Holding

The suit for specific performance is barred by limitation; the three‑year period under Article 54 runs from the expiry of the 15‑day notice period, irrespective of the contract’s non‑essential time clause.

Summary

The appellant, owner of agricultural land, had taken a bank loan and entered into a sale agreement with the respondent, who was to discharge the loan by depositing the mortgage amount and execute a sale deed. The appellant served a notice on 24 April 1984 demanding the respondent deposit the full amount and execute the deed within 15 days, threatening cancellation if the demand was not met. The respondent failed to comply, paying only a partial sum in 1985, and later filed a suit for specific performance on 26 September 1989. The trial court held the suit not barred by limitation; the first appellate court dismissed it as barred; the High Court reversed, saying time was not of the essence. The Supreme Court allowed the appeal, holding that under Article 54 of the Limitation Act, 1963 the three‑year limitation period began after the expiry of the 15‑day notice period, making the 1989 suit time‑barred. Consequently, the decree of the first appellate court was restored and the High Court judgment set aside.

Issues considered

Whether a suit for specific performance of a contract for sale of immovable property is barred by limitation when the contract does not fix a date for performance but a notice of refusal has been served.
Whether the time for performance being "not of the essence" affects the computation of the limitation period under Article 54 of the Limitation Act, 1963.

Legislation cited

Subjects

specific performancelimitation periodcontract of saleimmovable propertyArticle 54notice of refusaltime of essenceSupreme Court of India

Judgment

- J. R.K. PARVATHARAJ GUPTA
v.
A

K.C. JAYADEVA REDDY

FEBRUARY 2, 2006

[S.B. SINHA AND P.K. BALASUBRAMANYAN, JJ.]

..
~· Limitation Act, 1963-Article 54-Suit for specific performance of
~
contract filed after a period of three years from date of expiry of 15 days
specified in notice, if barred by limitation-Held: Though time for performance
was not fIXed in sale agreement, but purchaser had notice that performance
c
was being refused, if he failed to fulfil his obligation under the contract
within 15 days of receipt of notice-On facts, it was clear that purchaser was
not ready and willing to perform his part of contract-Thus, in terms of
Article 54 suit should have been filed within three years from date of expiry
of 15 days specified in notice-Thus as such suit barred by limitation- D
Specific Relief Act, 1963.

Appellant-owner of agriculture land took loan from bank depositing
original title deed of the property with the bank. On the other hand appellant
entered into agreement for sale of his land with the respondent for a certain
E
sum. As per the sale agreement respondent was to oeposit the mortgage
amount in the bank and get the loan discharged. A dispute was pending
between appellant and C in the High Court. Appellant was to inform respondent
about disposal of the case. Sale deed was to be executed within period of four
months upon disposal of appeal pending in High Court. Even if the dispute did
not come to an end, sale deed was to be executed and the balance sale F
consideration was to be left with the appellant after deducting the advance
amount so as to enable the respondent to pay the same to the Bank till the
said dispute came to an end. Respondent did not deposit the requisite amount.
Bank filed a suit. Appellant served notice upon respondent on 24.04.1984 to
deposit the amount and get the sale deed executed within 15 days of receipt of
G
notice failing which sale agreement would stand cancelled. Respondent did
not deposit the amount nor inquired about the disposal of the case. He deposited
' only part of the amount one year later. Respondent then filed suit for specific
performance of contract on 26.09.1989. Trial Court decreed the suit holding
that the sanie was not barred by limitation. However, first appellate court
1059 H
1060 SUPREME COURT REPORTS [2006] I S.C.R.

A dismissed the suit on the ground that it was barred by limitation. High Court
holding that since time was not the essence of contract, suit was not barred
by limitation and remitted the matter to the first appellate court. Hence the
present appeal.

Allowing the appeal, the Court
B
HELD: 1.1. In terms of Article 54 of the Limitation Act, 1963 a suit for
specific performance of a contract is required to be filed within three years;
in the event no date is fixed for the performance, within a period of three years
..
from the date when the plaintiff has notice that performance is refused.
C (1063-E)

1.2. There cannot b.: any doubt whatsoever that in respect of a contract
for sal'! of immovable property, time is not of the essence of the contract, but
the notice dated 24.04.1984, is required to be construed in the context of the
agreement entered into by and between the parties and the facts of the case.
D From 1982 to 1984, the respondent did not pay any amount to the Bank nor
took any steps to make any inquiry as regard the disposal of the said litigation
before the High Court. Therefore, the appellant had good reasons to serve
the notice dated 24.04.1984 calling upon the respondent to deposit the entire
amount to the Bank. There is nothing on record to show that despite receipt
of the said notice, the respondent took any step to deposit the said amount. He
E was not ready and willing to perform his part of contract. Evidently, he was
not interested in payment of the loan amount to the Bank on behalf of the
appellant as he was appropriating the usufructs from the land as he was in
possession thereof. He deposited a sum of Rs. 10,000/- after more than one
year. [1063-F; 1064-E, FJ
F
1.3. Even though the time for performance was not fixed in the
agreement for sale, on receipt of the notice, the respondent had notice that
the performance was being refused, if he failed to fulfil his obligation under
the contract within 15 days of receipt of the notice. Therefore, the suit, in
terms of the requirement of Article 54 of the Limitation Act, should have
G been filed within a period of three years from the date of expiry of fifteen days
from the date of receipt of the said notice and as such was barred by limitation.
[ 1064-H; 1065-A, BJ

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 937 of2006.

