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High Court Of Calcutta
D. K. SETH, JYOTESH BANERJEE
CEEAN INTERNATIONAL PRIVATE LIMITED - Appellant
Versus
ASHOK SURANA - Respondent
FIRST APPEAL 13 Of 2002
Decided On : 08/27/2002
In a suit for specific performance of a contract for sale of immovable property, the court held that the plaintiff was not ready and willing to perform the essential terms of the contract and that time was of the essence of the contract. The court further held that it would be inequitable to grant the relief of specific performance to the plaintiff in the facts and circumstances of the case and that the defendant never prevented the plaintiff from performing the essential part of the terms of the contract or had never waived any of the defendant's right. The court dismissed the suit for specific performance and decreed the suit for damages against the defendant.
Fact of the Case:
The plaintiff entered into an agreement for sale with the defendant No. 1 in respect of his 1/7th share in the suit property. The property was originally mortgaged to Hindustan Insurance Company on 31st May 1948. On 29th of October, 1960, Satya Prasanna died intestate leaving behind several heirs including defendant No. 1, who, admittedly, inherited 1/7th share in the property. In 1963, LIC filed a mortgage suit being the Title Suit No. 53 of 1963 before the subordinate Judge, 3rd Court, Alipore for realisation for the mortgage dues then outstanding amounting to Rs. 60,000/- approximately. On 19th of June 1967, a consent decree for Rs. 59,715. 81 was passed in a preliminary form with interest @ 7% per annum with quarterly rests against the defendants in the said suit. Subsequently, final mortgage decree was passed. The property was put to sale. One Rameswar Singh purchased the property in auction. On 6th May, 1987, an application for setting aside the mortgage decree was filed on the ground that the defendant No. 4 in the said mortgage suit was of unsound mind. On the other hand, LIC prayed for confirmation of sale. On 6th May, 1987, the prayer for setting aside the decree was rejected by the Executing Court by an order of the same date passed in Title Execution Case No. 9 of 1972. The application for confirmation of sale was also rejected on the same date. LIC filed F. M. A. 17 of 1988 against the said order refusing confirmation of sale. On 28th of February, 1994, the defendant No. 1 entered into an agreement for sale with the plaintiff in respect of his 1/7th share in the suit property. On being approached, the LIC on 19th April, 1994 declined part redemption and informed that a sum of Rs. 5,12,040. 72 was due on account of the mortgage decree. On 6th May, 1994, the defendant No. 1 by its letter (Exhibit B) asked the plaintiff to send the draft conveyance for obtaining Income Tax Clearance Certificate. In reply, the plaintiff through its letter dated 31st May, 1994 (Exhibit 3) asked the defendant No. 1 to get the property freed from encumbrance by redeeming the mortgage from LIC. The defendant No. 1 in his reply dated 11th June 1994 (Exhibit 'b-1') informed the plaintiff that the plaintiff was satisfied about the title of the defendant No. 1 and it was the plaintiff, who was to pay to LIC a sum of Rs. 70,000/ -. On 20th of June 1994, the plaintiff through its letter (Exhibit 4) asked the defendant No. 1 to make out a good and marketable title. On 28th of February, 1995, in the said appeal being F. M. A. No. 17 of 1988 dated 6th May 1987 rejecting the LIC's application for the confirmation of the sale filed by LIC, this Court had directed the defendant No. 1 to liquidate the entire dues of LIC including interest within one month. On 7th March 1995, a banker's cheque Rs. 5,40,366. 84 in the name of LIC was issued at the instance of the defendant No. 2. This was forwarded to LIC by the defendant No. 1 in terms of the order of the Court on 10th of March 1995. The LIC accepted the cheque against the mortgage decree in terms of the order of this Court on 14th of March 1995 on which date LIC granted receipt to the defendant No. 1. On this 14th of March 1995, the plaintiff filed Title Suit No. 90 of 1995 before the learned Munsif, 3rd Court, Alipore against the defendant No. 1 for a declaration and permanent injunction restraining him from transferring the property. This suit, however, was dismissed for default in 1997. On 28th April 1995, the present suit was filed. On 19th of June 1995, the defendant No. 1 sold his right, title and interest in the property to the defendant No. 2, appellant. The defendant No. 2 had purchased 3/7th share by negotiation and 2/7th share by virtue of decrees passed in Title Suit No. 146 of 1995 and Title Suit No. 147 of 1995.
Finding of the Court:
1. The plaintiff was not ready and willing to perform the essential terms of the contract. 2. Time was of the essence of the contract. 3. It would be inequitable to grant the relief of specific performance to the plaintiff in the facts and circumstances of the case. 4. The defendant never prevented the plaintiff from performing the essential part of the terms of the contract or had never waived any of the defendant's right.
Issues: 1. Whether the plaintiff was ready and willing to perform the essential terms of the contract? 2. Whether time was of the essence of the contract? 3. Whether it would be inequitable to grant the relief of specific performance to the plaintiff in the facts and circumstances of the case? 4. Whether the defendant prevented the plaintiff from performing the essential part of the terms of the contract or had waived any of the defendant's right?
