Hon'ble Arvind Kumar Tripathi (II),J.
(Delivered by Prakash Krishna,J) The above appeal under section 96 of CPC is against the judgment and decree dated 8.12.2004 passed by Civil Judge (Senior Division) Allahabad in Original Suit No. 104 of 2000 (Smt.Sarita Rastogi Versus Ramesh Chandra and Others), where by the Court below has decreed the suit for specific performance of contract to sell dated 15.11.1988 and 16.11.1988 by providing that the defendants will execute the sale deed after giving adjustment of Rs.3,15,000/- out of Rs.6,00,000/-, within one month. The plaintiff, in pursuance of the finding returned under issue no. 3 shall deposit the balance court fees.
The respondent wherein instituted the aforesaid mentioned suit on the allegations that the defendants (appellants herein) on 15.11.1988 agreed to sell a parcel of land measuring 88 x 127 square meters (1003.32 square meters) for a sum of Rs.3,60,000/- out of which 75,000/- was given, as advance. It was agreed that the said parcel of land being Nazul property (lease hold property), the defendants will get the lease renewed and shall obtain permission ,from the State Government/Collector to sell the plot in favour of the plaintiff. The State Government sanctioned the grant of renewal of lease and even the format of lease deed was typed out on stamp paper but at that moment it was transpired that there is violation of some of the conditions of lease. Therefore, the Collector, Allahabad demanded compounding charges from the defendants but the defendants failed to make the payment of the compounding charges. Although the defendants assured that the matter will be worked out and after renewal/grant of the fresh lease, application for permission will be moved for sale of the demise property in favour of the plaintiff, which they failed to do so. A notice was served by the plaintiff to the defendants to do the needful in the matter, otherwise suit for specific performance will be filed. The receipt of the notice was acknowledged but as a Peshbandi, the defendants issued a notice to the plaintiff and offered to return back the part of the sale consideration paid in advance to the plaintiff. The plaintiff has all along being ready and willing to perform her part of the contract in terms of the agreement for sale dated 15.11.1988. The plaintiff was assured by the defendants that they will complete the formalities and get the site of the land converted into free hold as per the new free hold policy issued by the State Government and the plaintiff will pay the proportionate free hold charges and sundry expenses over and above the agreed terms and conditions. The plaintiff on the assurance given by the defendants also filed application for conversion of the lease hold land into free hold which has been denied by the Collector, Allahabad, there being no nomination in her favour by the defendants. The defendants on account of escalation of prices during the last three years have become dishonest and have refused to transfer the property in her favour, hence the suit.
The defendants filed written statement contesting the plaint allegations. The execution of the agreement to sell dated 15.11.1988 is, admitted. However, it was stated that two agreements were simultaneously executed on 15.11.1988, one is registered one which is in dispute and the another is unregistered one and is dated 16.11.1988. Under the unregistered agreement sale consideration was fixed at Rs.6,00,000/- and the defendants were paid a sum of Rs.1,40,000/- cash and Rs.75,000/- through cheque. The second agreement is unregistered one and was executed by the plaintiff to avoid the payment of stamp duty and to hide it from the Income Tax Department.
The defendants came out with the case that the original lease was in favour of their ancestral Shri Shanker Lal Vaish who expired on 23.1.1966 but the two renewals of the lease of 30 years each, were due. The defendants applied for renewal of the lease which was denied by the Collector, Allahabad and therefore, the sale deed could not be executed in favour of the plaintiff. Faced with this situation, a registered notice dated 1.6.1995 was given to the plaintiff informing her the factual situation and asking her to take back the advance money by making it clear in explicit terms that the contract to sell in view of the non renewal of the lease by the Government, has become infructuous and incapable of being performed. It was replied on 30.6.1995 by the plaintiff on incorrect facts.
Further, the suit for specific performance of contract having not been filed within three years from the date of the receipt of the notice dated 1.6.1995 but filed in the year 2000 is clearly barred by time. Plea that subsequently, the lease hold land has been got converted into free hold and thus it is not possible to perform the terms of the agreement in question was also raised. Certain other pleas that the suit is not properly valued etc. were also put forward.
The parties led evidence oral and documentary in support of their respective cases. The plaintiff examined her husband as PW 1 and the defendant no. 1 holding power of attorney of the other defendants examined himself as DW-1.
The following issues were struck by the Trial Court.
