Holding

Time was not of essence because the seller’s obligation to clear the mortgage and deliver title documents (clauses 5 and 8) precedes the buyer’s payment, the letters were deemed served, and the plaintiff was ready and willing, so specific performance was upheld.

Summary

The parties entered into a sale agreement for a suit property at Rs.3.65 lakh, with the buyer paying an advance and Rs.60,000, while the seller was to clear the mortgage and deliver title documents before the balance could be paid. The buyer sent registered letters and a legal notice urging the seller to fulfill his obligations, but the seller failed to do so, leading to a suit for specific performance. The trial court granted specific performance, but the High Court reversed, holding that time was of essence, the letters were not proved, and the buyer was not ready and willing. The Supreme Court held that clause 3 must be read with clauses 5 and 8, making the seller’s duty to clear the mortgage precedent, and that the letters were deemed served, establishing the buyer’s readiness. Consequently, the High Court’s judgment was set aside and the decree for specific performance was restored.

Issues considered

Whether the three‑month period in clause 3 of the agreement makes time of essence.
Whether the registered letters of 18‑12‑2002 and 19‑12‑2002 were duly served and proved.
Whether the plaintiff was ready and willing to perform the contract.
Whether delay in filing the suit can be a ground to deny specific performance under Indian law.
Whether the valuation of the property at the time of agreement affects the grant of specific performance.

Subjects

contractspecific performancetime of essencereciprocal promisesservice of noticereadiness and willingnessmortgagesale agreementdelaylimitation period

Judgment

[2019] 9 S.C.R. 1009 1009

R LAKSHMIKANTHAM A
v.
DEVARAJI
(Civil Appeal No.2420 of 2018)
JULY 10, 2019 B
[R. F. NARIMAN AND SURYA KANT, JJ.]
Contract – Specific performance of – Parties entered into an
agreement to sell a suit property for Rs. 3.65 lakhs – Plaintiff paid
Rs.5000/- on the date of signing the agreement – Thereafter, he
C
further made the payment of Rs.60,000/- – Clause 3 of the agreement
required that balance sale consideration to be paid within 3 months
from the date of the agreement – Clause 5 of the agreement also
required seller to obtain the original title documents of the suit
property from the mortgagee after clearing mortgage – Plaintiff
alleged that defendant was attempting to wriggle out of the D
agreement and he had sent three notices (two letters and a legal
notice) to the defendant to comply with the terms of the agreement –
Trial Court ordered specific performance – First appeal was
dismissed – In second appeal, High Court reversed the concurrent
judgments of the Courts below and held that time was the essence
E
of the contract and letters sent by the plaintiffs were not proved –
On appeal, held: High Court went wrong on number of counts –
First, to hold that time was essence in the agreement was wholly
incorrect – Clause 3 of the agreement to sell has to be read along
with clauses 5 and 8, which clearly show that in the nature of
reciprocal promises, the promise made by the seller in clause 5 has F
to be performed first, viz., that the title documents have to be obtained
from the mortgagee after the mortgage is cleared – Secondly, both
letters were addressed to the defendant on the address on which he
later received/acknowledged the legal notice – Further, High Court
erred in holding plaintiff was not ready and willing to perform the
G
agreement – Therefore, judgment of the High Court set aside and
that of the Courts below restored.
Allowing the appeal, the Court
Held: 1. The High Court has, in the second appeal, gone
wrong on a number of counts. First, to hold that time was of H
1009
1010 SUPREME COURT REPORTS [2019] 9 S.C.R.

