Holding

The Supreme Court held that the plaintiff was not entitled to equitable relief under Sections 27 or 31 of the Specific Relief Act and set aside the High Court’s decree.

Summary

The plaintiff, Jaipur Traders Corp. Pvt. Ltd., executed a sale deed for an oil mill and received an initial payment, but the balance consideration was withheld pending income‑tax clearance. The parties entered into a written settlement with a director that deferred the balance payment until all formalities were completed. The plaintiff later claimed the contract was rescinded due to the defendants' alleged breach and sought cancellation of the deed and possession under Sections 27 and 31 of the Specific Relief Act. The trial court held that the contract was not rescindable, the title had passed, and the plaintiff was not entitled to equitable relief; the High Court reversed this decision. The Supreme Court set aside the High Court, affirmed the trial court’s findings, held that the plaintiff’s conduct (withholding the tax clearance, delay, and unclean hands) barred equitable relief, and dismissed the suit, modifying the decree to include a payment of Rs 40 lakhs by the defendants.

Issues considered

Whether Sections 27 and 31 of the Specific Relief Act, 1963 are applicable for cancellation of the sale deed.
Whether the contract of sale could be rescinded by the plaintiff before registration despite a clause conditioning title on full payment.
Whether title passed to the purchaser upon registration or earlier, and the relevance of Section 47 of the Registration Act, 1908.
Whether the plaintiff is barred by laches or the doctrine of unclean hands due to the delay and conduct.
Whether the settlement agreement with the director was binding on the plaintiff company.

Legislation cited

Subjects

Specific Relief ActRescission of contractSale deedRegistrationEquitable reliefLachesUnclean handsContract lawProperty lawIncome tax clearance

Judgment

-~-
•
LAUT KUMAR JAIN AND ANR.
v.
A .
JAIPUR TRADERS CORPORATION PVT. LTD.

APRIL 24, 2002

[R.P. SETHI AND P. VENKATARAMA REDD!, JJ.] B

> - Specific Relief Act, 1963-Sections 27 and 31-Equitable Relief-
Entitlement of-On facts, vendor filing suit for cancellation of sale document
and physical possession of property on the ground that vendee committed
breach of contract of sale and the contract stood rescinded-Trial court
c
dismissing the suit-However, High Court decreed the suit-On appeal, held,
since on facts of the case and conduct of the vendor, recession of contract by
vendor not justified, he is not entitled to equitable relief-Order ofHigh Court
set aside.
D
Respondent-company executed sale deed in favour of appellants. Part
of the consideration was paid before the Sub-Registrar at the time of
registration of sale deed and the balance amount was to be paid in two
instalments. However, before the registration, the Income Tax Certificate
(ITq was cancelled and registration of the property was stopped till fresh
certificate was issued by the Income Tax Officer (ITO). Later on, the Officer E
restored the certificate. Respondent issued several notices to the appellants
for payment of balance sale price. Appellants averred that one of the Directors
of the respondent-Company agreed not to demand the balance price unless
the fresh clearance certificate was obtained and also a settlement was arrived
at and sum of Rs. 5,000 was paid to the said Director. Respondent in the final
F
notice stated that the Director had no authority to give any assurance or make
any commitment of behalf of the respondent-Company without any resolution
of the Board of Directors. Appellant then averred that the respondent was
legally bound to complete the formalities pertaining to registration and to
deliver the sale deed before they could ask for the balance sale money.
Thereafter, Sub-Registrar issued notice to the respondent for furnishing ITC G
for registrar of the sale deed. Respondent requested the Sub-Registrar to
,. return document without registration, as the sale deed was no longer effective.
Sub-Registrar refused to register the document, as ITC was not produced.
r But the District Registrar directed the Sub-Registrar to register the sale deed.
Income Tax Officer also sent the copy of the clearance certificate to the Sub-
445 H
446 SUPREME COURT REPORTS [2002) 3 S.C.R.

A Registrar and formalities of registration of sale deed were completed.
Meanwhile, respondent filed suit under Section 31/27 of the Specific
Relief Act for cancellation of sale deed. Trial Court held that the appellants
did not commit breach of contract in not paying the balance price before the
registration of sale deed and the respondent had no right to rescind the
B contract and also that the contract was neither voidable nor terminable by
the respondent and, therefore, section 27 or 31 of the Specific Relief Act was
not attracted. Respondent then filed appeal before the High Court, which was
allowed. .....

C In appeal before this Court appellants contended that the requirements
of section 31 or 27 are not attracted and that rescinding of executed contract
on account of non-payment of balance sale consideration does not arise as
the title passed to the appellants with the registration of document and delivery
of possession since though the formalities of registration were completed four
years later, the registration must be deemed to have relat.ed back to the date
D the sale deed was executed.

