J. P. Builders vs A. Ramadas Rao - 2010 Supreme(SC) 1118

Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2010 Supreme(SC) 1118

IN THE SUPREME COURT OF INDIA
P. SATHASIVAM & ANIL R. DAVE, JJ.
M/s J.P. Builders & Anr. .... Appellant(s)
Versus
A. Ramadas Rao & Anr. .... Respondent(s)
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NOs. 9821-9822 OF 2010
CIVIL APPEAL NOs. 9824-9825OF 2010
CIVIL APPEAL NO. 9826 OF 2010
(Arising out of S.L.P. (C) Nos. 14985-14986 of 2010)
(Arising out of S.L.P.(C) Nos. 15008-15009 of 2010)
(Arising out of S.L.P.(C) No. 17435 of 2010)
Decided on : NOVEMBER 22, 2010.

Headnote:Specific Relief Act, 1963 - Section 16(c) - Plaintiff has to comply with Section 16(c) even in absence of specific plea by OP - In a suit for specific performance, plaintiff must allege and prove a continuous readiness and willingness to perform contract on his part from date of contract - Readiness and willingness has to be determined from entirety of facts and circumstances relevant to intention and conduct of party concerned. (Paras 12 and 19)
       (1995) 5 SCC 115; (2004) 6 SCC 649; (1970) 3 SCC 140-Relied on.
       Indian Contract Act, 1872 - Sections 31 and 32 - Contingent contract - If condition prescribed in contract is impossible, such contract become void and not enforceable in terms of Section 32 - Merely because contract insists settlement of a loan of bank and handover title deeds to plaintiff from bank, contract did not come to an end on this ground and such contract is not a contingent contract - Court has jurisdiction to grant relief in terms of contract. (Paras 23 and 25)
       Transfer of Property Act, 1882 - Section 56 - Marshalling - Plea of marshalling being pure question of law based upon decree obtained for specific performance, cannot simply be thrown out merely because the same was not specifically pleaded-Merely because for recovery of loan secured by banks, a special Act, has been enacted, is not a bar for Civil Court to apply to other relief such as Section 56 of T.P. Act. (Paras 30 and 33)
       (2008) 4 SCC 594; (2008) 17 SCC 491-Distinguished.
       (1964) 2 SCR 324; AIR (34) 1947 Lahore 230; AIR 1962 Punjab 477-Relied on.
       Constitution of India - Articles 222 and 227 - There is no bar for Division Bench which has jurisdiction to hear appeal, to hear writ petition when the same is connected with main issue. (Para 35)

Judgement Key Points

Key Points on Specific Performance

In a suit for specific performance, the plaintiff must allege and prove continuous readiness and willingness to perform their part of the contract from the date of the contract, determined from the entirety of facts, circumstances, intention, and conduct. (!) [1000493800007][1000493800011] (!) (!)
Readiness refers to financial capacity, while willingness relates to the plaintiff's conduct in seeking performance; both must be demonstrated continuously.[1000493800008][1000493800009] (!)
Proof of readiness and willingness includes pleadings in the plaint, part-payments of consideration, bank statements showing financial capacity (e.g., fixed deposits, savings balances), and absence of demand by defendants for further payment without response. (!) (!)
Withdrawal of a small deposit in a no-lien account does not negate readiness and willingness if followed by further advances and subsequent agreement execution. (!)

Key Points on Contract Nature

A contract requiring settlement of a bank loan and handover of title deeds is not contingent under Sections 31 and 32 of the Indian Contract Act if capable of performance; such requirements are incidental covenants, not impossible events. (!) (!) (!) (!) (!) (!)
Subsequent agreement for sale supersedes earlier MoU terms; vendors undertake to discharge loans and hand over title deeds within specified time, with purchaser to provide further advances if demanded. (!) (!) (!)
No demand by vendors for further advances to settle loan defeats claim of impossibility; plaintiff demonstrated financial ability via deposits. (!) (!)

Key Points on Marshalling (Section 56, Transfer of Property Act)

Subsequent purchaser (or specific performance decree holder) entitled to marshalling, requiring mortgagee to satisfy debt from unsold properties first, without prejudice to mortgagee rights. (!) (!) (!) (!)
Plea of marshalling, as a pure question of law arising from specific performance decree, can be raised in appeal despite not being specifically pleaded in trial court, especially when plaint seeks broader relief including loan discharge. (!) (!) (!) (!)
Civil court not barred from applying marshalling despite special recovery laws for banks; directs bank to exhaust other properties first, resorting to suit property only if shortfall. (!) (!)
No prejudice to bank if other valuable properties available; bank accepted direction without appeal. (!) (!) (!)