A essence in the agreement, is wholly incorrect. Clause 3 of the
agreement to sell has to be read along with clauses 5 and 8, which
clearly show that in the nature of reciprocal promises, the promise
made by the seller in clause 5 has to be performed first, viz., that
the title documents have to be obtained from the mortgagee after
the mortgage is cleared. It is only then that the consideration
B
above Rs.70,000/-, being the balance consideration for the sale,
has to be paid. Secondly, the High court is wholly incorrect in
stating that the two letters of 18.12.2002 and 19.12.2002 cannot
be said to have been proved. Both the letters were registered
A.D. letters sent to the very address of the defendant, which the
C defendant states is the address on which it received the legal
notice dated 07.07.2003. Further, the moment the registered
letter once sent is returned with the remarks stating that the
addressee did not receive the same, it shall be deemed to have
been served on the defendant on the address so stated, unless
the contrary is proved. The defendant did not come forward with
D
anything to show that this was not the proper address. In fact,
that this is the proper address is shown by the fact that he
acknowledged the receipt of the legal notice dated 07.07.2003
on this very address. [Para 9] [1014-D-H]
2. The High Court order is not correct in stating that
E readiness and willingness cannot be inferred because the letters
dated 18.12.2002 and 19.12.2002 had not been sent to the
defendant. The High Court also erred in holding that despite
having the necessary funds, the plaintiff could not be said to be
ready and willing. In the aforesaid circumstances, the High Court
F was also incorrect in putting a short delay in filing the Suit against
the plaintiff to state that he was not ready and willing.
Para 10] [1014-H; 1015-A]
3. The High Court also went into error in stating that the
value of the property was Rs.10 lakhs at the time of the sale
G agreement. PW-1 in his cross examination admitted that it was
Rs.10 lakhs on the date when PW-1 was cross-examined. The
value of the property on the date of the sale agreement was only
Rs.6 lakhs, and it was open for the parties to negotiate the said
price upwards or downwards, which was what the parties did in
the facts of the present case. Nothing can, therefore, be derived
H
R LAKSHMIKANTHAM v. DEVARAJI 1011

from the erroneous assumption that a valuable property had been A
sold at a throwaway price. [Para 11] [1015-E-G]
Mademsetty Satyanarayana v. G. Yelloji Rao and Others
AIR 1965 SC 1405 : [1965] 2 SCR 221
– referred to.
Case Law Reference B

[1965] 2 SCR 221 referred to Para 10
CIVIL APPELLATE JURISDICTION: Civil Appeal No.2420 of
2018
From the Judgment and Order dated 03.02.2017 of the High Court C
of Judicature at Madras in Second Appeal No. 592 of 2011
Dr. Pooja Jha, Dr. R. Prakash, Ms. Nandita Jha, Vishwa Pal Singh,
Advs. for the Appellant.
The Judgment of the Court was delivered by
D
R. F. NARIMAN, J.
1. In the present appeal, despite service of notice, nobody appears
for the respondent. We have heard Dr. (Ms.) Pooja Jha, learned counsel
appearing for the appellant.
2. The High Court, in the present appeal, has, by the impugned E
judgment dated 03.02.2017, set aside the concurrent judgments of the
Courts below, and allowed the appeal of the erstwhile defendant, who is
the respondent before us, and hence, set aside the decree for specific
performance that was passed in the plaintiff’s favour.
3. By an agreement to sell dated 22.09.2002, the suit-property F
was to be sold for a sum of Rs.3,65,000/-. Certain clauses of the
agreement are important and are set out hereinbelow:
“1. The sale price of the property mentioned in the schedule
hereunder shall be Rs.3,65,000/-(Rupees Three Lakhs and Sixty
Five Thousand only). G
2. The party of the second part has paid a sum of Rs.5,000/-
(Rupees Five Thousand only) towards advance by cash and
the party of the first part hereby admit and acknowledge the
receipt of the same.
H
1012 SUPREME COURT REPORTS [2019] 9 S.C.R.

A 3. The balance sale consideration shall be paid by the party of the
second part to the party of the first part within three months
from today. The party of the first part agrees to execute sale
deed on the day on which the balance sale consideration is
paid.
B 4. The party of the second part agrees to pay part of the sale
consideration of Rs.60,000/-(Rupees Sixty Thousand only)
to the party of the first on or before 10th day of October.
5. The party of the first part had handed over the original title
documents to the mortgagee and the party of the second part
C shall settle the loan, receive the documents from the
mortgagee and keep the same in his custody.
……………………………………………………………………………………
………………………………………………………………………………….

