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1979 Supreme(Del) 221

High Court Of Delhi
KAMAL RANI - Appellant
Versus
CHAND RANI - Respondent
REGULAR FIRST APPEAL 15 of 1975
Decided On : 10/26/1979

Advocates Appeared:
D.K.KAPUR, P.K.Seth, S.L.Bhatia

Payment of consideration within a stipulated time can be held to be of the essence of the contract even with regard to payment of consideration if from a reading of the agreement and the appreciation of the surrounding circumstances it appears that reciprocal promises had to be performed, in order that the transaction contemplated by the agreement is completed.

Headnote:

SPECIFIC PERFORMANCE - SALE OF IMMOVABLE PROPERTY - PAYMENT OF CONSIDERATION WITHIN STIPULATED TIME - ESSENCE OF CONTRACT - INTERPRETATION OF AGREEMENT - READINESS AND WILLINGNESS TO PERFORM CONTRACT - BREACH OF CONTRACT - FORFEITURE OF EARNEST MONEY.

Fact of the Case:

The appellant and the respondents entered into an agreement for the sale of an immovable property. The agreement stipulated that a sum of Rs. 98,000 was to be paid by the respondents within 10 days of the execution of the agreement. The respondents failed to pay the amount within the stipulated time. The appellant treated the contract as breached and forfeited the earnest money of Rs. 30,000 paid by the respondents. The respondents filed a suit for specific performance of the agreement.

Finding of the Court:

The court held that the payment of Rs. 98,000 within 10 days was of the essence of the contract. The respondents were not ready and willing to perform their part of the contract as entered into. They were ready and willing to go through with the sale transaction by varying the conditions to suit their convenience. The appellant was justified in treating the contract as breached and forfeiting the earnest money.

Issues: 1. Whether the payment of Rs. 98,000 within 10 days was of the essence of the contract? 2. Whether the respondents were ready and willing to perform their part of the contract? 3. Whether the appellant was justified in treating the contract as breached and forfeiting the earnest money?

Ratio Decidendi: 1. The court interpreted the agreement and found that the word "only" was used twice in clause 1 of the agreement. The first time it was used to qualify the amount of Rs. 98,000. The second time it was used to qualify the period of 10 days. The court held that the word "only" was used in the context of specifying the time for performance of an obligation and not in the context of specifying the amount. 2. The court found that the respondents were not ready and willing to perform their part of the contract as entered into. They insisted on the appellant giving possession of one room on the ground floor as a condition precedent to their paying Rs. 98,000. They also insisted that the appellant obtain income-tax clearance certificate and redemption of property before they paid Rs. 98,000. These conditions were not justified in terms of the agreement between the parties. 3. The court held that the appellant was justified in treating the contract as breached and forfeiting the earnest money. The respondents had committed a breach of contract by failing to pay the amount of Rs. 98,000 within the stipulated time and by insisting on conditions that were not justified in terms of the agreement.

Final Decision: The appeal was allowed and the suit for specific performance was dismissed. The respondents were granted a decree of Rs. 30,000 in their favour and against the appellant.

PRAKASH NARAIN, J.

( 1 ) THIS appeal arises out of the judgment and decree of a learned Single Judge of this court sitting on the original side whereby a suit for specific performance of an agreement to sell immoveable property has been decreed.

( 2 ) THE appellant and the respondents entered into an agreement dated August 26, 1976 (Exhibit Public Witness 8/28) whereby the appellant agreed to sell her house and property comprised of a freehold plot bearing No. 30, Block K, Green Park, New Delhi, measuring 311 sq. yards with a double storeyed residential house constructed thereon along with fixtures and fitting for a sum of Rs. 1,78,000 to the first respondent, Smt. Chand Rani. The second respondent, Shri Niranjan Nath, is the husband of the first respondent, Smt. Chand Rani. A sum of Rs. 30,000 was paid at the time of the execution of the agreement, Exhibit Public Witness 8/28. A further sum of Rs. 98,000 was stipulated as payable within 10 days of the execution of the said agreement and the balance of Rs. 50,000 was to be paid at the time of the registration of the sale-deed. It wa"s agreed between the parties that the appellant would redeem the property by paying off a loan of Rs. 25,000 out of the sum of Rs. 30,000 paid at the time of the execution of the agreement. The property was mortgaged with the Life Insurance Corporation of India. The appellant was also to get the income-tax clearance certificate from the income-tax authorities. The sale-deed was to be executed on or before October 31, 1971. The first floor of the house was let out to tenants at the time of the execution of the agreement. It was stipulated by the said agreement that the appellant would hand over documents pertaining to the property in suit along with the vacant possession of the first floor by September 30, 1971 and possession of the front portion of the said property at the time of the registration of the sale-deed. The amount of Rs. 30,000 was to stand forfeited to the appellant if respondent No. 1 failed to pay the consideration and get the sale-deed registered within the agreed time.

( 3 ) THE respondents filed a suit for specific performance of. the said agreement on November 27, 1971. It was alleged that though the respondents called upon the appellant to complete the sale and though various letters and notices were issued to her she failed to fulfil her part of the bargain and in fact by a letter dated September 15, 1971 resiled from the contract on the plea that the first respondent had failed to pay the stipulated amount of Rs. 98. 000 within 10 days of the execution of the foresaid agreement, i. e. by September 6, 1971 and, therefore, the agreement stood anulled and the sum of Rs. 30,000. 00 stood forfeited to the appellant. In reply to the said communication the first respondent wrote to the appellant calling upon her to execute the sale-deed in her favour offering to pay the remaining consideration at the time of the execution of sale-deed. As the appellant failed to comply with the said demand the suit for specific performance was filed claiming specific performance of the said agreement or in the alternative damages in the sum of Rs. 1,50,000 including refund of Rs. 30,000.

( 4 ) THE appellant in reply to the suit admitted the execution of the agreement dated August 26, 1971 and receipt by her of the sum of Rs. 30,000. She, however, maintained that payment of Rs. 98,000 within 10 days of the execution of the agreement. Exhibit Public Witness. 8128, was essence of the contract and inasmuch as that amount was not paid, she was entitled to treat the contract as having become null and void. She admitted that she was to take necessary steps for redemption of the property in suit and the documents were to be delivered by September 30, 1971 but maintained that all this was to be done only on payment of Rs. 98,000 within 10 days of the execution of the agreement. As far as possession was concerned, she stated that she was bound to give possess

























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