TaxTMI 
TaxTMI 
2002 (8) TMI 877
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....ommon 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 bee....
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....an, AIR1997SC1751 . Submission on behalf of the appellant in F.A. 14 of 20QO: 3. Mr. S.P. Roychowdhury, learned counsel appearing on behalf of the defendant No. 1, being the appellant in F.A. No. 14 of 2000 had supported Mr. Dasgupta. He had led us through various clauses of the agreement and had pointed out to the absence of readiness and willingness on the part of the plaintiff. He had reiterated the contention of Mr. Dasgupta to the extent that the plaintiff had been insisting upon performance at variance of the contract. He had also relied on the same decisions on which Mr. Dasgupta had relied. 3.1. In his deposition, the plaintiff himself had admitted that time was essence of the contract. But the plaintiff did not take any step despite being asked for by the defendant No. 1 through his letter. Unless a draft conveyance's handed over, the clearance under Section 230A of the Income Tax Act could not be obtained and that the plaintiff had refused to deliver the draft conveyance. He pointed out that in terms of Section 55 of the Contract Act, if a particular time is stipulated for performance of a particular term of a contract and if such part of the contract is not ....
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....uct of the parties, it appears that the time was never made essence of the contract. Inasmuch as, at one place three months was stipulated and in another place six months was stipulated. In any event, the essence of time is dependent on the redemption of the mortgage. If it takes a longer time, the principle of essence of time cannot be adhered to and implemented. 4.2. He had distinguished all the decisions cited by Mr. Dasgupta and Mr. Roychowdhury respectively. He pointed out that the defendant No. 2 is not entitled to agitate this point of readiness and willingness of the plaintiff since it had never contested the suit on those grounds. It had also not cross-examined the witnesses of the plaintiff. Therefore, it is precluded from assailing the same on those grounds. He further points out that when the suit was decided, the decision in Jugraj Singh and Anr. v. Labh Singh and Ors., (1995)2SCC31 was governing the field. This decision precluded a purchaser from challenging the readiness and willingness of the plaintiff. Therefore, even in appeal, this question is to be decided on the basis of the law that prevailed at that point of time. The action undertaken at that point of tim....
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.... for the purpose of this appeal. None of these documents could have any bearing either with regard to the readiness and willingness of the plaintiff or with regard to the question that time was essence of the contract or otherwise. Therefore, the application for additional evidence should be dismissed with costs. Facts: 7. Before we address ourselves on the respective questions raised by the learned counsel for the respective parties, we may refer to the relevant facts in order to appreciate the question involved herein. From the materials on record including those sought to be adduced as additional evidence, the facts may be summarised as hereafter. 7.1. The property originally belonged to one Satya Prasanna Basu, father of the defendant No. 1. The said Satya Prasanna Basu mortgaged the property with 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 ....
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....arded 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. 7.5. 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. 7.6. Subsequently, on 12th of September 1997. this Court modified the order dated 6th May 1987 of the Trial Court to the extent that if a sum of Rs. 1,50,000/- is paid to the auction purchaser, the matter would stand remitted to the Executing Court and in default, the auction sale woul....
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....ugraj Singh (supra). Now that the law has since changed, the case of the defendant No. 2 may come within the purview of Clause (aa) of Rule 27 Sub-rule (1) of Order 41 CPC. 8.3. At the same time, Section 20 SR Act makes the Court's power to grant specific performance discretionary guided by certain judicial principles as provided in Sub-section (2) thereof. In order to exercise such decision, if it appears to the Court that production of certain documents are required for the purpose of pronouncing judgment, the Appellate Court may resort to Clause (b) of Order 41 Rule 27(1) CPC. Under Section 20(2) SR Act, Court has to consider whether such grant would allow an unfair advantages to the plaintiff over the defendant or whether such grant could involve some hardship on the defendant, which the defendant did not foresee whereas it's non-performance would not involve such hardship on the plaintiff or where there are circumstances to make specific performance unquotable. 8.4. In such a case, if such application is made and such documents are produced and leave is sought for then it is a bounden duty of the Court to examine the said documents and arrive at a conclusion as t....