D 8. If there is no encumbrance to the schedule property and when
the party of the second part is willing to pay the balance sale
consideration, the party of the first shall execute sale deed in
favour of the party of the second part or her nominee. If the
party of the first part refuses to do so, the party of the second
part is entitled to take legal action.”
E
4. It is stated that at the time of the sale agreement, the suit
property was worth roughly a sum of Rs.6 lakhs, but the parties finally
agreed and the defendant, in particular, agreed to sell the aforesaid
property for Rs.3.65 lakhs. A perusal of the agreement to sell would
show that though clause 3 requires that the balance sale consideration
F will be paid within three months from the date of the agreement and that
the seller will execute the sale deed on the date on which balance sale
consideration was paid yet, clauses 5 and 8 clearly show that the original
title deeds which are with the mortgagee had yet to be handed over and
the mortgage had yet to be redeemed. It is only when this is done that
clause 3 would kick in, showing that the time of three months is obviously
G
not of essence.
5. Soon after the agreement, the plaintiff sent a registered letter
dated 18.12.2002 to the present address of the defendant reminding the
defendant that Rs.5000/- had been received on the date of signing the
agreement and Rs.60,000/- had been received on 14.10.2002. Despite
H this, the original title documents were not obtained from the mortgagee
R LAKSHMIKANTHAM v. DEVARAJI 1013
[R.F. NARIMAN, J.]

and hence the mortgage could not be discharged. The letter then goes A
on to state that repeated calls were made and that the plaintiff is ready
with the balance money, and that the defendant should come forward
immediately to discharge the mortgage, get all documents from the
mortgagee, and register the sale deed. This registered A.D. letter was
returned to the sender stating that the addressee did not receive the
B
same for the past one week. The same was the fate of another legal
notice on the very next date, i.e., 19.12.2002. Finally, on 07.07.2003,
the plaintiff sent a legal notice referring to the earlier legal notice of
19.12.2002 and called upon the defendant to immediately comply with
the terms of the agreement. To this notice, which was admittedly received
by the defendant at the very same address, no reply was given. C
Thereafter, the present suit for specific performance was filed by the
plaintiff in February, 2005.
6. Given these facts, the trial Court, by its judgment dated
12.09.2008, held that the suit agreement was proved and that three notices
sent by the plaintiff were also proved, it being clear that the defendant D
was attempting to wriggle out of his obligations under the agreement.
Though the suit was filed belatedly, the trial Court felt that as the
defendant did not furnish the address of his mortgagee or take steps to
clear the mortgage, it was clear that the defendant was attempting to
wriggle out of the agreement. Further, the plaintiff’s readiness and
willingness was proved by the fact that he has necessary funds as on E
the date of the agreement, and thereafter, as was stated by him in his
letter dated 18.12.2002. This being the case, the Court ordered specific
performance as the balance sale consideration had already been deposited
into the Court on the date of the filing of the Suit. The first appeal from
the aforesaid judgment was dismissed on 20.12.2010 by the Principal F
District Judge. The District Judge found concurrently for the plaintiff
on all the points argued and hence dismissed the first appeal.
7. By the impugned judgment, the High Court reversed the
concurrent judgments and held, on a construction of the agreement, that
since only three months were given to complete the sale transaction, G
time was of essence. It also went on to hold that the two letters dated
18.12.2002 and 19.12.2002 could not have been said to have been served
on the defendant and hence were not proved. The High court recorded
the defendant’s advocate’s statement that it was not going into other
aspects except that plaintiff was not ready and willing throughout to
H
1014 SUPREME COURT REPORTS [2019] 9 S.C.R.