Respondent contended that there was no general rule that mere
registration of the document without reference to other circumstances would
operate to transfer the title. The clause in the sale deed prohibited transfer
or assignment by the vendor till the balance money was paid; that the
E respondent was well justified in rescinding the contract before the actual
registration of the document and the theory of dating registration to the date
of sale .cannot be invoked by the appellants.

Allowing the appeal, the Court
F HELD: 1. High Court failed to address itself to certain factors which
disentitles the respondent to equitable relief before reversing the order of Trial
Court. If the alleged recession or termination of contract is not justifiable on
facts or having regard to the conduct of the respondent, the equitable relief
under section 27 or 31 of the Specific Relief Act, 1963 has to be denied to the
G respondent. (455-C, D-E]

2.1. The respondent cannot on the one hand withhold the production
ofl.T.C., which was essential for registration, and on the other hand take tl_le
stand that appellants committed breach of contract. [456-C, DJ

H 2.2. High Court did not advert to the agreement or understanding
-- j._

L.K. JAIN i·. JAIPUR TRADERS CORPN. PVT. LTD. 447

arrived at between the Director of the Respondent-Company and the A
appellants by which demand for the payment of balance sale consideration
was deferred till all the formalities are finally completed on the settlement of
dispute. It may be an imprudent act on the part of the Director, going by the
tenor of agreement, but, in the absence of any allegations of collusion or mis-
representation, the Court cannot disregard the agreement embodied in the
letter which was believed by the trial court. The reversal by the High Court B
of the trial court's finding on this aspect is unwarranted and is vitiated by

- ~ non-consideration of the relevant material on record. [458-A-C)

2.3. Unexplained delay of three years in filing the suit after the exchange
of notices in September, 1973 is another factor which disentitles the respondent c
to the equitable relief under Section 27/31 of the Specific Relief Act. [458-D)

3. If the above facts and circumstances are cumulatively considered, the
plaintiff has no legitimate ground to seek equitable remedy. Though the
conduct on the part of the defendants is not above board, the conduct of the
plaint..l, who has sought equitable remedy, should be kept uppermost in the D

.. ~
mind of the Court. The plaintiff seeking equitable remedy cannot approach
the Court with unclean hands or be guilty of laches. Irrespective of the conduct
of the defendants, it must be held that the plaintiff has, for various reasons
disentitled himself to the relief of cancellation of instrument and for recovery
of possession from the defendants, that too after the property was substantially
developed. [458-E, H; 459-A, BJ
E

)On recording a finding that the suit was rightly dismissed by the Trial
Court and setting aside the judgment of High Court, the Court directed
payment of a sum of Rs. 40 lakhs to the respondent in view of the offer made
and undertaking given by the appellants-defendants to that effect.) p
[459-C, F)

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 2957 of

. 1997 .

From the Judgment and Order dated 5.7.96 of the Allahabad High G
Court in F.A. No. 346 of 1980.

Rakesh Diwedi, E.C. Agrawala, Shail Kr. Garg, V ijay Garg and Alok .
Kr. Agarwal for the Appellants.

Sudhir Chandra, Trideep Pais, Achintya Dwivedi and Jayant Bhushan H
~-

448 SUPREME COURT REPORTS [2002] 3 S.C.R.

A for the Respondent.
The Judgment of the Court was delivered by

P. VENKATARAMA REDDI, J. By the impugned judgment, the High
Court at Allahabad allowed the first appeal filed by the respondent-plaintiff,
B decreed the suit and ordered that the plaintiff should be put in physical
possession of the suit.ptoperties and the indenture (sale deed) dated 22.2.1971 ~
should be deemed to be void and cancelled and therefore be delivered up to
'<-
the plaintiff-vendor. A decree was also granted for a sum of Rs. 95,000 being .......
the value of properties wrongfully demolished and sold, after adjustment of
c Rs. 55,000 received by the plaintiff towards the sale consideration. The suit
was ostensibly filed under Section 31 of the Specific Relief Act for cancellation
of indenture dated 22.2.1971 and also for physical possession of the property
in dispute and for recovery of Rs.· 95,000 being the value of property
wrongfully demolished after adjusting an amount of Rs. 55,000. The Trial
Court dismissed the suit. At the same time, it granted a decree in favour of """·-
D the plaintiff for a sum of Rs. l,45,000 representing the balance sale
consideration.
..(

