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2004(6) Supreme 385
SUPREME COURT OF INDIA
(From Bombay High Court)
Ashok Bhan & S.H. Kapadia, JJ.
Smt. Swarnam Ramachandran & Anr. -Appellants
versus
Aravacode Chakungal Jayapalan -Respondent
Civil Appeal No. 4527 of 2000
Decided on 25-8-2004
Counsel for the Parties :
For the Appellants : T.L. Viswanatha Iyer, P. Krishnamoorthy, Sr. Advocates, K.R. Nambiar, Advocate.
For the Respondent : Dushyant, A. Dave, Sr. Advocate, P. Venugopal and P.S. Sudheer, Advocates.
Held : That time is presumed not to be of essence of the contract relating to immovable property, but it is of essence in contracts of reconveyance or renewal of lease. The onus to plead and prove that time was the essence of the contract was on the person alleging it, thus giving an opportunity to the other side to adduce rebuttal evidence that time was not of essence. That when the plaintiff pleads that time was not of essence and the defendant does not deny it by evidence, the Court is bound to accept the plea of the plaintiff. In cases where notice is given making time of the essence, it is duty of the Court to examine the real intention of the party giving such notice by looking at the facts and circumstances of each case. That a vendor has no right to make time of the essence, unless he is ready and willing to proceed to completion and secondly, when the vendor purports to make time of the essence, the purchaser must be guilty of such gross default as to entitle the vendor to rescind the contract. Applying the above principles to the facts of the present case, we find that there was no justification in claiming, in the circumstances, to treat time as of the essence. At the outset, referring to the original agreement dated 18.2.1981, there is nothing in the express stipulation between the parties to show that the intention was to make the rights of the parties dependent upon the observance of the time limits. Prima facie, equity treats the importance of such time limits as being subordinate to the main purpose of the parties. [See: Jamshed Khodaram Irani v. Burjorji Dhunjibhai reported in [AIR 1915 PC 83]. In the present case, it was submitted on behalf of the appellants that time to pay Rs. 75,000/- on or before 30.9.1981 was made the essence of the contract by notice dated 12.9.1981 as the respondent was a chronic defaulter. We do not find any merit in this argument. In his evidence, the respondent asserted that when he paid Rs. 50,000/- on 31.3.1981, the appellants orally agreed to extend the time for payment of Rs. 75,000/- from 18.4.1981 to 30.9.1981; that at the time there was no agreement to make time the essence of the contract. This assertion has not been rebutted by the appellants. No evidence in rebuttal has been led by the appellants. Further, as rightly held by the Courts below, the conduct of the respondent was not a gross conduct so as to justify giving of notice making time of the essence of the contract. That on the contrary, time was extended by the appellants in furtherance of clause (8) of the agreement up to 31.12.1981. In the circumstances, we are in agreement with the conclusion that time was not of the essence. (Paras 12 to 14)
Key Points: - Time is presumed not to be of essence in contracts relating to immovable property (!) . - The onus to plead and prove that time was the essence lies on the party alleging it (!) . - A vendor has no right to make time of the essence unless ready and willing to proceed to completion (!) . - Time may be treated as essence only if the purchaser is guilty of gross default entitling the vendor to rescind (!) . - Courts must examine the real intention of the party giving notice of time as essence based on facts and circumstances (!) .
JUDGMENT
Kapadia, J.-Being aggrieved by the suit for specific performance being decreed, the defendants-vendors have filed this appeal by special leave against judgment and order passed by the Division Bench of the Bombay High Court dated 17.6.2000 in Appeal No. 813 of 1994 confirming the judgment of the learned Single Judge dated 3.10.1994.
2. The facts giving rise to this civil appeal, briefly, are as follows:-
By an agreement for sale dated 18.2.1981 entered into between appellants as vendors and respondent as purchaser, the appellants agreed to sell all that piece or parcel of land admeasuring 481.25 square metres bearing plot no. 423- out of the larger piece of land bearing City Survey No. 1285 (Part) of Suburban Scheme-III of Chembur with bungalow bearing Municipal No. 1137 (2) standing thereon. (hereinafter for the sake of brevity referred to as "the suit property") for lump sum consideration of Rs.10,00,000/-. Prior to the execution of the agreement, the respondent paid Rs.1,00,000/- as earnest money. Under clause (1) of the said agreement, a sum of Rs.1,25,000/- was to be paid by the respondent within two months from the date of the agreement i.e. by 18.4.1981 and the balance of Rs. 7,75,000/- was payable by him on completion of the sale i.e. by 31.8.1981. Under clause (8) of the agreement, the sale was to be completed on or before 31.8.1981. However, there was a proviso to clause (8) under which an option was given to the appellants to extend the date of sale up to 31.12.1981.
3. On 31.3.1981, the respondent herein paid Rs. 50,000/- by cheque to the appellants. By letter dated 3.9.1981, addressed by the appellants, it was alleged that Rs. 1,25,000/- was payable by the respondent on or before 18.4.1981; that the full amount was not paid; that the respondent was, therefore, called upon to make the balance payment of Rs.75,000/- within three days from the date of receipt of the said letter. However, by the said letter, time to complete the sale was extended by the appellants under clause (8) up to 31.12.1981. In reply, the respondent stated that out of Rs.1,25,000/-, a sum of Rs. 50,000/- had been paid on 31.3.1981, when it was agreed by and between the parties that the balance amount of Rs. 75,000/- would be paid by 30.9.1981. By letter dated 12.9.1981, the appellants denied having agreed to receive the balance amount of Rs. 75,000/- payable on or before 18.4.1981, by 30.9.1981. At the same time, by the same letter dated 12.9.1981, the appellants agreed to accept the amount of Rs. 75,000/- on or before 30.9.1981 and purported to make time the essence for such payment. On 30.9.1981, the respondent s advocate forwarded two cheques to the appellants i.e. cheque dated 29.9.1981 for Rs.30,000/- and another cheque dated 15.10.1981 for Rs. 45,000/- (post-dated cheque). In the said letter, it was pointed out that the cheque for Rs. 45,000/- was post-dated as the respondent would be realizing the effects of certain cheques deposited by him in his account. By letter dated 3.10.1981, the appellants alleged that time to pay balance amount of Rs. 75,000/- by 30.9.1981 was made the essence of the contract; that since the respondent had failed to pay the said amount, the agreement for sale stood terminated. Consequently, the appellants forfeited the amounts paid by the respondent under the agreement. By letter dated 17.10.1981, respondent herein contended that time was not the essence of the agreement; that the agreement had been terminated with mala fide intentions; that the respondent had complied with all his obligations and that he was ready and willing to perform his obligations under the said agreement.
4. In the circumstances, on 2.12.1981, the respondent herein instituted suit No. 1985 of 1981 on the original side of the Bombay High Court. In the suit, the respondent alleged that sometime in the last week of March, 1981, he was informed that the appellants desired to extend the date of completion of sale till 31.12.1981,
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