notice on 11.7.1981. It is not the plaintiffs case that within
six months', he purchased the stamp papers and offered to pay balance
consideration. Defendants' case is that the tenant is their own relation, that
he is ready to vacate at any point of time and that the very fact that the
plaintiff has in his suit notice offered to purchase the house with the tenant
itself shows that the story put forward by him is false. The tenant has been

It is a well-known fact that the steep rise in the price of oil following the 1973
Arab-Israeli war set in inflationeiy trends all over the world. Particularly affected were
countries like who import bulk of their requirement of oil.
K.S. VIDYANADAMv. VAIRAVAN[B.P.JEEVANREDDY,J.] 1003
l
examined by the defendant as DW-2. He stated that soon after the agree- A
ment, he was searching for a house but could not secure one. Meanwhile
(i.e., on the expiry of six months from the date of agreement), he stated,
the defendants told him that since the plaintiff has abandoned the agree-
ment, he need not vacate. It is equally an admitted fact that between
December 15, 1978 and July 11, 1981, the plaintiff has purchased two other B
properties. The defendants' cpnsistent 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 by three times and that only
because of the said· circumstances has the plaintiff (who had earlier aban-
doned any idea of going forward with the purchase of the suit property)
turned round and demanded specific performa~ce. Havii'ig regard to the c
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 forward by .the plaintiff that during the- said period of 2-112 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 D
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 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 E
the balance amount and call upon the defendants to execute the sale deed
1-i and deliver possession of the property. We are inclined to accept the
: defendant's case that the values of tht; house property in Madurai town
was rising fast and this must have induced the plaintiff to wake up after
2-1/2 years and demand specific· performance.
F
Sri Sivasubramanium cited the de~ision of the Madras High Court in
S. V. Sankaraninga Nadar v. P. T.S. Ratnaswamy Nadar, AI.R. (1952) Mad.
389 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 G
into account while exercising the discretion vested in the court by law. We
cannot be oblivious to the reality - and the reality is constant and con-
tinuous rise in the value of urban properties - fuelled by larger-scale
migrating of people from rural areas to urban centres and by inflation.
Take this very case. The plaintiff had agreed to pay the balance considera-
tion, purchase the stamp papers and ask for the execution of sale deed and H
I

)-
1004 SUPREME COURT REPORTS [1997] 1 S.C.R.

A delivery' of possession 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. 5,000 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. 5,000 (as against the total consideration of Rs. 60, 000)
B the plaintiff did nothing until he issued the suit notice 2-1/2 years after the
agreement. Indeed, we are indined to think that the rigor of the rule
evolved by courts that time is not of the essence of the contract in the case ~ \
of immovable properties - evolved in times when prices and values were
stable and inflation was unknown - requires to be relaxed, if not modified,
c particularly in the case of urban immovable properties. It is high time, we
do so. 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 the said circumstance but they have also specified six
months as the period within which the transaction should be completed. I
D 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 rule of law or
rule of prudence that where time is not made the essence of the confract,
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
E while exercising its discretion, the court should also bear in mind that when r
the parties prescribe certain time-limit(s) for taking steps by one or the
other party, it must have some significance and that the said time-limit(s)
't
cannot be ignored altogether on the ground that time has not been made
the essence of the contract (relating to inunovable properties).
~

F
Sri Sivasubramanium relied upon the decision of this Court in
Satya11arayana v. Yellogi Rao, [1965) 2 S.C.R. 221, wherein it has been
held: ..
'
"As Art. 113 of the Limitation Act prescribes a period of 3 years
G from the date fixed thereunder for specific performance of a
contract, if follows that mere delay without more extending up to
,...._
the ~aid period cannot possibly be a reason for a court to exercise
its discretion against giving a relief of specific performance. Nor
can the scope of the discretion, after excluding the cases mentioned ~
H ins. 22 of the Specific Relief Act, be confined to waiver, abandon-
KS. VIDYANADAMv. VAIRAVAN(B.P.JEEVA."IREDDY,J.] 1005
ment or estoppel. If one of these three circumstances is established, A
no question of discretion arises, for either there will be no subsist-
ing right or there will be a bar against the assertion. So, there must
be some discretionary field unoccupied by the three cases, otherwise
the substantive section becomes otiose. It is really difficult to define
that field. Diverse situation may arise which may induce a court not B
to exercise the discretion in favour of the plaintiff. It may better be
left undefined except to state what the section says, namely, dis-
cretion of the court is not arbitrary, but sound and reasonably
guided by judicial principles and capable of correction by a court
of appeal.
c
(Emphasis supplied)

Subba Rao, J., speaking for the Bench, pointed out the distinction between
Indian Law and the English.Law on the subject and stated the conclusion
in the following words : "While in England, mere delay or laches may pe a
ground for refusing to give a relief of specific performance, in India mere D
delay without such eonduct on the part of the plaintiff as would cause
prejudice t~'.the defendant does not empower a court to refuse such a
relief...... It is not possible or desirable to lay down the circumstances under
which a court can exercise its discretion against the plaintiff. But they must
be such that the representation by or the conduct or neglect of the plaintiff E
is directly responsible in inducing th~ .defendants to change his position to
his prejudice or such as cto bring· about a situation when it would be
inequitable to give him such a relief."

In the case before us, it is not mere delay. It is a case of total inaction
on the part of the plaintiff for 2-1)2 years in clear, violation of the term of F
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 - between the date of agreement and the date of
• suit notice. The delay has brought about a situation where it would be G
inequitable to give the relief of specific" performance to the plaintiff.

Sri Sivasubramanium then relied upon the del'.ision in Dr. Jiwan Lal
& Ors. v. Brij Mohan Mehra & Anr., [1973) 2 S.C.R. 230 to show that the
delay of two years is not a ground to deny specific performance. But a
perusal of the judgment shows there were good reasons for the plaintiff to H
->-
1006 SUPREME COURT REPORTS (1997) 1 S.C.R.

A 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 Rani. 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
B the express terms of the contract and the nature of the property.

Sri Sivasubramanium submitted that as on today, fourth appellant
alone is fighting the litigation, that he has purchased the property after the
decree of the Trial Court which means that he has consciously purchased
c litigation and that, therefore, there are no equities in his favour. Counsel
submitted that as between the plaintiff and the fourth defendant, equities
are in favour of the plaintiff. We are not impressed. The plaintiff has paid
only a sum of Rs. 5,000 in December, 1978 as against the consideration of
Rs. 60,000. The Trial Court dismissed the suit for specific performance on
4.9.1982, while decreeing the refund of their earnest money. Defendant No.
I> 4 purchased the suit house on November 19, 1982 for a comideration of
Rs. 90,000. May be, he knew he was purchasing litigation and probably'it '"""
was for that reason that he may not have paid the full amount of the value.
In any event, we cannot ignore the fact that Defendants 1 to 3 are also
appellants before us. We are also not prepared to say that as between
E plaintiff and the fourth defendant, the equities are in favour of the plaintiff
alone.

In the above circumstances, we allow the appeal, set aside the decree
of the High Court and restore the decree of the Trial Court inasmuch as
Defendants 1 to 3 did not choose to file an appeal against that decree.
F There shall he no order as to costs.
_,
"
v.s.s .. Appeal allowed.