Procedural and Other Points

Division Bench may hear connected writ petition with statutory appeals under Articles 226/227 if parties and subject matter overlap. (!) (!) (!)
Costs awardable to successful plaintiff paying substantial court fee, even if partial relief granted. (!) (!)
Supreme Court under Article 136 need not interfere with concurrent findings if no substantial injustice, even post-leave grant. (!) (!) (!)

JUDGMENT

P. Sathasivam, J.

1) Leave granted in all the Special Leave Petitions.

2) These appeals seek to challenge the common judgment and order dated 23.02.2010 passed by the Division Bench of the High Court of Judicature at Madras in A.S. Nos. 708 of 2008 and 946 of 2009 and W.P. No. 23405 of 2009 whereby the High Court partly allowed A.S. No. 708 of 2008 confirming the decree for specific performance granted by the Principal District Court, Chengalpet in O.S. No. 336 of 2008 and dismissed A.S. No. 946 of 2009 preferred by the appellants herein. By the same order, the High Court disposed of W.P. No. 23405 of 2009 with certain directions. By a subsequent order dated 29.04.2010, the High Court dismissed the Review Application No. 37 of 2010 in A.S. No. 708 of 2008 and Review Application No. 47 of 2010 in W.P. No. 23405 of 2009 preferred by the appellants herein. Brief facts:-

3) (a) The subject matter of the suit is a total extent of 30 acres 86 cents of land in Senthamangalam Village, Sriperumbadur Taluk, Kancheepuram District comprised in 38 items. M/s J.P. Builders-Appellant No. 1 and Shri J.P. Paramanandam-Appellant No. 2 herein are the owners of the suit property which they acquired under various sale deeds. The sister concern of M/s J.P. Builders viz., M/s Anand Agency has availed certain financial assistance from the Indian Bank, (hereinafter referred to as `the Bank') and for the said assistance Appellant Nos. 1 and 2 herein offered their various properties including the suit property as security for the principal as well as interest amount payable by M/s Anand Agency of which Appellant No. 2 is the sole proprietor.

(b) On 15.08.2005, the appellants entered into a Memorandum of Understanding (MoU) (Ex. A-2) with Respondent No. 1 herein for sale of the suit property at a sale consideration of Rs. 14 lakhs per acre and a sum of Rs. 1 lakh was paid as advance by way of cheque on the same day. Balance sale consideration was to be paid within three months from the date of obtaining confirmation letter from the Bank.

(c) On 10.10.2005, M/s J.P. Builders, by a letter addressed to the AGM, Indian Bank, Asset Recovery Management Branch II, offered a sum of Rs. 100 lakhs as full and final settlement of the dues of its sister concern, M/s Anand Agency, which was declined by the Bank by letter dated 15.10.2005 advising them to revise the offer with substantial improvement. By letter dated 23.01.2006, the Bank stated that Appellant No. 2 herein had not made any improvement in his One Time Settlement (in short `OTS') proposal of Rs. 100 lakhs and hence the Bank is proceeding to enforce its rights under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interests Act, 2002 (hereinafter referred to as `the Act'). By letter dated 01.02.2006, Appellant No. 2 offered a sum of Rs. 148 lakhs as one time settlement of the loans availed by M/s Anand Agency.

(d) On 03.02.2006, Respondent No. 1 entered into a Sale Agreement with the appellants for purchase of the suit property. The sale price of Rs. 14 lakhs per acre was 4 enhanced to Rs. 18 lakhs per acre and the total sale consideration was fixed at Rs. 5,55,48,000/-. On the same day, Respondent No. 1 had paid a sum of Rs. 24 lakhs by way of cheque as further advance to Appellant No.2 in addition to Rs. 1 lakh already paid. On 18.04.2006, a further payment of Rs. 50 lakhs was made by Respondent No. 1.

(e) On 26.04.2006, the Bank rejected the OTS offer of Rs. 148 lakhs stating that since the amount offered is very low, the Bank has decided to pursue the recovery application filed before the Debts Recovery Tribunal, (hereinafter referred to as `DRT') Chennai for the recovery of the dues of the Bank. Again, by letter dated 15.05.2006, the Bank stated that out of court settlement can be done if an offer of Rs. 629.60 lakhs by working out interest at PLR i.e. 11% compound on the principal outstanding as on 31.03.1993 be made. However, since the settlement amount w