I) Whether the defendants executed an agreement to sell in respect of property in dispute in favour of the plaintiff for a sum of Rs. 6,00,000/- and received a sum of Rs. 1,40,000/- as earnest money?
II) What is the effect of unregistered agreement dated 16.11.1988 on the registered agreement dated 15.11.1988?
III) Whether the suit is under valued and the Court fee paid is insufficient?
IV) Whether the suit is bad for non joinder of State of U.P , Union of India and Nagar Nigam, as parties?
V) Whether the suit is barred by time?
VI) Whether the suit is hit by Sections 34 & 41 of Specific Relief Act?
The Trial Court under issue no. 1 found that under the agreements dated 15.11.1988 and 16.11.1988, the property in dispute was agreed to be sold for a sum of Rs.6,00,000/- and Rs.75,000/- was given on 15.11.1988 and on 16 .11.1988 Rs.1,40,000/- was paid to the defendants. Under Issue no.2, the Trial Court found that the agreement dated 16.11.1988 should be read along with the registered agreement dated 15.11.1988 and it will not adversely effect the agreement dated 15.11.1988. The plaint was found under valued and proper Court fee was not paid. The plaintiff was directed to pay the proper Court fees only then she will be entitled to get the decree executed, under issue no.3. Plea of non joinder of necessary parties was negated under issue no. 4. Under the issue no. 5 the Court held that the suit is not barred by time and period of limitation will start running from the date when the defendants got converted the lease into free hold. Issue no. 6 was decided in favour of the plaintiff as it was not pressed. Under issue no.7 it was found that there is a cause of action and the plaint is not liable to be rejected under Order 7 Rule 11 CPC. Under issue no. 8, the Trial Court found that the agreements in question dated 15.11.1988 and 16.11.1988 have not become infructuous or impossible and the performance under the agreement is possible. The suit was decreed for the specific performance of contracts dated 15.11.1988 and 16.11.1988 subject to payment of court fees, by the judgment under appeal.
Heard Shri Yogesh Agarwal, learned counsel for the appellant and Shri U.N.Sharma, learned senior counsel along with Shri Ravi Shanker Prasad for the respondents.
At the very outset it may be stated that only some of the findings returned under the various issues were challenged by the appellant's counsel. He has confined and focused his arguments to the following four points.
1. That the suit is barred by time and the finding recorded by the Trial Court under issue no. 5 in this regard is incorrect. The brief submission is that the period of limitation will start running from the date when the plaintiff has the notice that the performance has been refused by the defendants, ergo, limitation will run from the date of the receipt of the notice dated 1.6.1995.
2. That in any case the agreement to sell was executed in respect of lease hold right (Nazul Land). The State Government having refused to renew the lease, the performance of agreement in question has become impossible, and the defendants cannot be compelled to transfer freehold rights.
3. In any case, it is not a fit case where discretion should be exercised in favour of the plaintiff compelling the defendants to perform their part of the contract.
4. The agreement dated 16.11.1988 is unregistered document and has not been pleaded or made basis of the suit, the Court below committed illegality in passing a decree for its specific performance also.
Point No.1.
The learned counsel for the appellants submits that the plaintiff got the information through the notice dated 1.6.1995 of the defendants that the defendants have refused to perform their part of the contract. In view of the Article 54 of the Limitation Act, the period of limitation will start running when the plaintiff has noticed that the performance is refused and in this case it would be not later than 13.6.1995 the day on which the plaintiff gave the reply of the defendants' notice dated 1.6.1995. It may be placed on record that the factum of the defendants' notice dated 1.6.1995 and its reply given through reply dated 13.6.1995 are not in issue between the parties.
Refuting the above contention of the appellants' counsel, Shri U.N.Sharma submits that the period of limitation will not start running from 13.6.1995 but from a subsequent date, i.e when order converting the lease hold land to free hold was passed in favour of the defendants by the authorities concerned and within three years from that date the suit was filed. The Court was taken through the spot inspection report dated 14.8.1997 which was carried in respect of the plot in question in connection with the free hold proceedings. The period of limitation will start from that date. Therefore, according to him, the suit is within time. On legal plain submission is that Article 54 of the Limitation Act provides two modes for counting the prescribed period of three years of limitation. The present is one which falls in first part of Article 54 of the Act, submits the learned counsel for the respondent.
