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2000 Supreme(Bom) 435
IN THE HIGH COURT OF BOMBAY
N.J. Pandya Dr. D.Y. Chandrachud, JJ.
Smt. Swarnam Ramachandran another.... Appellants.
Versus
Aravacode Chakungal Jayapalan... Respondent.
Appeal No. 813 of 1994 in Suit No. 1985 of 1981, decided on 17-6-2000.
Advocates appeared :
Virendra V. Tulzapurkar with T.N. Subramaniyam and Ms. Toral Shah i/b Tyabji Dayabhai Co., for the appellants.
K.K. Singhvi Sr.A. with S.U. Kamdar and V.K. Khemka, for the respondents.
Headnote:Specific Relief Act, 1963
-Sections 9 and 10-Readiness ~ Willingness-The time is never the essence of the agreement for sale of the immovable property between the parties. The purchaser has not declined to pay the balance of the consideration money or sought an in definite extension of time to pay the balance amount. Since, the second instalment was paid through a post dated cheque, it is clear that the purchaser was ready and willing to perform his part of obligations under the agreement. Because the time for the completion of the contract was unilaterally extended by the vendor, he is not entitled to cancellation of the contract and hence suit for specific performance deserves decreed.- The circumstances on the record of the case are thus sufficient to establish, in our view the time was never the essence of the agreement which had been entered into between the parties. The original agreement contained no such stipulation. Thereafter, the Appellants themselves, extended the time for the completion of the sale till 31.12.1981. The Respondent had, out of the second installment, paid an amount of Rs. 50,000/- on 31.3.1981 and the cheques for the balance were also forwarded on 30.9.1981. The Learned Single Judge has concluded in the circumstances that "Heavens were not going to fall if the payment of Rs. 45,000/- made by post-dated cheque was accepted by the defendants." It must be emphasised that this is not a case where the Respondent declined to pay the balance of the consideration or sought an indefinite extension of time to pay the second installment. The second instalment was in fact paid, though a part of it, by a post-dated cheque which was dated fifteen days after the payment of the installment. The Respondent was, thus, at all material times, ready and willing to perform his obligations under the agreement with the Appellants. The Appellants unilaterally, by their letter dated 12.9.1981, sought to make time the essence of the contract. This, in our view, was impermissible because this was not a case where the Respondent-Plaintiff has unreasonably delayed or neglected to perform his obligations under the agreement.
The law on the point is well settled. Ordinarily, time is not the essence of a contract for the sale of immovable property. The parties, in a given case, may make time of the essence either expressly in terms which unmistakably provide unmistakably that they intended to do so. Alternately, making of time as the essence of a contract may be inferred from the nature of the contract, the property or the surrounding circumstances. A mere stipulation in a contract laying down the time for performance is not sufficient to make time the essence of a contract for sale of immovable property. A party to a contract cannot by his unilateral act make time of the essence unless the circumstances are such as would establish that the other party to the contract had delayed or defaulted in the performance of his obligations under the agreement.
In Gomathinayagam Pillai v. Palaniswami Nadar, AIR 1967 Supreme Court 808, a Bench of three learned Judges of the Supreme Court placed the principle in the following words:-
"It is not merely because of specification of time at or before which the thing to be done under the contract is promised to be done and default in compliance therewith, that the other party may avoid the contract. Such an option arises only if it is intended by the parties that time is of the essence of the contract. Intention to make time of the essence, if expressed in writing, must be in language which is unmistakable; it may also be inferred from the nature of the parties and the surrounding circumstances at or before the contract. Specific performance of a contract will ordinarily be granted, notwithstanding default in carrying out the contract within the specified period, if having regard to the express stipulations of the parties, nature of the property and the surrounding circumstances, it is not inequitable to grant the relief. If the contract relates to sale of immovable property, it would normally be presumed that time was not of the essence of the contract. Mere incorporation in the written agreement of a clause imposing penalty in case of default does not by itself evidence an intention to make time of the essence.
Intention to make time of the essence of the contract may be evidenced by either express stipulations or by circumstances which are sufficiently strong to displace the ordinary presumption that in a contract of sale of land stipulations as to time are not of the essence. In the present case there is no express stipulation, and the circumstances are not such as to indicate that it was the intention of the parties that time was intended to be of the essence of the contract. It is true that even if time was not originally of the essence, the appellants could, by notice served upon the respondent, call upon him to take the conveyance within the time fixed and intimate that in default of compliance with the requisition the contract will be treated as cancelled. A observed in Stickney v. Keeble, 1915 AC 386, where in a contract for the sale of land the time fixed for completion is not made of the essence of the contract, but the vendor has been guilty of unnecessary delay, the purchaser may serve upon the vendor a notice limiting a time at the expiration of which he will to great the contract as at an end."
