An explicit provision making time of the essence in contracts obliges parties to perform within stipulated periods, and discretionary relief for specific performance can be denied if granting it would result in inequity.

JUDGMENT :

SOMASEKHAR SUNDARESAN, J.

Context and Factual Background:

1. This is a Petition filed under Section 34 of the Arbitration and Conciliation Act, 1996 (“the Act”) challenging an arbitral award dated May 31, 2013 (“Impugned Award”) passed by a Learned Arbitral Tribunal comprising a Sole Arbitrator in connection with disputes and differences between the Petitioner, Vasanji Assaria Mamania (“Mamania”) and the Respondent, Yadunarayan Mulky Shetty (“Shetty”).

2. The parties entered into a memorandum of understanding (“Agreement”) by which Mamania agreed to purchase from Shetty a certain land parcel located in Chembur, described in fuller detail in the Impugned Award, admeasuring 2,493.9 square metres (“Subject Property”), for a consideration of Rs. 11.25 crores, of which Rs. 50 lakhs were payable at execution; Rs. 1 crore was payable as and when Shetty removed the tenants from the premises and the balance Rs. 9.75 crores against completion of the conveyance. On the face of the Agreement, a date of execution is not discernible and there had been some differences about the precise date although there was no dispute about execution of the Agreement towards the end of April and start of May 2006. For all purposes of this judgment the date of the Agreement is taken as May 2, 2006, as indicated in the Impugned Award and in the pleadings in the Petition. As will be seen from this judgement, nothing would turn on this facet.

3. The parties agreed that if a survey of the Subject Property were to indicate a lower area, the consideration would be adjusted downwards proportionately. Within three months, Shetty was required to settle with all the tenants to get them to vacate the Subject Property; make out a marketable title to the Subject Property free from any encumbrance; have a survey conducted to demarcate the Subject Property at Mamania’s cost; and build a boundary wall around the Subject Property as per the survey coordinates, at Mamania’s cost. The conveyance too was expected to be completed within three months, subject to Shetty complying with the aforesaid obligations.

4. The Agreement records in two places that time was of the essence of the contract and on the face of it indicated a timeline of three months for completion. The parties agreed that in the event of non- completion due to Shetty’s default, Mamania would have the option of demanding specific performance; or demanding a refund of the “earnest money” with interest at 12% per annum. Likewise, if Mamania’s payment obligation were to not be honoured, Shetty would have the option to demand specific performance; or demand interest at 12% per annum for the period of delay in payment; or cancel the Agreement and forfeit the “earnest money” with anything excess paid being refunded with interest at 12% per annum after 30 days of electing to cancel the Agreement. The Agreement does not define the term “earnest money” although it is used twice and in one place, indicates a blank that has remained unfilled. The amount of Rs. 50 lakh agreed to be paid at signing of the Agreement has been treated as the earnest money.

5. Even before executing the Agreement, Mamania had paid a sum of Rs. 1.5 crores to Shetty. After execution, he made two further payments aggregating to Rs. 1.5 crores towards the end of July 2006, taking the total amount paid to Rs. 3 crores.

6. Mamania then filed Suit No.1255 of 2007 in this Court seeking specific performance of the Agreement. A deposit of Rs. 8.25 crores was made by Mamania with the Registry of this Court on June 27, 2007. By consent of the parties, the matter