H
From the Judgment and Order dated 9.3.2005 of the Karnataka High
R.K. PARVATHARAJGUPTAv. K.C.JAYADEVAREDDY [SINHA,J.) )061

Court in R.S.A. No. 266/2000. A
>
S.N. Bhat, D.P. Chaturvedi and N.P.S. Panwar for the Appellant.

P.R. Ramasesh abd Shanmu Khappa for the Respondents.

The Judgment of the Court was delivered by
B

S.B. SINHA, J. Leave granted.

This appeal is directed against a judgment and order dated 09.03.2005
passed by a learned Single Judge of the High Court of Karnataka dated C
09.03.2005 in RSA No.266 of 2000 whereby and whereunder the Second
Appeal filed by the Respondent herein was allowed decreeing the suit for
specific performance filed by the plaintiff-respondent.

The facts relevant for this case are as under :
D
The Appellant was at all material times, the owner of agricultural la11ds
bearing Survey Nos.12, 13, 14 and 16 situated in Village Sheganayakanahalli
Village, Sarjapur Hobli, Anekal Taluk. The parties hereto entered into an
agreement for sale on or about 13.10.1982, wherefor a sum ofRs.65,000/- was
fixed as consideration. Allegedly, a sum of Rs.16,500/- was paid to the Appellant E
by way of earnest money whereupon the Respondent was put in physical
possession of the lands in question. Allegedly, a sale deed was to be executed
and registered upon disposal of an appeal pending before the Karnataka High
Court.

It is not in dispute that the Appellant had taken a sum of Rs.42,000/- F
by way of loan from the Central Bank of India wherefor the original title deeds
were deposited therewith. The Plaintiff-Respondent was to deposit the mortgage
amount in the Bank in terms of the said agreement for sale. On or about
24.04.1984, the Appellant herein served a notice upon the Respondent herein,
alleging that he had not performed his part of the contract, having not G
deposited the requisite amount in the Central Bank of India towards the
agricultural loan raised by him on the security of the property. In connection
with the said loan, the Central Bank of India had filed a suit wherefor a notice
was served upon him. In that situation, the aforementioned notice was issued
asking the Respondent to deposit the amount to the Central Bank of India
forthwith and get the sale deed executed within fifteen days from the date of H
1062 SUPRFME COURT REPORTS [2006] I S.C.R.

A receipt of the notice failing which the agreement to sell would stand cancelled
and the Appellant would be at liberty to deal with the property to the best
of his advantage and in such case, if he suffers any damages, the Respondent
would be responsible therefor.

The amount admittedly was not paid to the Central Bank of India by the
B Respondent in terms of the said notice. He allegedly deposited a sum of
Rs. I0,000/- on 25.05.1985. The said sum of Rs. I0,000/- evidently was not the
entire amount required to be deposited by way of repayment of the agricultural
loan raised by the Appellant herein. A suit for specific performance of the
contract and injunction, was filed by the Respondent on 26.09.1989. The said
C suit was decreed by the trial court, inter a/ia, holding that the same was not
barred by limitation. It was further held that though there had been a stipulation
for completion of the deed of sale within a period of four months from the
date of the agreement; in view of the fact that the Appellant was also to
perform his obligation to inform the Respondent about the disposal of the
case pending before the High Court and as no such information was given
D as regard the status of the case, a decree for permanent injunction had to be
passed in his favour. The Appellant herein preferred an appeal thereagainst
and by the judgment and order dated 0J.01.2000, the said appeal was allowed
on the ground that the suit was barred by limitation. A Second Appeal came
to be filed by the Respondent herein wherein the following purported
·E substantial question of law had been framed :
"Whether the finding of the first appellate Court that the suit of the
plaintiff is barred by time by reversing the judgment of the trial court
is perverse, is contrary to law and the material on record?

F The High Court reversed the judgment and decree passed by the First
Appellate Court and came to the conclusion that as the time was not of the
essence of the contract, the suit was not barred by limitation. The High Court
while allowing the second appeal remitted the matter back to the First Appellate
Court with the direction to dispose of the same insofar it related to the relief
for specific performance of the agreement of sale dated 13. I0.1982 in accordance
G with law.