The facts giving rise to the suit and the appeal are these : ~

The plaintiff-Company executed a sale deed on 22.2.1971 in favour of
E the defendants in respect of an oil mill located at Khurja in UP State ·with the
structures, open land, machinery and fixtures, lease-hold rights in the land
1-
etc. for a consideration of Rs. 2 lakhs. A sum of Rs. 50,000 was to be paid
before the Sub-Registrar at the time of registration and it was stipulated in
the sale deed that the balance amount will be paid in two instalments falling
F on 15.3.1971 and 30.4.1971. It was further stipulated that the transferee shall
not be entitled to deal with, sell, transfer or assign the property sold, till such
time as the entire balance sale price of Rs. 1.50 lakhs was paid to the transferor.
A sum of Rs. 50,000 was accordingly paid to the transferor on the date of

G
registration. Possession was admittedly handed over to the defendants. The
respondent-plaintiff produced the income tax clearance certificate on the date
of registration i.e. 22.2.1971. However, before the formalities of registration
.. l

viz., copying out the deed was completed, the Sub-Registrar received a
communication from the Income Tax Officer that the I.T.C. was cancelled
and therefore the Sub-Registrar should stop registration of the property till a
fresh certificatewas issued by him. 'J:herefore, the Sub-Registrar did not take
'""
H further steps in the matter. Moreover, the sale deed was impounded on the
,,.
L.K. JAIN v. JAIPUR TRADERS CORPN. PVT. LTD. [REDD!, J.] 449
4.
· ground of insufficient stamp and it was sent to the District Registrar for A
adjudication. By an order dated 4.1. I 972, the Income Tax Officer revoked
his earlier order and restored the certificate issued by him earlier. On appeal
by plaintiff, the Commissioner of Income Tax directed the Income Tax Officer
to issue a fresh I.T.C. instead of validating the earlier one. On 13.6.1972, a
fresh I. T.C. was issued. The document which was sent for assessment of

- deficient stamp duty was received back by the Sub-Registrar on 3.5.1973. B
When there was a notice from the Sub-Registrar in August 1973 to furnish
- the l.T.C. for the purpose of registration, the plaintiff in its reply dt. 28.8.1973
maintained that the document was no longer effective as the contract stood
rescinded on account of the breach committed by the defendants in declining
payment of balance sale price. Sub-Registrar was requested to return the C
document without registration. The Sub-Registrar, by his order dated
19.9.1973, refused to register the document as ITC was not produced. An
appeal was filed against the said order by the appellants-defendants before
the District Registrar. On 16.10.1973 the appellants also filed a civil suit
impleac•;11g the respondent, Sub-Registrar and also the l.T.O. for a direction
that I.T.C. should be issued and the Sub-Registrar should register the sale D

- )..
deed. On 3.7.1976, the suit out of which the present appeal arises was filed
seeking the relieves as stated above. In that suit, a disclosure was made as to
obtaining the fresh l.T.C. On 24.12.1976, the District Registrar allowed the
appeal and directed the Sub-Registrar to register the sale deed. In view of this
subsequent event, the Income Tax Officer also sent a copy of l.T. clearance E
certificate to the Sub-Registrar. The formalities of registration of sale deed
were then completed on 28.12.1976. The suit filed by the appellants therefore
became infructuous. The appellants amended the plaint in the pre.sent suit
questioning the legality of the order of Dy. Registrar and the consequential·
, action of Sub-Registrar in registering the sale deed. On 27.08.1979, offer was
made to pay the balance consideration by issuing a notice but the respondent F
refused to accept payment taking the stand that the matter was sub-judice.
The suit in question was dismissed on 2.5.1980 subject to the direction as to
the payment of balance of sale money. The money" was deposited in court
thereafter. The first appeal to the High Court filed by the respondent herein
was allowed by the impugned judgment dated 5.7.1996. G
It is now necessary to advert to certain other events that happened
; between the date of presentation of sale deed for registration and the date of
filing of the suit including the exchange of correspondence. On 16.3.1971,
plaintiff issued notice to defendants to pay Rs. 50,000 towards the first
instalment specified in the indenture of sale. The defendants expressed their H
~

~

450 SUPREME COURT REPORTS [2002] 3 S.C.R.
4
A willingness to pay the amount provided that the plaintiff obtained a fresh
ITC. On 12.1.1972, a second notice was issued from the plaintiffs side
informing the defendants that they have illegally withheld the payment due.
under the terms of sale for which they were liable to pay interest and further
protesting against the demolition of portions of building and sheds and
disposing of the building material and machinery. This was replied to by the
B defendants stating that in the absence of valid Income Tax Clearance Certificate
the sale deed could not be delivered after due registration and therefore they ..
were not liable to pay the baiance sale price. Moreover, the defendants referred .,_

