In specific performance cases, if time is of the essence and the buyer fails to perform within stipulated time, the contract is void and the plaintiff is not entitled to relief if material facts are suppressed.

1. Leave is granted in both the special leave petitions.

2. These appeals have been preferred from the judgment and final order dated 2nd September, 2008 passed in OSA No. 332/2007 and CMP No. 1/2007 by the Division Bench of the Madras High Court.

3. The controversy arose out of a suit of specific performance. M/s. Citadel Fine Pharmaceuticals (defendant No.1), a partnership firm, owned 66 cents of agricultural land (hereinafter 'the suit property'), forming a part of total of 2.87 acres of agricultural land in survey nos. 363, 364, 366/1 of Velachery village, Mamblam, Guindy Taluk, Registration District of Madras, and entered into an agreement for sale of the suit property (hereinafter 'the agreement') for a consideration of Rs.1,00,00,000/- with M/s. Ramaniyam Real Estates Private Limited (plaintiff), which was a company incorporated under the Companies Act, 1956 and engaged in the business of constructing buildings.

4. The agreement dated 7th July, 1995 was the subject matter of suit between the above parties. As per the agreement, Rs.10,00,000/- of the sale consideration was to be paid upfront as earnest money, and the remainder of Rs.90,00,000/- was to be paid at the time of the registration of the sale deed. At the time of agreement, the suit property was encumbered by way of security with M/s. State Bank of India, Guindy Branch (defendant No.2) and therefore one of the conditions of the agreement was that defendant No. 1 would get the suit property released from such encumbrance before the final payment of Rs.90,00,000/- was to be made. Apart from this encumbrance, it was stated in the agreement, the suit property was to be without any other encumbrance; vide clauses 2 and 6 of the agreement.

5. Of the said 66 cents, however, 19 cents were considered excess urban vacant land under the Tamil Nadu Urban Land (Ceiling and Regulations) Act (24 of 1978), (hereinafter 'the Tamil Nadu Act'). As per clause 7 of the agreement, it was for the plaintiff to have the land cleared for sale from the urban land ceiling authorities. Under clauses 8, 10 and 11 of the agreement, the sale was made time bound. Clause 10 stated that time was the essence of this contract. Clause 8 mandated that under all circumstances, the sale had to materialize within a year from the date of the agreement. In terms of clause 9, if the sale failed on account of lapses on plaintiff's part, the sale was to stand completely cancelled, and the earnest money of Rs.10,00,000/- was to be returned. As per clause 11, however, if the sale failed because of defendant No. 1, the plaintiff was at liberty to sue for specific performance of the contract.

6. In pursuance to the agreement, the earnest money was paid by the plaintiff and received by defendant No. 1. The plaintiff then preferred an application in Form 37 - I prescribed under R.48 - L of the Income Tax Rules, 1962, before the Appropriate Authority for the clearance of the suit property for sale vide S.269UC in Chapter XX of the Income Tax Act , 1961.

7. However, the Income Tax Authority refused such clearance on the ground that as per S.6 of the Tamil Nadu Act, agreement to sell a piece of urban land declared excess vacant land, or a piece of land, part of which had been declared excess vacant urban land, was deemed as null and void.

8. From the Statement and Objects and Reasons of the Tamil Nadu Act it appears that it was enacted to impose a ceiling on the quantum of land that could be held or owned within an urban agglomeration. The object of the Act was to prevent concentration of ownership of u