Mr. S. N. Bhat, learned counsel ~ppearing on behalf of the Appellant,
would draw our attention to the aforementioned notice dated 24.04.1984 and
submit that in view of the fact that the contract stood repudiated, the
H Respondent was required to file a suit within a period of three years therefrom
R.K. PARV ATHARAJ GUPTA v. K.C. JAY ADE VA REDDY [SINHA, J.] ] 063

Mr. P.R. Ramasesh, learned counsel appearing on behalf of the A
Respondent, on the other hand, would submit that on a bare perusal of the
agreement dated 13. l 0.1982, it would be apparent that the time was not of the
essence of the contract. It was urged that the contract was a contingent
contract and, thus, a sale-deed could be executed by the parties pursuant
thereto only upon fulfilment of the conditions stipulated therein, namely, (i) B
furnishing of inf01mation by the· Appellant to the Respondent about the
status of the suit; and (ii) permission of the competent authority for sale of
land; and in that view of the matter, the trial court and the High Court must
be held to have correctly held that the suit was not barred by limitation.

Article 54 of the Limitation Act reads thus : c
"54. For specific Three years The .date fixed for the
performance of performance, or, if no
a contract such date is fixed, when
the plaintiff has notice
that performance is D
refused. "
In terms of the said Article, a suit for specific performance of a contract
is required to be filed within three years; in the event no date is fixed for the
performance, within a period of three years from the date when the plaintiff
has notice that performance is refused. The notice dated 24.04.1984, thus, is E
required to be construed in the context of the agreement dated 13. l 0.1982
entered into by and between the parties.

There cannot be any doubt whatsoever that in respect of a contract for
sale of immovable property, time is not of the essence of the contract, but the F
question as regard the conduct of the Appellant must be considered in the
backdrop of the events noticed hereinbefore.

He had taken an agricultural loan from the Bank. He deposited the
original title deed with the Bank. He was to pay interest on the said amount.
of loan. A dispute was pending between the Appellant and one G
Chikkanarayanappa in the High Court. The Central Bank of India obtained a
decree for a sum of Rs.42,000/- against the Appellant. As per the agreement
for sale, the Respondent was to pay the said amount on behalf of the
Appellant and get the loan discharged. The Appellant was to get only such
amount from the Respondent which might have been remaining after discharge H
1064 SUPREME COURT REPORTS [2006] l S.C.R.

A of the loan taken by him from the Central Bank of India.

The sale deed was to be executed within a period of four months.
However, ifthe dispute between the Appellant and the said Chikkanarayanappa
was not disposed of within the said period, the Appellant was required to
B have pennission from the State.

It is now accepted that no pennission at the relevant point of time was
required to be obtained from the State, for sale of the land. It is furthennore
not in dispute that the litigation pending between the Appellant and the said
Chikkanarayanappa had not been disposed of within a period of four months.
C Even if the said dispute, in terms of the stipulation contained in the agreement
for sale, was not to come to an end, the sale deed was to be executed and
the balance sale consideration was to be left with the Appellant after deducting
the advance amount so as to enable the Respondent to pay tl)e same to the
Bank till the said dispute comes to an end wherefor a separate agreement was
to be entered into.
D
The notice dated 24.04.1984 must be construed having regard to the
aforementioned backdrop of facts. From a perusal of the said notice, it appears
that prior thereto, the Appellant had received notice from the court of the Civil
Judge, Bangalore, in connection with the said loan. From 1982 to I984, the
E Respondent did not take any steps to make any inquiry as regard the disposal
of the said litigation before the High Court. He did not pay any amount to
the Bank.

The Appellant, therefore, had good reasons to serve the aforementioned
notice calling upon the Respondent to deposit the entire amount to the Bank.
F There is nothing on record to show that despite receipt of the said notice
dated 24.04.1984, the Respondent took any step to deposit the said amount.
He was, thus, not ready and willing to perform his part of contract. He has,
as noticed herein before, deposited a sum of Rs. 10,000/- only in the year 1985,
i.e. after more than one year thereafter.

G Evidently, he was not interested in payment of the Joan amount to the
Bank on behalf of the Appellant as he was appropriating the usufructs from
the land as he was in possession thereof.

Thus, even though the time for performance was not fixed in the
H agreement for sale, on receipt of the notice, the respondent had notice that
R.K. PARVATHARAJ GUPTA v. K.C. JAY AD EVA REDDY 1065
the performance was being refused, if he failed to fulfil his obligation under A
the contract within 15 days of receipt of the notice.

The suit was, therefore, in terms of the requirement of Article 54 of the
Limitation Act, should have been filed within a period of three years from the
date of expiry of fifteen days from the date of receipt of the said notice.
B
In this. view of the matter we are of the opinion that the impugned
judgment of the High Court cannot be sustained, which is set aside accordingly.
The appeal is allowed and the decree of the appellate court is restored. No
costs.

N.J. Appeal allowed. C