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1985 Supreme(AP) 425
Andhra Pradesh High Court
Judges : K.A.SWAMI, K.RAMASWAMY
K.S.PHOOL SINGH - Appellant
Versus
BALAJI RICE MILL - Respondent
Decided On : 11-08-85
Time is not the essence of a contract for reconveyance of immovable property, unless it is expressly stipulated by the parties or where time was not originally of the essence of the contract but may be made so by one party giving notice in writing to the other.
Headnote:
SPECIFIC PERFORMANCE - RECONVEYANCE - TIME OF THE ESSENCE - MUTUAL COVENANTS - BREACH - RELIEF - LACHES - DELAY - POSSESSION - EQUITABLE ESTATE - LEGAL TITLE - SECTION 10, 20 OF THE SPECIFIC RELIEF ACT, 1963 - SECTION 55 OF THE CONTRACT ACT, 1872 - ARTICLE 54 OF THE LIMITATION ACT, 1963.
Fact of the Case:
The appellants lent money to Sukhlal, who used it to start a rice mill on a portion of his land. The parties entered into a private arbitration, which found that Sukhlal's share in the mill was Rs. 30,000/- and the appellants' share was Rs. 50,000/-. Sukhlal conveyed his share in the mill to the appellants, who leased it back to Sukhlal. The appellants agreed to reconvey the mill to Sukhlal on his paying Rs. 80,000/- within three years. Sukhlal and the respondents continued to be in possession and enjoyment of the rice mill, subject to their paying rent at Rs. 1200/- per mensem. In 1977, the appellants and respondents entered into an agreement (Ex. A-7) which was in continuation of the earlier agreement (Ex. A-6). Ex. A-7 provided that the sale would be concluded on or before January 28, 1978, and that time was of the essence of the contract. The respondents paid Rs. 30,000/- as part consideration and obtained sanction from the Competent Authority under the Urban Land Ceiling Act, 1976 to alienate the rice mill. The respondents approached the appellants on January 28, 1978, offered to pay the balance consideration and requested them to execute the sale-deed. The appellants requested them to await obtaining of the income-tax clearance certificate and they need not pay any rent from that date and time was extended accordingly. The appellants did not obtain the income-tax clearance certificate and committed breach of the contract. The respondents filed a suit for specific performance of the contract.
Finding of the Court:
The court held that time was not the essence of the contract, as the appellants had committed breach of the contract by not obtaining the income-tax clearance certificate. The court also held that the respondents were ready and willing to perform their part of the contract and that the appellants had committed breach thereof. The court further held that the respondents were entitled to a decree of specific performance, subject to their liability to pay Rs. 1200/- per month from October 17, 1977 till the date of deposit, viz., March 6, 1980 with interest at 6% per annum from March 6, 1980 till date of realization.
Issues: 1. Whether time was the essence of the contract for reconveyance of the rice mill? 2. Whether the respondents had committed breach of the contract? 3. Whether the appellants had committed breach of the contract? 4. Whether the respondents were entitled to a decree of specific performance? 5. Whether the respondents were liable to pay rent for the period from October 17, 1977 to March 6, 1980?
Ratio Decidendi: 1. Time is not the essence of a contract for reconveyance of immovable property, unless it is expressly stipulated by the parties or where time was not originally of the essence of the contract but may be made so by one party giving notice in writing to the other. 2. The respondents did not commit breach of the contract, as they were ready and willing to perform their part of the contract and it was the appellants who committed breach thereof by not obtaining the income-tax clearance certificate. 3. The appellants committed breach of the contract by not obtaining the income-tax clearance certificate. 4. The respondents were entitled to a decree of specific performance, subject to their liability to pay Rs. 1200/- per month from October 17, 1977 till the date of deposit, viz., March 6, 1980 with interest at 6% per annum from March 6, 1980 till date of realization. 5. The respondents were liable to pay rent for the period from October 17, 1977 to March 6, 1980.