The Trial Court has proceeded to decide the question of limitation in favour of the plaintiff on the ground that the denial of performance of the contract by the defendants was not bonafide and on wrong facts. It was not bonafide act of the defendants to refuse the performance of their obligation under the said contract through notice 1.6.1995. It has proceeded on the footing that the defendants failed to pay the compounding charges as was demanded by the State Government and as such the lease could not be renewed. The defendants did not file application for permission to sell the plot in dispute to the plaintiff and as such the defendants are liable to execute the sale deed from the date when they got it converted into free hold. The plot in dispute having been converted into free hold property and the defendants have failed to execute the sale deed, it cannot be said that the suit is barred by time.
We are at a loss to find that the Trial court has decided the issue of limitation, without taking into consideration the relevant Article 54 of the Limitation Act, 1963, even.
The Court was taken through the sale agreement dated 15.11.1988 and clause no. 4 & 5 in particular. For the sake of convenience, the aforesaid clauses are reproduced below:
"4.That the first party shall, in cooperation, (in all needed), shall apply to the Collector for grant of permission to sell the demised property in favour of the second party within a month from the date of the execution and registration of the lease deed in favour of the first party, and shall give intimation of the receipt of permission within a month from date of its receipt. Thereafter it will be incumbent upon the first party to execute the sale deed transferring the demised property in favour of the second party after receipt of the balance of sale consider and the second party shall get the sale deed executed from the first party after payment of balance of consideration within the said period.
5. That however it will be open for the first party to apply and/or grant permission for division and separation of the lease in respect of the demised property and the grant of lease hold rights in favour and in the name of the second party directly by the State of Uttar Pradesh through the Collector or any other Competent Authority appointed in this regard. In that event too besides the payment of the balance of sale consideration mentioned above to the First Party, the Second Party shall have to bear and pay the entire premium, costs of division, for grant and transfer of lease in respect of the demised property in her name by the State of U.P."
1. The first party shall got the lease renewed and shall (i) apply to the Collector for grant of permission to sell of the demised property in favour of the plaintiff. (ii) The application for renewal shall be filed within a period of one month from the date of execution and registration of lease deed in favour of the vendors. 2. Thereafter, the vendors shall execute the sale deed. The first and foremost action on the part of the vendors to apply for renewal of lease which they did. But, whatever be the reason, it was refused. Consequently the vendors, were not expected to undertake the subsequent steps. Admittedly, the plaintiff was communicated by the vendors through notice dated 1.6.1995, that the renewal of lease has been denied. At this juncture, it is apt to reproduce Article 54 of the Limitation Act 1963 which is as follows: Description of suit Period of Time from which period limitation begins to run 54. For specific performance of a Three years The date fixed for the performance, contract. or, if no such date is fixed, when the plaintiff has notice that performance is refused. The aforesaid section has been subject matter of interpretation by various High Courts and the Apex Court as well.
The learned counsel for the appellants submits that the second part of the Article which provides that the time from which the period begins to run i.e if no date for the performance is fixed, when the plaintiff has notice that performance is refused, the period of limitation be counted.
On the other hand, the contention of the learned counsel for the respondent is that the first clause i.e time from which period begins to run - 'the date fixed for performance will apply'. The learned counsel for the respondent submits that clauses 4 & 5 of the agreement, reproduced above, would show that the defendants were required to apply to the Collector for grant of permission to sell the disputed property in favour of the plaintiff within a month from the date of executing and registration of lease deed in favour of the first party. The submission is that time for performance was fixed i.e one month from the grant of permission to sell by the Collector.
Reverting to the plaint allegations in paragraph 5 thereof, the plaintiff has stated that the State Government by its order (without giving any specific date of the order) sanctioned for grant of fresh lease and even the format of lease deed was typed on stamp paper and was to be signed by the Collector, Allahabad. However, before registration of the deed of lease in favour of the defendant, it was transpired to the authorities that the defendants have raised illegal and unauthorised construction for commercial purposes on part of the aforesaid site no. E/2 Civil Station, Allahabad (the disputed property lies within the said site). Compounding charges were demanded by the Collector but the defendants failed to pay the same. The husband of the plaintiff who has examined himself as PW1 has stated that the renewal of lease was sanctioned by the Government, the Government demanded compounding charges (for illegal and unauthorised constructions for commercial purpose made by the defendants on a part of the aforesaid site ) but not paid by the defendants.
Noticeably, there is no document on record to show granting renewal of lease in favour of the defendants. Logically it follows that the lease was not renewed ultimately.