c
to the fact that one of the Directors of the plaintiff-Company by name Raj
Kumar Meattle agreed not to demand the balance unless the fresh clearance
certificate was obtained and other formalities connected to the sale were
---
fulfilled. The alleged settlement took place on 17 .1.1972 on which date a
sum of Rs. 5,000 was paid to the said Director. One more fact, which according
to the defendants justified the withholding of payment, was the suit filed by
one Seth Shanti Lal questioning the validity of the sale. In the concluding
para it is stated : "I would request you not to stick to your unreasonable
D demand for the balance money and let the clear picture emerge. I again
assure you that the balance will be paid the moment these formalities are
....
complied". A third notice was issued by the plaintiff on 25.5.1973. By that
.:
time it may be noted that a fresh ITC was issued to the plaintiff and the
document which was impounded for assessment of deficient duty was received
E back in the office of the Sub-Registrar, Khurja. By the notice dated 25.5.1973,
the plaintiff found fault with the defendants in declining payment of balance
money on the ground of cancellation of ITC and alleged that the defendants
committed breach of contract by wrongfully withholding the payment and
also demolishing and dealing with the property quite contrary to the prohibition !
contained in the sale deed. The plaintiff then gave last opportunity 'to make ).
F the. balance sale price together with interest at the rate of one per cent per
month within a period of 15 days upon which the requisite certificate under
Section 230-A of the Income Tax Act will be produced'. The defendants
were further warned that in case of failure to make the pay@ent, the contract
of sale dated 22.2.1971 will stand rescinded and the defendants will be liable
G to restore the possession of all the properties covered by the sale deed and
to compensate the plaintiff for the damage done to the properties. The
defendants sent a reply reiterating that there was a clear agreement on
17.6.1971 arrived at on the intervention of plaintiffs Director Shri Raj Kumar ..
Meattle and the payment of Rs. 5,000 made pursuant to such agreement. The
defendants once again referred to the suit filed by Seth Shanti Lal Jain
H impleading both the plaintiff and the defendants. The defendants also called
JI
L.K. JAIN v. JAIPUR TRADERS CORPN. PVT. LTD. [ P. VENKATARAMA REDD!, J.] 451

upon the plaintiff to bear the amou,nt of Rs. 2,980 on account of extra stamp A
·expenses. In the concluding para it is stated, "I hope you will wait for the
payment till the fonnalities are completed and the suit of Seth Shanti Lal is
decided finally". A month later, i.e. on 3.7.1973, the 4th and final notice
came to be issued by the plaintiff. In that notice it was stated that Shri Raj
·Kumar Meattle had no authority to give any assurance or make any
commitment on behalf of the plaintif~-Company, that too without any resolution B
of the Board of Directors. The plaintiff offered to give credit to the additional
stamp duty said to have been paid by the defendants of Rs. 2,980. The
defendants were then infonned of the dismissal of the suit filed by Shanti Lal
Jain for default Moreover, the plaintiff took the stand that the suit of Shanti
Lal Jain was a frivolous suit and that the pendency of the suit ought not to C
be a ground to withhold the payment. The plaintiff was even willing to waive
the claim for interest and handover the requisite certificate under Section
230-A of the Income Tax Act, provided that balance consideration ofRs.1.50
lakhs subject to adjustment of Rs. 5,000 and the excess stamp duty, was paid
to it within 15 days. The defendants were warned that if they failed to make
the payment as aforesaid within the stipulated time which is of essence, the D
contract of sale dated 22.2.1971 shall stand rescinded in which case the
~ defendants will have to restore all the properties to it within 15 days thereafter.
On 19.7.1973, the defendants sent a reply through their lawyers wherein it
was asserted that the plaintiff was legally bound to complete the fonnalities
pertaining to registration and to deliver the sale deed before they could ask E
for the balance sale money. Further, the plaintiff was notified that the demand
of balance money even before the suit of Seth Shanti Lal was finally decided,
was unjustified. An assurance was given that the entire balance amount will
be paid when all the fonnalities are completed and the title was proved in the
pending litigation. The plaintiff was called upon to produce the ITC before
• 3.9.1973 as per the requisition made by the Sub-Registrar. Thereafter, the F
plaintiff sent a letter on 28.8.1973 to the Sub-Registrar stating that the
defendants committed breach of contract of sale and therefore, the contract
stood rescinded. The Sub-Registrar was infonned that the document was no
longer effective and the question of registration of that document on the
production of ITC as required in his letter did not arise at all. The Sub- G
Registrar was requested to return the document without registration. It appears
that the suit of Seth Shanti Lal Jain which was filed on 7.4.1971 was finally
dismissed on 10.4.1978. It was dismissed for default earlier and restored.

