2011 Supreme(SC) 604

2011 (5) Supreme 1
SUPREME COURT OF INDIA
R V Raveendran and K S Radhakrishnan, JJ.
Mrs. Saradamani Kandappan — Appellant
versus
Mrs. S. Rajalakshmi & Ors. — Respondents
Civil Appeal Nos. 7254-7256 of 2002
and
Contempt Petition (C) No. 28-29 of 2009
with
Mrs. S. Rajalakshmi & Ors. — Appellants
versus
Mrs. Saradamani Kandappan & Anr. — Respondents
Civil Appeal Nos. 4641-42/2002
Decided on : 4-7-2011

IMPORTANT POINTS
When time is the essence of the contract.
Competent witness.
Encumbrance.

Headnote:(a) Contract Act, 1872 – Section 55 – Whether time is the essence of the contract depends upon terms of the contract – In case of sale of immovable property, normal presumption is against the time being the essence of the contract – However, even if time is not the essence of the contract, the contract is to be performed in a reasonable time. (Para 19)

        (2009) 5 SCC 182; (1993) 1 SCC 519; (1967) 1 SCR 227; (1977) 2 SCC 539; (1988) 2 SCC 188; AIR 1915 PC 83 – Relied upon

        (b) Transfer of Property Act, 1882 – Section 55(5) (b) – Time is normally the essence of the contract in regard to the terms relating to payment of balance price – It is not so in regard to the execution of the sale deed – Instantly as per agreement, time regarding payment of balance price was the essence of the contract – Such payment was not dependent upon the purchaser’s satisfaction regarding title – So the said satisfaction or execution of sale deed was not the essence of the contract. (Paras 20 and 21)

        (c) Specific Relief Act, 1963 – Section 10 – In the present day of galloping prices and ever rising inflation, holding that time is not of the essence of the contract in regard to immovable properties, may no longer apply. (Para 25)

        (1986) 3 SCC 385; (1998) 2 SCC 1; (1997) 3 SCC 1 – Relied upon

        (d) Judicial Review – Laws, which might have been reasonable and valid when made, can, with passage of time and consequential change in circumstances, become arbitrary and unreasonable. (Para 26)

        (e) Indian Contract Act, 1872 – Section 52 – The agreement not specifying order of performance or interrelation of performance by the Vendor and the Vendee – Section 52 not applicable. (Para 37)

        (f) Judicial Review – Allegation of fraud has to be specifically pleaded and proved – Vendee was made aware of encumbrances of the property – Provision for payment of sale price and execution of sale deed de-linked – On execution of the agreement the purchaser was to take possession as care taker of the suit schedule properties and that on complete payment of the sale price to be entitled to possession in part performance – Execution of the sale deed whenever required by the purchaser – Fraud neither pleaded nor proved. (Para 40)

        (2000) 8 SCC 512 – Distinguished

        (g) Specific Relief Act, – Sections 37 and 38 – In absence of payment of the installments, plaintiff remaining merely a caretaker – On cancellation of the agreement of sale, the plaintiff became liable to leave the suit schedule properties as the possession continued to be with the defendants – Plaintiff never having ‘possession’ was not entitled to seek a permanent injunction. (Para 44)

        (h) Indian Evidence Act, 1872 – Section 118 – Competent witness – Where the entire transaction has been conducted through a particular agent or representative, the principal has to examine that agent to prove the transaction – Where the principal at no point of time had personally handled or dealt with or participated in the transaction and has no personal knowledge of the transaction, and where the entire transaction has been handled by the agent, necessarily the agent alone can give evidence in regard to the transaction. (Para 47)

        (2010) 10 SCC 512 – Relied upon

        (1999) 3 SCC 573; (2008) 4 SCC 464 – Distinguished

        (i) Words and Phrases – Encumbrance – An ‘encumbrance’ is a charge or burden created by transfer of any interest in a property – It is a liability attached to the property that runs with the land – Mere execution of an MOU, agreeing to enter into an agreement to sell the property, does not amount to encumbering a property – Receiving advances or amounts in pursuance of an MOU would not also amount to creating an encumbrance. (Para 50)

        AIR 1977 SC 1566; (2001) 8 SCC 104 – Relied upon

       Facts of the case:

        This case relates to transfer of immovable property in which an agreement for sale was executed, specific performance of which was sought giving rise to further complications.

       Finding of the Court:

        Time being the essence of the contract, failure to make payments on stipulated time clearly amounted to breach. The respondents were justified in determining the agreement of sale.

       Result : Appeals dismissed.