The simplicitor case of the defendants is that the lease was not renewed and the matter ended there, with the result they got issued notice dated 1.6.1995. The contents of paras 2 & 3 of the said notice is extracted below:
"2. That the sale of the said property was subject to the renewal of the lease of the said site by the Government as well as the Government's permission for transfer of the same to you.
3. That the lease of the site has not been renewed by the Government and since the lease itself has not been renewed, the question of permission for transfer does not arise. The contract has, accordingly, become infructuous and incapable of being performed."
Two things fall:
Firstly, whatever may be the reason, the lease was not renewed. It is a fact accomplished.
Secondly, the defendants informed the plaintiff that since the lease has not been renewed, the question of grant of permission for transfer in favour of the plaintiff does not arise and as such the contract has become infructuous and incapable of being performed.
In the plaint, it is further pleaded that in paragraph 6 that inspite of lapse of considerable long time, when the defendant did nothing, the plaintiff got a notice served on the defendants to do the needful in the matter, else a suit for specific performance shall be filed. In the said paragraph, purposely, the date of notice etc. if any, given by the plaintiff has been omitted. In the later part of the plaint, it has been pleaded that the assurance was given by the plaintiff from time to time that they will get the plot in dispute converted into freehold and will sold it to the plaintiff on agreed terms and conditions contained in the agreement to sell dated 15.11.1988. In the cause of action clause, it has been stated that it arose finally on 3.12.1999 when the defendants refused to transfer the demise property in favour of the plaintiff.
In the written statement, the defendants have come out with the case that they repeatedly offered to return back the earnest money to the plaintiff. The plaintiff without the consent of the defendants unauthorisedly applied for the grant of freehold rights in the property in dispute which was rejected on the objection raised by the defendants.
We find that the pleadings of the plaintiff in plaint is very vague and lacks the particulars of the material fact. It has been camouflaged in such a manner to give an impression to the Court that the defendants treated the contract as continue to subsist, which is not so.
Having regard to the pleadings of the parties and the evidence led by them as delineated above, the Trial Court was not correct to say that the notice dated 1.6.1995 given by the defendants to the plaintiff was on wrong facts. There is nothing on record to show that the lease was ever renewed by the State Government. It appears that the matter relating to renewal of lease was processed and it was found that lease could not renewed due to some illegal commercial constructions existing on the site. It ended there. There is no evidence at least on record to show that any amount was demanded by the State Government as compounding fee. There is also nothing to show the quantum of the amount of compound, if any, on the record.
We therefore, conclude, in the absence of any evidence, that the renewal of lease was denied, for whatever may be the reason and the matter with regard to renewal of the lease had attained finality.
The Trial Court has proceeded in the matter in a very casual manner and somehow reached to the conclusion that the defendants never applied for permission to execute the sale deed in favour of the plaintiff. It conveniently overlooked the fact that in the absence of the renewal of the lease in favour of the defendants which was one of the essential terms, the latter could not apply for grant of any such permission. This would have been an exercise in futility..
It has misdirected itself that the plaintiff was under bonafide belief that the defendants would get converted the plot in dispute into freehold and would execute the sale deed. The material on record (clause 4 of the agreement) shows otherwise.
On the first day of the month of June 1995, the defendants had expressed their intention in writing vide legal notice that they would not perform their part of contract any further. In the absence of any overt act on the parts of the defendants to show that they had changed their earlier stand, the plea, by the plaintiff that the defendants assured that they will execute the sale deed, notice dated 1.6.1995 notwithstanding, is cock and bull story and cannot be accepted. Even otherwise also, we were not referred to any cogent or relevant material or evidence on record to show that the defendants thereafter in any manner agreed to abide by the terms of the agreement of sale.
Categorically, the defendants stand is that on the commencement of the new policy of freehold issued by the State Government not only they applied for conversion of land in question in freehold but they also opposed the conversion application filed by the plaintiff. This is definite indication on the part of the defendants that by the notice dated 1.6.1995 they have said goodbye to the contract. Not only that they also expressed their willingness to return the entire earnest money.
The reply to the above notice is dated 13.6.1995. The plaintiff in her reply has suggested that she is prepared and ready to get the lease in respect of the disputed demise property (site) converted into freehold on her costs. She further suggested that in view of renewal policy by the State Government, the transfer of demise site has not at all made it impossible and the defendants may get the lease of the site converted into freehold and charged the dues of amount from her and give no objection in her favour for conversion of lease into free hold in respect of demise property and that she will bear the entire cost. This would amount change in the term of the contract, or denovo contract which has not been reduced in writing.