The Trial Court held that the defendants did not commit breach of the
contract in not paying the balance price before the registration of the sale H
.-<,

452 SUPREME COURT REPORTS (2002] 3 S.C.R.

A deed and the plaintiff had no right to rescind the contract. In fact, there was ...
no rescission because the plai~tiff did not send specific intimation ofrescission
of contract with effect from a particular date. The learned trial Judge further
held that the contract was neither voidable nor terminable by the plaintiff and
therefore Section 27 or 31 of the Specific Relief Act was not attracted.
According to the trial court, the sale was complete and title passed irrespective
B of non-payment of balance sale price. The following were the circumstances
relied upon by the Trial Court for reaching the conclusion that no breach was
committed by the defendants and the plaintiff was not entitled to put an end .,_
..
to the contract are :- .......
I. The plaintiff got the I.T.C. cancelled by setting up his relative
c by name Shri R.K. Meattle to file a complaint;
2. After the certificate was restored on 4.1.1972, the plaintiff instead
of filing the order of.J.T.O., challenged that order on the ground
that fresh certificate should have been issued, for which there
was no bona tides on the part of the plaintiff. Moreover, the
D factum of restoration or issuance of fresh clearance certificate
was not intimated to the Sub-Registrar;
.A
3. The plaintiff having knowledge of the fact that the document ....
has. not been registered for want of I. T.C. was not justified in
making demand for payment of balance money;
E
4. On the intervention of Shri R.K. Meattle - one of the Directors
of the plaintiff-Company, a binding agreement came into being
according to which the terms of the contract as to the payment
of balance money got altered. The undertaking given by Shri

F
R.K. Meattle on 17.8.1971 was binding on the plaintiff and in
fact the plaintiff acted according to that undertaking by not
demanding the payment for about a year; and
.. -
5. On account of the suit filed by Seth Shanti Lal Jain in the year
1971 claiming to be the co-owner of the properties, there was
a bona fide doubt in the mind of the defendants as regards title
G and that is the reason why a commitment was made by the
plaintiff through its Director, Shri R.K. Meattle.

6. In the circumstances of the case the time for payment stipulated 1
in the sale deed cannot be regarded as the essence of the contract.

H The learned trial Judge observed thus :-
L.K. JAIN"· JAIPUR TRADERS CORPN. PVT. LTD. ( P. VENKATARAMA REDD!, J.] 453

"Jn fact, it was a breach of the contract from the side of the plaintiff, A
who deliberately did not manage the affairs in such a way that the
clearance certificate may be produced before the Sub Registrar, Khurja,
at an earliest and the registration of the document could be completed.
It appears to me that the plaintiff was only interested in the payment
of balance sale consideration of Rs. One lac fifty thousand and he B

-
was not interested in the registration of the document. The
circumstances and conduct of the plaintiff are as such which go against
the plaintiff and show that it was the plaintiff on whose account the
document could not be registered. The non payment on the stipulated
dates by the defendants was justifiable because the time was not the
essence of the contract." c
The High Court was of the view that under the contract title to the
property would pass only on the payment of the entire sale consideration, that
the Trial Court committed an error of law by holding that time was not
·- essence of the contract and title had passed even before the payment of
balance money. The High Court then observed that Section 47 of the D
Registration Act does not come to the aid of the defendants because the
contract was terminated for valid reason before the document was registered.
Referring to the suit of Seth Shanti Lal Jain, the High Court observed that the
defendants having enjoyed property after taking possession should have made
the payment first and sue the plaintiff for indemnification, if necessary.
Referring to the alleged agreement entered into between Shri R.K. Meattle E
and the defendants, the High Court observed that the alleged agreement was
not believable. The High Court then observed that the appellant should have
made the payment at least after the final notice sent in July, 1973, wherein

- it was mentioned that l.T.C. was procured and the sale deed could be got
registered on payment of balance money. The High Court was therefore of
the view that the defendants failed to fulfil the contractual obligation on their
part and therefore the contract was voidable and could be repudiated by the
plaintiff. The appeal was therefore allowed and the suit was decreed.
F

It is the contention of the appellants that the requirements of either
Section 31 or 27 are not attracted to the present case and therefore the suit G
itself is misconceived. It is contended that the rescission of executed contract
on account of non-payment of balance sale consideration does not arise as
the title passed to the appellants with the registration of document and delivery
of possession. Though the formalities of registration were completed on
24.12.1976, the registration, by virtue of Section 47 of Indian Registration H
*' ~