Final Decision: The appeal filed by the appellants was dismissed, but in the circumstances, without costs. Time was extended for the appellants to obtain the income-tax clearance certificate and execute the sale-deed, by six months from the date of the judgment. The decree of the trial Court in the suit filed by the respondents was modified and the suit was decreed for payment of rent at Rs. 1200/- per mensem from October 17, 1977 till the date of deposit, viz., March 6, 1980 with interest at 6% per annum from March 6, 1980 till date of realization. The appeal filed by the appellants in the suit filed by the respondents was allowed in part and the decree of the trial Court for possession was confirmed.
( 1 ) THE appellants in A. S. No. 1650/85 are the defendants in the suit, initially numbered as OS 228/80 but on transfer on point of territorial jurisdiction, re-numbered as OS No. 350/83. The respondents sought specific performance of the agreement of reconveyance Ex. A-7, dated October 17, 1977. AS No. 1649/85 arises from the suit of the appellants/plaintiffs for recovery of possession and arrears of rents, initially numbered as OS No. 77/80, and re-numbered as OS No. 353/83. The result of one impinges upon the other arising out of the same facts and law necessitating to have disposed by a common judgment.
( 2 ) ONE S P. Sukhlal, the husband of the fourth respondent, had a site in Macha Bolaram, Hyderabad East. He entered into a transaction with the appellants to advance money to start rice mill business in the said site and, as a result thereof, Sri Balaji Rice Mill came to be established When disputes cropped up, they were settled by a nrivate arbitration, dated November 24, 1974 in which Sukhlal had Rs. 30,000/- interest and the appellants rs. 50,000/- interest; the appellants were directed to pay Rs. 30,000/- to sukhlal and obtain a sale-deed from him of the entire business. The appellants should also execute an agreement to convey the property to Sukhlal on his repaying Rs. 80,000/-within three years. Sukhlal should be in possession and enjoyment of the rice mill as lessee and he should pay every month Rs. 1,200/- to the appellants as rent. Accordingly, Sukhlal conveyed sri Balaji Rice Mill with the land on which the mill is situated under a saledeed ex. B-1, dated January 3, 1975 to the appellants who, in turn, executed exs. A-6/b-6, dated January 28, 1975 agreeing to reconvey the same within three years from that day. Sukhlal, in this turn, executed Ex. B-2 lease-deed, dated January 28, 1975 for ten months effective from January 6, 1975 in favour of the appellants on his paying Rs. 1,200/- per month towards rent.
( 3 ) ON April 26, 1976, under Ex. A-9, Sukhlal received a notice under section 226 (3) of the Income Tax Act, 1961. from the Income-tax Officer stating that the appellants were due of Rs. 65,000/- towarde income-tax and directed him to pay the lease amount to the Income-tax Department. On receipt thereof, Sukhlal informed the appellants of the same by notice dated. September 6, 1976. In the meanwhile, Sukhlal entered into a partnership with respondents 1 to 3 on September 9,1976 under Ex. A-23 so as to discharge the debt and to run the mill. On October 8, 1976, the appellants under Ex. A-10 informed Sukhlal that they appealed to the Assistant appellate Commissioner, Income-Tax and is likely to be allowed and requested Sukhlal to pay the rent to them. On October 19, 1976, under Ex. B-7, sukhlal informed them that he is bound to pay the rent to the Income Tax officer, unless the appellants adjust the dispute with the Income-Tax Officer. Penalty proceedings were initiated against the appellants. On December, 27, 1976, the Income Tax Officer, under Ex, A-12, directed Sukhlal to pay three months rent. Pursuant thereto, on February 7, 1977, under Ex. A-ll, sukhlal paid a sum of Rs. 3,. 600/- to the Income Tax Department. On october 17, 1977, the appellants and respondents 1 to 3 and Sukhlal entered into an another agreement Ex. A-7, in continuation of Ex. A-6, dated january 28, 1975 whereunder the respondents paid a sum of Rs. 30,. 000/- under Ex. A-2 receipt towards part consideration and also Rs. 18,000/- towards arrears of rent and the appellants agreed to execute the sale deed on or before the January 28, 1978 on payment of the balance consideration.
( 4 ) IT is pleaded by the respondents and accepted by the trial Court that, on January 28, 1978, they approached the appellants with the balance consideration and requested them to reconvey the mill; the appellants are claimed to have stated that they are trying to wipe out or minimise the tax liability in appeal and requested them to await the