It is interesting to note that in paragraph 7 of the reply, the plaintiff has stated that if she does not receive any communication in this regard, she will have no other option but to proceed in the matter one or the other ways and mode/modes as she may be advised.
Para 7 of the reply is reproduced below:
"That in case your clients have given up their mind to get the lease renewed/fresh lease granted or getting it converted into free hold, kindly ask your client to inform my client in writing within two weeks from the date of receipt of this reply to enable my client to apply to the State Government for grant of free hold rights in respect of demised property, in her favour and name on her own costs. However, in case my client does not receive any communication in this regard, she will have no other option but to proceed in the matter one or the other ways and mode/modes as she may be advised."
The defendants had been very assertive and clear in their mind that they are not going to honour the agreement in question any further which is evident from their letter dated 30.6.1995 given in reply to the plaintiff's reply. They have stated that they are not agreeable to the course suggested by the plaintiff. Their stand is that the suggestion given by her is not within the scope of the contract executed between the parties and no such thing was not within their contemplation when the contract was entered into.
Still, the defendants through their reply expressed in explicit terms that they are not going to keep the agreement alive any further and asked the plaintiff to have refund of advance money as offered through earlier notice dated 1.6.1995.
Having noticed the factual aspects of the case, we may now examine the issue with the legal angle, in terms of Article 54 of the Limitation Act.
The learned counsel for the appellants has placed reliance upon a recent judgment of the Apex Court in Ahmmadsahab Abdul Mulla versus Bibijan & others AIR 2009 SC 2193, (a decision given by a Larger Bench of three Judges on a reference made out to them), to show that it is second part of column three of Article 54 of Limitation Act, which shall be attracted and not the first part thereof.
The learned counsel for the respondent on the other hand has relied upon the following three decisions in support his contention that the suit is within time, under the first part thereof, i.e the period will begin to run from the date fixed for performance.
1. Ramzan versus Hussaini 1990 (1) SCC 104
2. S.Brahmanand and others versus K.R.Muthugopal and others (2005) 12 SCC 764
3. Panchanamdhara and others versus Monmatha Nath Maity and another 2006 Alld.C.J 2170 (SC)= AIR 2006 S.C 2281 All the aforesaid decisions are decisions given by different Division Benches of the Apex Court.
In view of the availability of a subsequent decision by a Larger Bench of the Apex Court, the law of precedent binds us, to follow subsequent decision of Larger Bench.
Out of three decisions relied by the learned counsel for the respondents, two of them were subject matter of consideration by the Apex Court itself in its subsequent decision in the case of Ahmmadsahab Abdul Mulla (Supra).
In Ahmmadsahab Abdul Mulla (Supra)., the Apex Court has examined the import of words 'Date' and 'Fixed' used in the aforesaid Article 54 of the Limitation Act. It has been held that 'Fixed' in essence means having final or crystalized form or character not subject to change or fluctuation. The relevant portions are reproduced below:
"6.`Fixed' in essence means having final or crystallized form or character not subject to change or fluctuation.
7. The inevitable conclusion is that the expression `date fixed for the performance' is a crystallized notion. This is clear from the fact that the second part 'time from which period begins to run " refers to a case where no such date is fixed. To put it differently, when date is fixed it means that there is a definite date fixed for doing a particular act. Even in the second part the stress is on `when the plaintiff has notice that performance is refused'. Here again, there is a definite point of time, when the plaintiff notices the refusal. In that sense both the parts refer to definite dates. So, there is no question of finding out an intention from other circumstances. Whether the date was fixed or not the plaintiff had notice that performance is refused and the date thereof are to be established with reference to materials and evidence to be brought on record. The expression `date' used in Article 54 of the Schedule to the Act definitely is suggestive of a specified date in the calendar. We answer the reference accordingly. The matter shall now be placed before the Division Bench for deciding the issue on merits."
The decisions given in the cases of S.Brahmanand and others versus K.R.Muthugopal and others (2005) 12 SCC 764; Ramzan versus Hussaini 1990 (1) SCC 104 relied by the learned counsel for the respondents, have been distinguished on the ground that in the case of S.Brahmanand and others versus K.R.Muthugopal and others (2005) 12 SCC 764, the Court did not go into the issue with regard to the expression ' date fixed' under Article 54 of the schedule to the Limitation Act. The case of Ramzan versus Hussaini (Supra) was related to the specific performance of contingent contract wherein it was held that the expression 'date fixed for performance' need not be ascertainable in the face of the contract deed and may be ascertainable on the happening of a certain contingent event specified in the contract.