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....have been annexed, has since assailed by Mr. Bachawat. The other documents, which are not Court records, do find support from the Court records. Inasmuch as, the Court permitted deposit of the dues of LIC within a particular date and it was so deposited through Banker's cheque. Upon receipt thereof, LIC had issued its receipt. A further order was obtained for deposit of a sum of Rs. 1,50,000/- as Interest or compensation payable to the auction purchaser. The auction purchaser was allowed to withdraw the above amount as well as the amount deposited by him. Pursuant to such order, the sum of Rs. 1,50,000/- was deposited within the time stipulated. Thus, having regard to the facts and circumstances of this case, the ratio decided in Ashalata (supra) cannot be attracted. 8.8. Mr. Bachawat had also relied on Sobharam Tikaram and Ors. v. Rajkumar Munnalal and Ors., AIR1959MP118 . In the said case, it was held that the reception of additional evidence at appellate stage by the Court depends on the test as to whether the Appellate Court is able to pronounce judgment on the material before It without taking into consideration the additional evidence sought to be adduced. Such discret....
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.... they are necessary parties to the suit, since any decree obtained by the plaintiff would be binding on the subsequent purchasers, the plea that the plaintiff must always be ready and willing to perform his part of the contract is available only to the vendor or his legal representatives, but not to the subsequent purchasers. Admittedly, this, was the law that governed the filed till the decree in the instant suit was passed, namely, on 31st August 1999. Therefore, the defendant No. 2 was not entitled to contest the suit on any of these questions. But defendant No. 2 was a necessary party to the suit as subsequent purchaser and was so made a party to the suit and the decree is binding on it. It has preferred the appeal, which is now being heard. 9.1. Subsequent to the decree but before this appeal is taken up for hearing the law has since changed. The Apex Court in the three Judge Bench in Ram Awadh (dead) by LRS and Ors. v. Achhaibar Dubey and Anr., [2000]1SCR566 , the decision in Jugraj Singh (supra) was held to be erroneous and was overruled. In the said decision, it was held that the obligation imposed by Section 16 SR Act is upon the Court not to grant specific performance ....
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....91 (FB) as well as Lachmeshwar Prasad Shukul v. Keshwar Lal Chaudhuri. 9.3. Mr. Bachawat, on the other hand, sought to contend that the changed law has no retrospective application. As such the appellant cannot take advantage of the decision in Ram Awadh (supra). He relied on L.C. Golak Nath and Ors. v. State of Punjab and Ors., [1967]2SCR762 . But that principle has no manner of application in a case where the order has not reached finality. Appeal is a continuation of proceedings, the judgment and decree is subject to appeal and has not reached finality. Therefore, no right appears to have been vested in the plaintiff in order to attract the mischief of affecting vested right. 9.4. Therefore, the changed law would govern the field. Under the changed law, the defendant No. 2 is equally entitled to resist the decree on all points available to defendant No. 1. Can a party in appeal contest an issue not contested in suit?: 10. It will make no difference in such a case where a party was precluded from contesting the suit on these points/issues on account of being disentitled in law then governing the field. The principle, on which such right is denied to a party in appeal ....
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.... the other side of the actual case that is going to be made when the turn of the party on whose behalf the cross-examination is being made, comes to give and lead evidence by producing witnesses. But this decision does no help us in the present case where the defendant No. 2 could not cross-examine because of the law prevailing at that point of time. Mr. Bachawat had also sought to contend that the defendant No. 2 could have cross-examined the witnesses, but Mr. Dasgupta relied on K. Venkataramiah v. A. Seetharama Reddy and Ors., [1964]2SCR35 in order to contend that no such cross-examination would be permissible since it would touch his defence which the defendant No. 2 was not permitted to defend in view of the law then prevailing. Defendant. No. 2 transferee for value without notice: Lis pendency: 11. The ground that the defendant No. 2 was a bona fide transferee for value without notice cannot be available in the facts and circumstances of this case. This principle would have been applicable to him as provided in Section 19(b) SR Act if the transfer was a pre-suit transfer. Admittedly, the transfer was effected on 19th June 1995. Whereas the present suit was filed on 28th....
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....n intended to be established by the contract; or (5) he willfully acts In subversion of the relation intended to be established by the contract; or (6) he fails to aver that he has performed the essential terms of the contract to be performed by him; or (7) he was always ready and willing to perform the essential terms of the contract to be performed by him; or (8) he was prevented by the defendant from performing any part of the contract; or (9) the defendant had waived performance of any part of the contract; and (10) he has to prove the conditions contained in (6) to (8). According to the explanation, much readiness and willingness to perform the contract must be according to the true construction of the contract. Was the plaintiff ready and willing?: 13. In this background, now we are to examine whether the plaintiff was ready and willing and was always ready and willing to perform essential part of the contract according to its true construction to be performed by him. Essential terms are those which are absolutely vital to the bargain, a violation whereof will alter the mutual relationship of the parties in such a manner that it would no longer be equitable to decree th....
