TaxTMI 
TaxTMI 
2022 (8) TMI 1565
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.... Mr. Ajay Kumar, Adv., Mr. Vaibhav Shukla, Adv. JUDGMENT KRISHNA MURARI, J. 1. Leave granted in all the matters. C.A. NO. 5822 OF 2022 (ARISING OUT OF SLP (C) NO. 13565 OF 2021) 2. The present civil appeal arises out of the impugned judgment dated 23.04.2021 in A.S. No. 998 of 2010, passed by the High Court for the State of Telangana at Hyderabad. 3. Siddamsetty Infra Projects Pvt. Ltd., who is the respondent herein, had filed a suit for specific performance against the appellants, Smt. Katta Sujatha Reddy and Smt. Kamireddy Geetha Reddy, who were respondents 6 & 8 respectively, among others in the suit. 4. A conspectus of the facts necessary for the disposal of the appeals is as follows: One late D Narayana, predecessor­in­interest of the respondent no. 2 and 3, was the owner of an agricultural land bearing Sy. No. 300­309, admeasuring 141.05 acres, situated in Budvel Village, Rajendra Nagar Mandal, Ranga Reddy District, Hyderabad. The appellants herein acquired certain extent of the land from the aforesaid predecessor­in­interest through an agreement dated 19.03.1994. In pursuance to this agreement, two registered Joint GPA'S dat....
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....ternative reliefs of delivery of possession and for refund of Rs. 34,80,850/­ with interest @36% per annum as pleaded in the plaint? 5. To what relief? 8. In response to issues (1) and (2), taking into consideration the evidence available on record, the trial Court held that the purchaser was never put in possession of the property. On the issue of payment, it was held that the purchaser never made the total payment of Rs. 34,70,000/­ under the agreement of sale. It was discovered during the course of cross and chief examination, that the purchaser had issued a cheque for Rs. 5,00,000/­ which was dishonoured. This information was not shared by the purchaser and hence the purchaser had suppressed material evidence. 9. The trial Court further held that the burden of proof lies on the person who pleads that time is the essence of the contract. It was further observed that in respect of an immovable property, time is not the essence of the contract unless the same is explicitly mentioned in the agreement of sale and the parties through their conduct have treated time as the essence of the contract. The lower Court observed that Clause 3 in the ....
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.... by way of a first appeal, being A.S. No. 998/2010. The High Court framed 7 issues for adjudication of the matter which are as under;­ 1. Whether the suit is barred by limitation? 2. Whether the purchaser proved it's possession over the suit schedule property? 3. Whether the plaintiff was ready and willing to perform his part of the contract and paid balance sale consideration within the stipulated time in the suit agreements? 4. Whether the trial court is right in holding that the time is not the essence of the contract and whether the same can be attacked by the defendants without filing cross objections? 5. Whether the trial court is right in not exercising its discretion for granting relief of specific performance? 6. Whether Section 10 of the Act as substituted by Act 18 of 2018 is prospective or retrospective in nature? 7. To what relief? 14. In response to point (1), the High Court has held that Clause 3 of the agreements did not stipulate time as the essence of the contract. Moreover, the vendor has not exercised the option of forfeiting the advance amount as per Clause 3 of the agreements. The High ....
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....inations stating that they did not receive the sale consideration. The vendors further took the false plea that the necessary documents and certificates as per clause 3 of the contract were obtained from the concerned departments, and hence the said point was answered in favour of the purchaser. 19. On point (6), the High Court held that when a provision is replaced by way of substitution, the substituted legislation operates retrospectively and not prospectively. It further held that specific relief in essence is a part of the law of procedure, and hence it is a retrospective law. The High Court then went on to state that an appeal is a continuation of the suit, and hence any change in law between the date of passing of the decree and the decision of the appeal must be taken into consideration. Based on the above analysis, the High Court held that Section 3 of the Amended Act is retrospective in nature and applies to pending proceedings. 20. On point (7), the High Court held that since the purchaser succeeded on all points, it partly allowed the appeal and directed the vendors to register the suit property in favour of the purchaser, to the extent of the amount paid by the p....
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....n possession cannot be a ground on which the Court can refuse grant of specific performance. Delivery of possession is ancillary to the relief sought and such an issue would be inconsequential. vi. In the light of the amendment to Section 10 of the Specific Relief Act, the jurisdiction to grant specific performance of a contract is no longer discretionary and it is mandatory for Courts to grant such relief, unless the case at hand falls within the statutorily carved out exceptions. 23. Mr. Mukul Rohatgi and Mr. Harish Salve, learned Senior Counsel appearing on behalf of the vendors, submitted as follows: i. The purchaser did not approach the Court with clean hands. The balance amount was not paid within the stipulated time period and the trial Court found the purchaser's statement regarding possession to be false inter alia, for the following reasons: (a)In the suit, there was an alternate prayer seeking possession. If the purchaser was already in possession, such a prayer would not have been made. (b)The purchaser has not mentioned any specific date as to when they were put in possession of the property. (c)As per the draft sale deed....