We find that the third case relied by the respondent i.e Panchanamdhara and others(Supra), therein the Apex Court has relied upon its earlier judgment in the case of S.Brahmanand and others (Supra) as also in the case of Ramzan versus Hussaini (Supra). In paragraph 22 of the judgment, the Court found that in that case the period of performance of the agreement was extended and ultimately in paragraph 31 it was noticed that the period of execution of the deed of sale having been extended, the suit was not barred by time. The said case was decided in the peculiar facts and circumstances of that case.
The Apex Court in the case of Ahmmadsahab Abdul Mulla (Supra) has laid down that in the absence of date fixed for performance of sale agreement, the suit to be filed within three years of date when they had notice that performance was refused. The word 'date' has been explained. The expression 'date fixed' for the performance is a crystalized notion. While interpreting it has been laid down by the Apex Court that there is a definite point of time, when the plaintiff notices the refusal.
In the agreement to sell in question no 'date' is fixed for the performance of the contract. It was not argued that it is of contingent nature. The parties agreed to bind themselves by the terms of the contract executed between them. The renewal of the lease having been denied, the contract became unenforceable. By applying the said proposition, in the case on hand, it is crystal clear that admittedly the plaintiff noticed the refusal from the receipt of the notice dated 1.6.1995. For whatever reason it may be when she received the notice dated 1.6.1995, the period of limitation for filing the suit started running from that date. Once a period of limitation begins, it is an acknowledged position that the running of the period shall not be stopped subsequently.
On these admitted documents, the only irresistible conclusion which can be drawn is that the plaintiff has noticed that the performance is refused, in the month of June 1995 itself. The suit not having been filed within the period of three years, and was filed in the year 2000 is evidently barred by time as prescribed under Article 54 of the Limitation Act.
We are not impressed that the case shall be governed by the first part of column III of Article 54 of the Limitation Act, in view of the authoritative precedent of the Apex Court in the case of Ahmmadsahab Abdul Mulla (Supra), laying down that when date is fixed it means that there is a definite date fixed for doing a particular act. No date was fixed in the agreement in question for getting the lease renewed. Nor any date for execution of sale deed in favour of the plaintiff is fixed thereunder.
The finding recorded by the Trial Court on this point cannot be allowed to stand and the same is hereby reversed and set aside by holding that the suit is barred by time.
Point No.2 Next, Shri Yogesh Agrawal, learned counsel for the appellants submits that at the most, the appellants undertook to deliver the goods i.e transfer of leasehold rights which they had agreed upon under the contract dated 15.11.1988. Elaborating the argument, he submits that the defendants had agreed to transfer the 'leasehold right' with respect to the plot mentioned therein. The first term of the lease had expired 21.5.1962 it could be renewed twice for 30 years each term. After the agreement, the renewal of lease has been denied by the State Government in the year 1995. Subsequent thereto , the State Government floated a scheme for conversion of leasehold rights into freehold rights. After informing the plaintiff in the year 1995 through notice dated 1.6.1995, the defendants applied for conversion into free hold land as per the freehold policy which came into existence thereafter. The said freehold policy was not in contemplation of the parties when the agreement was executed. Under the said policy, the defendants have acquired ownership right, a new right. There is no provision under the said agreement to transfer the freehold right i.e ownership rights.
The submission is that the defendants have spent a huge sum of money for getting the plot in dispute freehold. The Trial Court was not justified in passing a decree asking the defendants to execute the sale deed in terms of the agreement dated 15.11.1988 after giving adjustment of Rs.2,15,000/- out of Rs.6,00,000/-. The attention of the Court was drawn that a sum of Rs.24,06,460.50 was demanded as conversion charges by the authority concerned in respect of entire site Nazul Plot No.E/2 Civil Station inclusive of the plot in dispute.
In view of the changed circumstances, the decree of the Trial Court is liable to be set aside, submits the counsel. .
In reply, the learned counsel for the plaintiff-respondent submits that she is ready and willing to bear the expenses incurred by the defendants qua the plot in question.
Having regard to the facts of the case as noticed with some detail in the earlier part of the judgment, we find the argument of the defendants deserves acceptance for the reasons more than one. The specific performance of contract means its actual execution according to its stipulation and terms. It is a remedy by which a party to a contract is compelled to do or omit the very acts which he has undertaken to omit.