454 SUPREME COURT REPORTS (2002) 3 S.C.R.

A Act must be deemed to have related back to the date the sale deed was
executed i.e. 22.2.1971. Therefore, the so-called rescission for the alleged
breach of the terms of the contract subsequent to its execution has no legal
sanctity. The only remedy of the plaintiff was to recover the balance sale
price for which a statutory charge is provided in respect of the property. It
is pointed out that the view taken by the High Court that the payment of
B balance money on the stipulated dates was a condition precedent for passing
the title is erroneous in Jaw. The restriction against sale, transfer or assignment
offends Section 10 of the Property Act; moreover, such a condition does not
detract from the irrevocable nature of sale transaction. It is submitted that the
·,_
-
,.,..
contract is neither voidable nor terminable by the plaintiff and therefore the
c conditions requisite for seeking relief under Section 27 or 31 of the Specific
Relief Act are not attracted. The plaintiff could not unilaterally put an end to
the contract under Section 39 of the Contract Act on the ground that the
defendants refused to perform the promise to pay the balance money within
the stipulated time as Section 39 is wholly inapplicable to the contract which
was complete and which had been acted upon. In any case, it is submitted
D that there was no breach of the contractual terms by the appellant and there
was ample justification for non-payment of balance sale price within the time
stipulated in the sale deed or in the notice issued by the plaintiff. Reliance ....
in this connection is based on the findings of the Trial Court. ...
E On the other hand, it is contended on behalf of the respondents
(defendants) that there was no general rule that mere registration of the
document without reference to other circumstances would operate -to transfer
the title. The clause in the sale deed prohibiting transfer or assignment by the
vendor till the balance money was paid spells out an intention to make the
passing of title conditional on payment thereof. In any case, it is submitted
F that the plaintiff was well justified in rescinding the contract in the year 1973
before the actual registration of the document and therefore the registration
does not impart any sanctity to the purported sale. Section 47 of the
Registration Act has no application in this fact situation and the theory of
dating back cannot be invoked by the defendants. The refusal to pay the
G balance sale consideration on the ground of pendency of suit of Seth Shanti
Lal and the alleged agreement with one of the Directors of the plaintiff-
Company is wholly untenable and amounts to refusal to perform the contract
within the meaning of Section 39 of the Contract Act. The contract, it is
submitted, is voidable on account of persistent refusal by the defendants to
pay the balance sale consideration even after the notice was given by the
H plaintiff making the time the essence of contract. Having thus clarified the
_,.
- L.K. JA!Nv. JAIPUR TRADERS CORPN. PVT. LTD. [ P. VENKATARAMAREDDI, J.] 455

legal position, the learned senior counsel for the respondents have taken us A
through the correspondence and the findings of the High Court in support of
his argument that the plaintiff was amply justified in putting an end to the
contract when it became apparent that the defendants were in no mood to
fulfil the essential promise under the contract. Finally, the learned senior
counsel contended that the conduct of the defendants was most reprehensible. B
Having taken possession and started enjoying the property soon after the
execution of the sale deed and even gone to the extent of demolishing the
structures, failed to pay the balance money. On these grounds, the judgment
under appeal is sought to be supported by the learned counsel for the
} respondents.
c
We are of the view that the High Court failed to address itself to certain
crucial factors which disentitles the plaintiff to equitable relief. The High
Court reversed a well considered judgment of trial court without adverting to
the reasoning of trial court except in a cursory manner. In the view we are
taking, it is not necessary for us to dilate on various legal issues debated
before us. We shall proceed on the basis that in law the plaintiff could annul D
the contract of sale before the act of registration got completed and title
passed to the appellants. W.e shall further assume that the plaintiff in fact
rescinded the contract with effect from the date of expiry of the time stipulated
in the 4th and final notice dated 3.7.1973. If such rescission or termination
of contract is not justifiable on facts or having regard to the conduct of the E
plaintiff, the equitable relief under Section 27 or 31 of the Specific Relief Act
has to be denied to the plaintiff, no further question arises for consideration.
In such a case, the appellants' plea has to be accepted and the suit is liable
to be dismissed.

Before we proceed further, we would like to make it clear that it is not F
our endevour to re-appreciate the evidence on record and to disturb the
findings of fact, had they been arrived at on a consideration of all the relevant
matters and the evidence on record. Let us now take stock of those relevant
and important aspects. The first aspect which needs to be adverted to is the
conduct of the plaintiff vis-a-vis the production of Income Tax clearance G
certificate. On a petition filed by the nephew of one of the Directors of
plaintiff-Company, the ITC was cancelled when the document was about to
be registered. This fact was admitted by Shri B.D. Meattle, Director of the
plaintiff-Company, who was examined as a witness for the plaintiff. The
finding of the trial court is that the complaint was filed at the instance of the
plaintiff. This part of the finding of the trial Court is based on probabilities, H
456 SUPREME COURT REPORTS [2002] 3 S.C.R.