A perform the sale agreement. Despite this, the High Court held that
since the Suit itself was filed belatedly, it would not be enough for the
plaintiff to show that he had the necessary funds. It would also have
been necessary for him to show that he was otherwise ready and willing
throughout, which cannot be said to be correct considering that there
was a long time gap between 22.09.2002 and 07.07.2003 inasmuch as
B
the intermediate letters/notices were not proved. The High Court also
further stated that the property value was Rs.10 lakhs on the date of the
sale agreement, though this was not proved by the defendant, and then
went on to state that since readiness and willingness had to be held
against the Plaintiff, and since the Suit itself was belated, specific
C performance cannot be granted on the facts of this case and, as stated
earlier, reversed the concurrent findings of the Courts below.
8. We have heard learned counsel for the appellant.
9. The High Court has, in the second appeal, obviously gone
wrong on a number of counts. First, to hold that time was of essence in
D the agreement, is wholly incorrect. Clause 3 has to be read along with
clauses 5 and 8, which clearly show that in the nature of reciprocal
promises, the promise made by the seller in clause 5 has to be performed
first, viz., that the title documents have to be obtained from the mortgagee
after the mortgage is cleared. It is only then that the consideration
E above Rs.70,000/-, being the balance consideration for the sale, has to
be paid. Secondly, the High court is wholly incorrect in stating that the
two letters of 18.12.2002 and 19.12.2002 cannot be said to have been
proved. Both the letters were registered A.D. letters sent to the very
address of the defendant, which the defendant states is the address on
which it received the legal notice dated 07.07.2003. Further, the moment
F the registered letter once sent is returned with the remarks mentioned
hereinabove, it shall be deemed to have been served on the defendant
on the address so stated, unless the contrary is proved. The defendant
did not come forward with anything to show that this was not the proper
address. In fact, that this is the proper address is shown by the fact that
G he acknowledged the receipt of the legal notice dated 07.07.2003 on this
very address.
10. The High Court order is not correct in stating that readiness
and willingness cannot be inferred because the letters dated 18.12.2002
and 19.12.2002 had not been sent to the defendant. The High Court
H
R LAKSHMIKANTHAM v. DEVARAJI 1015
[R.F. NARIMAN, J.]

also erred in holding that despite having the necessary funds, the plaintiff A
could not be said to be ready and willing. In the aforesaid circumstances,
the High Court was also incorrect in putting a short delay in filing the
Suit against the plaintiff to state that he was not ready and willing. In
India, it is well settled that the rule of equity that exists in England, does
not apply, and so long as a Suit for specific performance is filed within
B
the period of limitation, delay cannot be put against the plaintiff – See
Mademsetty Satyanarayana v. G. Yelloji Rao and others AIR 1965
Supreme Court 1405 (paragraph 7) which reads as under:
“(7) Mr. Lakshmaiah cited a long catena of English decisoins to
define the scope of a Court’s discretion. Before referring to them,
it is necessary to know the fundamental differnece between the C
two systems-English and Indian-qua the relief of specific
performance. In England the relief of specific performance
pertains to the domain of equity; in India, to that of statutory law.
In England there is no period of limitation for instituting a suit for
the said relief and, therefore, mere delay – the time lag depending D
upon circumstances – may itself be sufficient to refuse the relief;
but, in India mere delay cannot be a ground for refusing the said
relief, for the statute prescribes the period of limitation. If the suit
is in time, delay is sanctioned by law; if it is beyond time, the suit
will be dismissed as barred by time; in either case, no question of
equity arises.” E

11. The High Court also went into error in stating that the value
of the property was Rs.10 lakhs at the time of the sale agreement. PW-
1 in his cross examination admitted that it was Rs.10 lakhs on the date
when PW1 was cross-examined. The value of the property on the date
of the sale agreement was only Rs.6 lakhs, and it was open for the F
parties to negotiate the said price upwards or downwards, which was
what the parties did in the facts of the present case. Nothing can,
therefore, be derived from the erroneous assumption that a valuable
property had been sold at a throwaway price.
12. For all these reasons, therefore, we allow the appeal and set G
aside the judgment of the High Court and restore that of the Courts
below.

Ankit Gyan Appeal allowed.
H