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....y sold at the earliest or else there was every likelihood of the auction sale being confirmed. Therefore, the performance within the time stipulated was also an essential part of the terms of the contract. 13.3. 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/-. If we read the agreement as a whole, it will be clear and unambiguous that this redemption was a part to be performed by the purchaser and not by the vendor and that the limitation of the liability of the purchaser at Rs. 70,000/- indicates that in case the property is not redeemed, the liability of the purchaser was restricted to Rs. 70,000/- and not more. This again goes to show that the agreement was intended for being sold together with the encumbrances of the said mortgage, suit and the decree with LIC and not free from it. 13.4. 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. 13.5. These essential terms of....
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....th May, 1994, being Exhibit 'B', requested the plaintiff to forward the draft conveyance in order to enable him to obtain clearance from the Income Tax Department under Section 230A(1) of the Income Tax Act. In reply, the plaintiff in his letter dated 31st May, 1994 (Exhibit 3) pointed out that the defendant No. 1 should make out a good and marketable title to his satisfaction in respect of the 1/7th share of the defendant No. 1 free from all encumbrances, impendence, trust, charge and/or attachment whatsoever subject to what was stated in the said agreement and that the defendant No. 1 had failed and neglected to make out a good and marketable title in respect of the said property and to get the mortgage of LIC released in respect thereof. Therefore, there was no question of sending the draft deed of conveyance. In the said letter, he had insisted that the defendant No. 1 was to make out a good and marketable title to the satisfaction of the plaintiff in terms of the agreement and that he was not obliged to send the draft conveyance neither the defendant No. 1 was obliged to obtain the Income Tax Clearance. The defendant No. 1 in his reply dated 11th June 1994 (Exhibit ....
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....ract. The plaintiff was not ready and willing to redeem the mortgage. But that could not have been done by him since part redemption was subject to the agreement of LIC, a third party to the contract. LIC declined part redemption of the mortgage. Therefore, non-compliance of redemption by the plaintiff would not make him disentitled to obtain specific performance of the contract. But, he cannot insist that the property should be made free from the mortgage when he had agreed to purchase the property on 'as it is' condition subject to the encumbrance mentioned in different clauses, namely, that the property is free from all encumbrances etc. but subject to the mortgage with LIC and the pendency of the execution case and the appeal as disclosed in the agreement. 13.10. Therefore, the essential part of the contract to be performed by the plaintiff was to complete the transaction and purchase the property with the encumbrances of the mortgage, the suit, the execution and the appeal respectively as mentioned in the agreement on 'as it is' condition. However, his liability towards LIC was limited to Rs. 70,000/-. But the plaintiff made it clear that he was not willing ....
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....had relied on Mst. Sahida Bibi v. Sk. Golam Muhammad, AIR1983Cal216 . In the said decision, it was held that one cannot enforce specific performance when he has become incapable of performing or violates any essential term of the contract that on his part remains to be performed, or acts in fraud of contract, or willfully acts at variance with or in subversion of the relation intended to be established by the contract. This relief would also be barred when he fails to aver and prove that he has performed and was always ready and willing to perform the essential terms of the contract, which are to be performed by him, other than those prevented or waived by the defendant. A plaintiff who seeks specific performance of contract has to show, first, that he had performed or was ready and willing to perform the terms of the contract on his part to be then performed, and secondly, that he is ready and willing to do all matters and things on his part thereafter to be done. A default on his part in either of these respects furnishes a ground upon which the action may be resisted. It is true that under explanation (i) to Section 16 SR Act, it is not essential for the plaintiff to actually te....