A though not positive evidence, coupled with the fact that the circumstances in
which the nephew filed the petition were not explained by the plaintiff's
witness. The second aspect which evoked adverse comments of the trial
Court is the fact that after the ITC was restored by the Income Tax Officer,
the plaintiff challenged the order of the ITO contending that it was an illegal
order and a fresh certificate should have been issued. This move on the part
B of the plaintiff was evidently meant to delay the process of registration an~
casts any amount of doubt on the bona fides of plaintiff. Moreover, even
after obtaining a fresh certificate pursuant to the order passed by the higher
authority, the plaintiff did not make the defendants or the Sub-Registrar· \.-
aware of this fact for more than a year. It was only in the letter dated ·\
C 3.7.1973, an indication was given that the certificate under Section 230(A) of
Income Tax Act was available. What is more surprising is that the plaintiff
returned the certificate to Income Tax Office on 10.9.1974 (vide paras 34 and
35 of trial Court's judgment). These facts noticed and commented upon by
.the Trial Court were not at all adverted to by the High Court. The plaintiff
cannot on the one hand withhold the production of I.T.C. which was essential
D for -registration and on the other hand take the stand that the defendants
committed breach· of contract.

The other important aspect which did not receive due consideration
from the High Court is the agreement or understanding arrived at between
E the Director of the plaintiff-Company - Shri R.K Meattle and the defendants_
on 12.8.1971. By that time, a suit was filed by one Shri Shanti Lal Jain
'claiming rights over the suit schedule property. The plaintiff and the defendants
in the present suit were also impleaded therein. At that juncture, infonnal
agreement was reached. The agreement couched in the form of a letter reads
as follows:
F
Dear Sir,

Yesterday Shri R.K. Meattle, a Director of your firm came to us
and requested to pay a sum of Rs. 5,000 against the arrears of the sale
deed executed by your firm in our favour for the expenses to get the
dispute decided so that formality of sale deed may be completed soon
G
with the assurance that your firm will not claim further any amount,
out of arrears till all the formalities are finally completed.
Yours faithfully

(Raj Kr. Poddar)
H (Lalit Kumar Jain, Khurja)
L.K. JAIN v. JAIPUR TRADERS CORPN. PVT.LTD. 1P. VENKATARAMA REDD!, J.] 457

Yes, this is our proposal and A
our firm agrees on this settlement
(Sd) 12.8.1971
Director
For Jaipur Trading Corp. (P) Ltd.

The commitment made in this letter was construed by the trial Court B
as a change in the terms of the contract by reason of which the demand for
the payment of balance sale consideration was deferred till all the formalities
were completed and the litigation was settled. The contention that Shri R.K.
Meattle acted without authority and therefore the commitment made by him
was not binding on the plaintiff-Company was not accepted by the Trial C
Court.The High Court reversed this finding on the ground that no prudent
person would agree to such arrangement which had the effect of postponing
the demand of balance sale price till the dispute was settled and/or the
formalities of registration were completed. The High Court observed that in
the absence of proper authorisation by the Company, the alleged undertaking
was not believable. Whether the alleged agreement is true and binding is no D
doubt primarily a question of fact. But for the fact that the High Court
overlooked certain material factors which have vital bearing in arriving at a
finding on this point, this Court would not have thought of probing into a
factual aspect. The averments in the plaint and the material portion of the
deposition of the plaintiffs witness were not adverted to while reaching a E
finding in this regard. In the plaint, the factum of sending Shri R.K. Meattle
to the defendants and Shri R.K. Meattle signing the letter are admitted. But,
what is stated in the plaint is that Shri Meattle was not authorised to do so.
When we come to the deposition of Shri B.D. Meattle examined as P.W.l,
a version was put forward that the letter was got forcibly written by the
defendants. If that is so, and if the private limited company having two F
Directors at the relevant point of time (R.K. Meattle and B.N. Ahuja) did not
approve of the action of R.K. Meattle, why did the plaintiff keep silent for
nearly two years without questioning the authority of Shri Meattle? This
question remained practically un-answered. Shri B.D. Meattle merely stated
that the defendants had no money and therefore they sought time. It is needless
to say that this explanation is vague and irrelevant. Another important fact is G
that the bank draft for the amount of Rs. 5,000 received from the defendants
was not returned and it is not the case of the plaintiff that the draft was not
credited to their account. When Shri B.D. Meattle (P.W.l) was confronted
with this fact, he came forward with a peculiar explanation that the relationship
was not so much strained and therefore the bank draft was not returned. If H
458 SUPREME COURT REPORTS [2002) 3 S.C.R.