Ratio Decidendi: 1. The plaintiff had agreed to purchase the property free from all encumbrances other than the encumbrance mentioned in the agreement, viz. the mortgage and the resulting suit and decree and the pendency of the appeal of LIC. Therefore, the plaintiff must show that he was ready to perform this essential part of the contract. 2. The other essential part of the contract was the time limit provided therein. The transfer was to be completed within three months from the date of the agreement. In default of completing the transaction within six months from the date of execution of the agreement would render the agreement invalid and earnest money forfeited. This was so intended as it can be discovered from the terms of the contract that the defendant No. 1 was eager to get the property sold at the earliest or else there was every likelihood of the auction sale being confirmed. 3. The other essential term was that the property is to be redeemed from LIC by the plaintiff/purchaser while restricting his liability towards payment for redemption of the property to LIC at Rs. 70,000/ -. 4. The next essential part of the contract was to furnish to the defendant No. 1 the draft conveyance in order to obtain clearance from the Income Tax Department under section 230a (1) of the Income Tax Act. 5. These essential terms of the contract can be found from clause (xi), (xii) and (xxi) of the recital of the agreement and clause (1), (2), (3), (4), (5), (6) and (8) of the terms and conditions of the agreement.
Final Decision: The court dismissed the suit for specific performance and decreed the suit for damages against the defendant No. 1 directing him to refund the earnest of Rs. 25,000/- together with damages assessed at Rs. 10,000/- and dismissed as against the defendant No. 2.
( 1 ) PRELIMINARY These appeals are directed against the judgment and decree dated 31st August 1999 passed by the learned Civil Judge, Senior Division, 8th Court, Alipore in a suit for specific performance of contract for sale being in Title Suit No. 33 of 1995. Against the said decree, defendant No. 1, vendor, has filed F. A. No. 14 of 2000, while the defendant No. 2, subsequent purchaser, has preferred F. A. No. 13 of 2000. Both these appeals, by consent of the parties, have been heard together. We propose to dispose of both the appeals involving common question of fact and law, by a common judgment. 1. 2. The plaintiff had succeeded in obtaining the decree of specific performance of the contract for sale of 1/7th share of the defendant No. 1 in the suit property. The said 1/7th share, however, was purchased by M/s. Ceean International Private Limited, appellant, in F. A. No. 13 of 2000 during the pendency of the suit. Submission on behalf of the appellant in F. A. 13 of 2000:
( 2 ) MR. Sudhis Dasgupta appearing with Mr. Bagchi and Mr. Sanjoy Jain, relying upon the various facts and materials on record contended that it was the liability of the plaintiff to redeem the share of the defendant No. 1 from the mortgage with LIC and also to purchase the property subject to the encumbrances referred to in the agreement. From the records, it was clear that the plaintiff was not ready and willing throughout to perform the essential part of the contract, which was to be performed by him. 2. 1. Referring to the amount due on account of the mortgage, he had pointed out that in order to avoid accrual of further interest, the defendant No. 1 intended to sell the property at the earliest. In that view of the matter, time was made essence of the contract, which has not been adhered to by the plaintiff. 2. 2. According to him, in order to obtain decree for specific performance in view of section 16 of the Specific Relief Act (SR Act), the readiness and willingness throughout is to be proved. If there is any lapse or intervening period, no specific performance can be granted. He had relied upon the decision in Mst. Sahida Bibi v. Sk. Golam Muhammad, AIR 1983 Calcutta 216 to support his contention and also on Manik Chandra Bhowmik v. Abhoy Charan Gope, AIR 1917 Calcutta 283; His Holiness Acharya Swami Ganesh Dassji v. Sita Ram Thapar, 1996 (4) SCC 526; and P. R. Deb and Associates v. Sunanda Roy, 1996 (4) SCC 423, in order to explain the meaning of readiness and willingness. 2. 3. He contended further that time was essence of contract is to be gathered from the surrounding circumstances and the conduct of the parties. At the same time, the readiness and willingness is also to be ascertained from the surrounding circumstances as well as conduct of the parties. In support of his contention with regard to time as essence of contract, Mr. Dasgupta relied on Chand Rani v. Kamal Rani, 1993 (1) SCC 519. 2. 4. He further contended that the defendant No. 1, as subsequent purchaser, was not entitled to contest the suit with regard to the readiness and willingness of the plaintiff in view of the law governing the field when the suit was decreed. Therefore, the defendant No. 2 could not adduce any evidence nor could examine any witness. Neither it could have cross-examined the witnesses of the plaintiff. According to him, the cross-examination relates to the defence of the defendants. As such, if the defence with regard to the absence of readiness and willingness and the plaintiff, is unavailable to the defendant No. 2, it could not have cross-examined the plaintiff's witnesses. Inasmuch as, such cross-examination would be in aid of its such unavailable defence. In support Mr. Dasgupta had relied on K. Venkataramiah v. A. Seetharama Reddy and Ors. , AIR 1963 SC 1526 (para 19 ). 2. 5. Relying on section 20 of the SR Act, Mr. Dasgupta contended that the decree for specific performance is a discretionary power of the Court. According to him,
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