Secondly, the Court while passing the decree under appeal lost site of the fact that it is now directing the defendants to execute a sale deed in respect of freehold land which was not a term of the contract dated 15.11.1988, on which the suit was filed. The stipulation under the contract agreement to sell was with regard to transfer of leasehold right in respect of plot in question. To put it differently, the Court below has rewritten a new contract giving higher rights to the plaintiff, but at the same time pegged, the price of the land at the agreed rate, which it could not do under law. It is neither equitable nor legal.
The argument of the learned counsel for the respondent-plaintiff that plaintiff will pay the proportionate conversion charges may be attractive but cannot be accepted. No such decree has been passed or could be passed.
Point No.3 The Section 20 of the Specific Relief Act provides that the grant of Specific Relief lies in the discretion of the Court. The Court must exercise such discretion on the basis of sound judicial principles. Its sub section(2) enumerates certain circumstances in which the Court may properly exercise discretion not to decree specific performance.
Section 20(2)(a) lays down that where the terms of the contract or the conduct of the parties at the time of entering into the contract or the other circumstances under which the contract was entered into are such that the contract, though not voidable, gives the plaintiff an unfair advantage over the defendant. In other words, Court should exercise discretion not to grant specific performance if the contract is not equal and fair. Even if, the contract is not voidable, Court may still not enforce the contract if it would not be consistent with the equity and good conscious to do so.
In such matters, the conduct of plaintiff is always an important element to be considered. After exchange of notices between the parties in the year 1995, there is nothing on record to show that the plaintiff took any concrete step by tendering money or otherwise to the defendants except lip service to show her willingness to share the time, money and energy spent by the defendants to acquire the freehold rights.
The facts of the present case are also covered under section 20(2)(c) of the Act which provides that where the defendant entered into the contract under circumstances which not rendering the contract voidable, make it inequitable to enforce specific performance.
Secondly, we could lay our hands to a recent decision of Supreme Court in Mrs. Saradamani Kandappan versus Mrs.Rajalakshmi & others AIR 2011 Supreme Court 3234 wherein it has been laid down that the old proposition that time is not essence of contract in respect of immovable properties requires re-visitation in view of changed circumstances arising out of inflation and steep increase of immovable properties. After a great detail of discussion, it has been held that there has been steep rise of immovable properties specially in urban area.
The third quarter of twentieth century saw a very slow but steady increase in prices. A drastic change occurred from the beginning of last quarter of the twentieth century. There has been a galloping inflation and prices of immovable properties have increased steeply by leaps and bounds. A judicial notice of the comparative purchase power of a rupee in the year 1975 and now, as also the steep increase in the value of immovable properties between then and now, can be taken.
It has been observed that it is no exaggeration to say that properties in cities, worth a lakh or so in or about 1975 to 1980, may cost a crore or more now.
The relevant paragraphs are reproduced below:
"25. The reality arising from this economic change cannot continue to be ignored in deciding cases relating to specific performance. The steep increase in prices is a circumstance which makes it inequitable to grant the relief of specific performance where the purchaser does not take steps to complete the sale within the agreed period, and the vendor has not been responsible for any delay or non-performance. A purchaser can no longer take shelter under the principle that time is not of essence in performance of contracts relating to immovable property, to cover his delays, laches, breaches and `non-readiness'. The precedents from an era, when high inflation was unknown, holding that time is not of the essence of the contract in regard to immovable properties, may no longer apply, not because the principle laid down therein is unsound or erroneous, but the circumstances that existed when the said principle was evolved, no longer exist. In these days of galloping increases in prices of immovable properties, to hold that a vendor who took an earnest money of say about 10% of the sale price and agreed for three months or four months as the period for performance, did not intend that time should be the essence, will be a cruel joke on him, and will result in injustice. Adding to the misery is the delay in disposal to specific performance, as suits and appeals therefrom routinely take two to three decades to attain finality. As a result, an owner agreeing to sell a property for Rs.One lakh and received Rs.Ten Thousand as advance may be required to execute a sale deed a quarter century later by receiving the remaining Rs.Ninety Thousand, when the property value has risen to a crore of rupees.
26. .....................................................