A at all, this is a factor which goes in favour of the defendants rather than the
plaintiff. All this would show that the plaintiff consciously agreed to honour
the understanding arrived at between the Director of the Company Shri R.K.
Meattle and the defendants which was reduced into writing in the form of a
letter. If that agreement is true and binding, as has been held by the Trial
B Court, the plaintiff could not have rescinded the contract in September 1973,
despite the fact that the suit filed by Seth Shanti Lal Jain was pending and
the formalities requisite for completion of registration were not completed. It
may be an imprudent act on the part of Shri R.K. Meattle, going by the tenor
of agreement, but, in the absence of any allegations of collusion and mis-
representation, the Court cannot disregard the agreement embodied in the
C letter dated 12.8.1971 which was believed by the trial Court.We are, therefore,
of the view that reversal by the High Court of the trial Court's finding on this
aspect is unwarranted and as already noted, is vitiated by non-consideration
of the relevant material on record. This Court has, therefore, no option but
to disturb the factual finding reached by the High Court.

D One more fact which disentitles the plaintiff to the equitable relief
under Section 27/31 of the Specific Relief Act is the un-explained delay in
filing the suit after the exchange of notices in September 1973. Almost three
years later, the suit was filed. This inaction has its own revelation. Either the
plaintiff did not stand by his declaration to rescind the contract, as held by
E the trial Court, or the plaintiff was sitting on the fence and waiting to see
whether the tum of events would be to his advantage or disadvantage.

If the above facts and circumstances are cumulatively considered, the
plaintiff has no legitimate ground to seek the equitable remedy. While these
are the factors that can be put against the plaintiff, the defendants-appellants
F are not free from blame. We cannot lose sight of the fact that their conduct
is also open to question. The defendants, in the initial stages, insisted on
income-tax clearance certificate. When the defendants were informed of the
readiness of the plaintiff to hand over the ITC subject to payment of balance
money within I 5 days, the defendants then raised the plea of pendency of the
suit of Seth Shanti Lal which was by then dismissed for default. The factum
G of dismissal of suit was intimated to the defendants through the notice dated
3.7.1973, though the suit was subsequently restored and was finally dismissed
in the year 1978. The fact remains that the defendants who, in the initial
stages, were prepared to pay the balance sale price on receipt of ITC, for
reasons best known to them, dodged to make the payment on the ground of
H pendency of suit. Though this conduct on the part of the defendants is not
L.K. JAIN v. JAIPUR TRADERS CORPN. PVT.LTD. IP VENKATARAMA REDD!, J.] 459

above board, the conduct of the plaintiff, who has sought equitable remedy, A
should be kept uppermost in the mind of the Court. The plaintiff seeking
equitable ·remedy cannot approach the Court with unclean hands or be guilty
of !aches. Irrespective of the conduct of the defendants we must hold that the
plaintiff has, for various reasons discussed above, disentitled himself to the
relief of cancellation of instrument and for recovery of possession from the B
defendants that too after the property was substantially developed.

The result of the foregoing discussion is that the suit is liable to be
dismissed and it has been rightly dismissed by the trial Court. However, in
view of the fact that the defendants are not free from blame as discussed
above and they have utilised the property to the best of their advantage right C
from day one without, at the same time, paying the balance sale price for
several years we put it to the counsel for the appellants whether they are
willing to pay to the plaintiff a substantial amount over and above the sale
price already deposited in the Court, in order to do justice to the parties. In
fact, in the course of arguments by the learned counsel for the appellants, D
there was an indication that the appellants were prepared to offer a reasonable
amount, without prejudice to their contentions. The learned counsel for the
appellants has filed a letter dated 18.04.2002 stating that "the appellants can
pay and agree to pay a further sum of Rs. 35 lacs (Rupees thirty five lacs)
in 3 instalments of Rs. 15 lacs and Rs. I 0 lacs and Rs. IO lacs," in three
weeks, by the end of August and by the end of November, 2002 respectively. E
When we suggested to the learned counsel that it would be fair if some more
amount is offered, the learned counsel for the appellants agreed on behalf of
his clients for payment of Rs. 40 lacs in lump sum within a period of six
months commencing from today. Having regard to the offer made in the
letter coupled with the oral representation made today and to mete out justice
to the parties, we direct that the undertaking to pay the sum of Rs. 40 lacs
F
within six months should form part of the decree in the suit. This shall be in
addition to the sale price already deposited in the Court. The same shall be
deposited in the Court within a period of six months and the plaintiffs are
entitled to withdraw the same in addition to the amount already deposited.
G
The judgment of the High Court is set aside and the appeal is allowed
subject to the direction as given above. With regard to the deposit of the said
additional' sum of Rs. 40 lacs, the decree of the trial Court shall stand modified
accordingly. Parties are left to bear their own costs.

N.J. Appeal allowed. H