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....is part of the contract. Referring to the conduct of the party and the attending circumstances, the Court may infer from the facts and circumstances whether the plaintiff was ready and always ready and willing to perform his part of the contract. In P.R. Deb & Associates v. Sunanda Roy, [1996]3SCR163 , the Apex Court had held relying on Chand Rani v. Kamal Rani, AIR1993SC1742 , a Five Judge Bench of the Apex Court held that time was essence of the contract and having regard to the attending circumstances, it was held that he was not ready and willing to perform his part of the contract. 14.3. Applying the above principles in the present case, we also find that the facts as disclosed on record are sufficient to demonstrate that the plaintiff was not ready and willing nor he was always ready and willing to perform his part of the contract, though there was no absence of readiness and willingness on the part of the defendant No. 1. Was time essence of contract?: 15. Ordinarily time is not an essence of the contract for specific performance of sale of immovable property. But, when it is specifically incorporated in the terms of the contract, then it has to be gathered from the....
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....as pending. There was every likelihood of confirmation of the sale and thereby the vendor's attempt to sell the property, subject to the encumbrances as stated in the agreement, would be belied, if there was delay. 15.2. From these attending circumstances, it appears that time was intended to be made essence of the contract and the reasonableness and proximity would be adhered to the time intended by the parties. In the present case, it being mutually agreed for 3 (three) months extendable for another 3 (three) months, i.e., total 6 (six) months, the Court normally ought not to extend it beyond that 6 (six) months. Even if it does so, it cannot extend treble or four times the period originally intended. Even then, if we accept treble, then it would be 9 (nine) months and not beyond. Even then there would be mounting interest and there would have been every likelihood of the sale being confirmed and the right of the vendor being lost forever. Having regard to the facts and circumstances of this case, we are not prepared to extend the time beyond it, namely, 6 (six) months from the date of agreement which is double the period stipulated and was agreed to by the parties mutuall....
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....ct relates to a sale of immovable property, it would normally be presumed that time was not essence of contract. 15.5. In Jamshed Khadaram Irani v. Burjorji Dhunjibhai ILR 40 Bom 289, the Judicial Committee of the Privy Council observed that the principle underlying Section 55 of the Contract Act did not differ from those, which obtained under the law of England as regards contracts for sale of land. The Judicial Committee observed that it should take place within a reasonable time. Their Lordships, however, added to the said observation of Lord Cairns in Tilley v. Thomas (1867) 3 Ch App 61 that the special jurisdiction of equity to disregard the letter of the contract in ascertaining what the parties to the contract are to be taken as having really and in substance intended as regard time, of its performance may be excluded by any plainly expressed stipulation. But to have this effect the language of the stipulation must show that the intention was to make the rights of the parties depend on the observance of the time limits prescribed in a fashion, which is unmistakable. The language will have this effect if it plainly excludes the notion that these time limits were of merely ....
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....hen It would be allowing the plaintiff an unfair advantage independent of the contract, inequitable for the defendants. Section 55 Contract Act: 16. Section 55 Contract Act prescribes that if some part of the contract is to be performed within a particular time and if it Is not performed, then it becomes voidable at the option of the promise if the intention of the parties was that the time should be the essence of the contract. In the present case, it was agreed that the plaintiff would perform the contract within the time stipulated and if he was unable to do it then the vendor/ promisee would be entitled to opt to make the contract voidable. Section 20 SR Act: 17. Section 20 makes the grant of specific performance of a contract discretionary. The Court is not bound to grant such relief merely because it is lawful to do so. However, such discretion of the Court is not arbitrary but be sound and reasonable guided by Judicial principles and capable of correction by Court of Appeal, The conditions under which the Court may exercise such discretion and may not decree a specific performance, are specified in Clause (a), (b) and (c) of Sub-section 2 of Section 20, which are....
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....in case of immovable properties, evolved in times when prices and values were stable and inflation was unknown, therefore, such rule requires to be relaxed, if not modified, particularly, in the case of urban immovable properties. It is high time the Courts do so. 17.2. In the present case, apart from rising of price, the defendant No. 1 had two difficulties staring on his face, one that the interest was mounting and the other that the confirmation of sale was awaiting, which prevented the defendant No. 1 from wasting time and waiting for an indefinite period. This was the reason why he had intended to sale the property with the stipulation making the agreement subject to the encumbrances referred to therein and to sale the property 'as it is' within the time stipulated and in default of the maximum limit of time, the agreement would stand cancelled and the earnest money would stand forfeited. 17.3. Having regard to the facts and circumstances of this case, the conduct of the parties, the expressed terms used in the agreement, the attending and surrounding circumstances at or before the agreement and the materials on record as discussed above, we are of the view that ....