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27. A correct perspective relating to the question whether time is not of the essence of the contract in contracts relating to immovable property, is given by this court in K.S. Vidyanadam and Others vs. Vairavan - (1997) 3 SCC 1 : (AIR 1997 SC 1751 : 1997 AIR SCW 956) (by Jeevan Reddy J. who incidentally was a member of the Constitution Bench in Chand Rani, (AIR 1993 SC 1742 : 1993 AIR SCW 1371). This Court observed:
"It has been consistently held by the courts in India, following certain early English decisions, that in the case of agreement of sale relating to immovable property, time is not of the essence of the contract unless specifically provided to that effect.
In the case of urban properties in India, it is well-known that their prices have been going up sharply over the last few decades - particularly after 1973. .........We cannot be oblivious to the reality and the reality is constant and continuous rise in the values of urban properties - fuelled by large scale migration of people from rural areas to urban centres and by inflation.
Indeed, we are inclined to think that the rigor of the rule evolved by courts that time is not of the essence of the contract in the case of immovable properties - evolved in times when prices and values were stable and inflation was unknown - requires to be relaxed, if not modified, particularly in the case of urban immovable properties. It is high time, we do so."
Therefore there is an urgent need to revisit the principle that time is not of the essence in contracts relating to immovable properties and also explain the current position of law with regard to contracts relating to immovable property made after 1975, in view of the changed circumstances arising from inflation and steep increase in prices. We do not propose to undertake that exercise in this case, nor referring the matter to larger bench as we have held on facts in this case that time is the essence of the contract, even with reference to the principles in Chand Rani and other cases. Be that as it may."
The Trial Court as a fact noticed that there has been steep increase in the price of the property in dispute. That was the reason according to Trial Court which impelled the defendants not to execute the sale deed. The property in dispute lies is in the heart of the City, Allahabad and is urban property. A judicial notice can be taken that after the commencement of the freehold policy by the State Government, the prices of expired lease land have been increased tremendously. Earlier it was not possible to transfer a leasehold property without the permission of the State Government/District Magistrate, which was a uphill task. The grant of permission to sell a leasehold land or the land of which lease has expired was in the discretion of the authority concerned and they were guided more by their own notion and whims.
In Chandee Widya Versus Dr.C.C.Katial AIR 1964 S.C 978 a contract for sale of a house standing on Government plot was entered with the stipulation that the vendor shall obtain necessary permission before sale. Vendor filed the application but withdrew it. Suit for specific performance was filed. It was held that the Court could direct the defendant to file an application for grant of permission and if the permission is refused then the plaintiff will be entitled to get the damages. In the appeal on hands, we find that the application for renewal of lease was rejected, and so, no decree for specific performance could be passed.
In paragraph-4 of the plaint, it has been stated that the State Government sanctioned for grant of fresh lease but the date of the order of the State Government has not been mentioned. The sanction order, if any, passed by the State Government is not on the record and in the absence of any material, the averment in para-5 of the plaint is incorrect.
In paras-6 & 7, date of the notice and the reply given by the plaintiff has not been mentioned. The theory as set out in the subsequent paragraphs that the defendants gave their consent and permitted the plaintiff to apply for freehold in respect of the plot in question has been found to be incorrect. The defendants contested the conversion application filed by the plaintiff for grant of freehold rights tooth and nail and got it dismissed.
The defendants have come out with the case that the unregistered agreement dated 16.11.1988 was executed to avoid the payment of proper stamp duty and with a view to hide it from the Income Tax Department. If that is so, the agreement dated 16.11.1988 is not enforceable as its objects being contrary to law and hit by Section 23 of the Contract Act.
Viewed as above, it is appropriate to exercise the discretion as envisaged under section 20 of the Act, not to grant decree for specific performance of contract to sell dated 15.11.1988.
Point No.4 We are unable to comprehend as to how the agreement dated 16.11.1988 can be admitted in evidence being unregistered one and is not consistent with the terms and conditions of the registered agreement dated 15.11.1988.
Viewed as above, we find the appeal is on terra-firma and the judgment and decree dated 8.12.2004 of the court below is contrary to law and facts and cannot be allowed to stand. The same is hereby set aside. It is held that the suit is barred by time. The relief for specific performance of contract to sell as prayed for cannot be granted to the plaintiff.
The suit for specific performance of contract to sell is dismissed and by molding the relief, the suit is decreed for recovery of Rs.2,15,000/- against the appellants.
The appeal is allowed in part with costs throughout.
(Arvind Kumar Tripathi(II),J) (Prakash Krishna,J) Order Date :- 14.8.2012 IB