As regards the making of time of the essence of the contract by one party to the contract, the Supreme Court relied upon a judgment in 1915 AC 386 Stickney v. Keeble, where it was held that "if in a contract for the sale of land the time fixed for completion was not made of the essence of the contract, but the vendor had been guilty of unnecessary delay, the purchaser may serve upon the vendor a notice limiting a time at the expiration of which he will treat the contract as at an end.
In Govind Prasad Chaturvedi v. Hari Dutt Shastri, AIR 1977 SC 1005, the Supreme Court held that it was settled law that the fixation of the period within which the contract has to be performed does not make the stipulation as to time of the essence of the contract.
Similarly, a Bench of the five learned Judges in AIR 1993 Supreme Court 1742, Chand Rani v. Kamal Rani, held thus :
"It is clear that in the case of sale of immovable property there is no presumption as to time being the essence of the contract. Even if it is not of the essence of the contract, the Court may infer that it is to be performed in a reasonable time if the conditions are :
1.from the express terms of the contract;
2.from the nature of the property; and
3.from the surrounding circumstances, for example : the object of making the contract."
-Sections 9 and 10- Time essence of contract-ordinarily time is not essence of a contract. A party to a contract cannot by his unilateral act, make time of the essence of the contract unless circumstances are such as would establish that the other party to the contract had delayed the performance of his part of obligations of the agreement. So long as the purchaser is willing to make payment on or before the date fixed or within a reasonable time, the ordinary presumption of time, not being the essence of the contract, would not be displaced.
2.On 18-2-1981, an agreement for sale was entered into between the appellants as vendors and the respondent as purchaser of a property comprising of a plot of land admeasuring 481.25 sq.meters bearing plot No. 423-C out of a larger piece of land bearing City Survey No. 1285 (Part), Plot No. 423 of Suburban Scheme III of Chembur with a bungalow bearing Municipal No. 1137(2) standing thereon. Clause (1) of the agreement provided that the respondent shall purchase the property, in question, for a price of Rs. 10 lakhs which was to be paid as follows :---
(i) A sum of Rs. 1,00,000/- was paid as earnest money by the respondent to the appellants on or before execution of the agreement;
(ii) A further sum of Rs. 1,25,000/- was to be paid by the respondent to the appellants within two months from the date of the agreement; and
(iii) The balance of Rs. 7,75,000/- was to be paid by the respondent to the appellants on the completion of the sale.
Clause 8 of the agreement provided as follows :---
"8) The sale shall be completed on or before the 31st day of August, 1981 when upon payment of the balance of the purchase money as aforesaid the vendors and all other necessary parties, if any, shall execute a proper conveyance of the said property in favour of the purchaser in vacant and physical possession of the said property provided that the vendors may, at their option, postpone the execution of the conveyance as aforesaid up to the 31st day of December, 1981."
(emphasis supplied).
3.On 20-2-1981, the appellants forwarded six documents by their advocate's letter to the respondent's advocate for the purpose of making out a marketable title to the property. As stipulated in the agreement, an amount of Rs. 1,25,000/- was to be paid by the respondent to the appellants on or before 18-4-1981. On 31-3-1981, the respondent forwarded an amount of Rs. 50,000/- by cheque to the appellants. The respondent, did not pay the balance amount of Rs. 75,000/- before 18-4-1981. On 3-9-1981 the advocate for the appellants addressed a letter to the respondent's advocate setting out that the respondent had not paid in full the amount of Rs. 1,25,000/- within two months from the date of the agreement. The respondent was called upon to comply with the terms of the agreement by effecting payment within three days of the receipt of the letter. In para 3 of the letter dated 3-9-1981, the appellants sought to extend the time for the completion of the sale to 31-12-1981 in accordance with the provisions contained in Clause 8 of the agreement. Together with the said letter, the appellants sought from the respondent a draft deed of conveyance for approval so that the income-tax clearance could be obtained.
4.In reply to the aforesaid letter, on 7-9-1981 the respondent's advocate set out that an amount of Rs. 50,000/- out of the 2nd instalment had already been paid by the respondent and recorded that the appellants had agreed to receive the balance on or before the end of the month of September, 1981. The respondent accepted the extension of time for the completion of the sale up to 31-12-1981. Thereafter, by a letter dated 12-9-1981, the appellant's advocate denied that the appellants had agreed to receive the balance on or before 30-9-1981 as alleged. However, it was stated in the said letter that with a view to ensure that the transaction was completed smoothly, the appellants "accept" the 'undertaking' of the respondent that he would pay the balance amount of Rs. 75,000/- on or before 30-9-1981. In this letter, the appellants sought to make time the essence of the contract and stated that upon the respondent failing to pay the balance amount on or before 30-9-1981, the appellants will take further action in the matter.
5.On 14-9-1981 further correspondence was exchan