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....e impugned judgement erroneously states that the amendment is merely procedural and would apply retrospectively. vii. The High Court has misconstrued Section 12 of the Specific Relief Act. The section would not be applicable to the present case as the question of 'inability to perform a contract' does not arise. viii. Reliance on Defendant No. 5's pleadings in support of the plaintiff is misplaced. She has nothing to do with the agreements in question and had filed a collusive written statement. Moreover, knowing such a statement is collusive, she never entered the witness box. 24. We have heard the learned Senior counsel appearing on either side and perused the entire material available on record. In the light of the arguments advanced, the following issues fall for consideration. A. Whether the suit for specific performance is barred by limitation? B. Whether the amended Section 10 of the Specific Relief Act is prospective or retrospective in operation? C. Whether the purchaser is entitled to the relief of specific performance? D. In any case, whether the purchaser is entitled to take benefit of Section 12 of the Speci....
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....no response from defendant no. 6 and defendant no. 8 to the said notice, in fact the defendant got issued a reply legal notice dated 14.04.2000 to the said alleged legal notice dated 8.2.2000. After receipt of the reply legal notice the Plaintiff kept quiet for nearly 2 ½ years and got issued another legal notice dated 6.7.2002. The defendant had got issued reply legal notice on 22.7.2002 to the notice dated 6.7.2002 by stating that the agreements are barred by limitation and the plaintiff never in possession of the suit property and moreover he has not performed his part performance in paying the balance sale consideration within the stipulated period and the notice dated 8.02.2000 was posted on 31.02.2000 with malafide intention." 30. In the above light, the first question that this Court needs to consider pertains to the aspect of limitation. The First Schedule to the Limitation Act, 1963 provides for the period of limitation in the following manner: DESCRIPTION OF SUIT PERIOD OF LIMITATION TIME FROM WHICH PERIOD BEGINS TO RUN 54. For specific performance of a contract Three years The Date fixed for the performance, or, if no such date is fixed, when ....
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....quences of forfeiture would ensue if the payment is not made within three months of the date of the agreements. It may be noted that as per Clause 21, the parties had entered into an earlier agreement to sell dated 19.03.1994, which did not materialize and accordingly the agreed price therein was no longer applicable. It is in this context that the fresh agreements were entered into between the parties, so as to provide a last opportunity for them to successfully enter into a sale­purchase agreement. The aforesaid intention of the parties is also made clear through Clause 23 of the agreement to sell, which reads as under: "23. The parties of the second part herein undertake on any pretext they will not make any claim for enhancing the agreed sale consideration." 33. The aforesaid clause clearly freezes any enhancement of the agreed sale consideration, which cannot be independent of a fixed time period. A contrary interpretation would render the contract commercially unreasonable and unworkable. The moratorium on the enhancement of rates prescribed under Clause 23 should be interpreted to be predicated on a fixed time and be executable within a reasonable period. The....
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..... 38. In light of the above, we may note that the suit filed by the purchaser was clearly barred by limitation in view of the first part of Article 54 of the Limitation Act and no amount of payment of advance could have remedied such a breach of condition. 39. Having come to the aforesaid conclusion, there would not have been any reason for this Court to continue the analysis on merits. However, we feel that even on merits, the purchaser's case cannot be countenanced in law and we accordingly adumbrate on the following aspects. Issue B 40. At the outset, we may notice that this question assumes great significance as application of the 2018 Amendment Act to the present set of circumstances would determine whether specific performance ought to be applied mandatorily or the aforesaid decision is a discretion of the Court to examine whether equity demands such application instead of granting damages if any. 41. We may note that the Specific Relief Act, 1963 is the second legislation, replacing the earlier 1877 enactment of the Specific Relief Act. The 1963 Act was enacted after consideration of the Law Commission in its Ninth Report. The 1963 Act more or less followed th....
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.... procedural amendment ought to be given retrospective effect. 45. We do not subscribe to the aforesaid reasoning provided by the High Court for the simple reason that after the 2018 amendment, specific performance, which stood as a discretionary remedy, is not codified as an enforceable right which is not dependent anymore on equitable principles expounded by judges, rather it is founded on satisfaction of the requisite ingredients as provided under the Specific Relief Act. For determination of whether a substituted law is procedural or substantive, reference to the nature of the parent enactment may not be material. Instead, it is the nature of the amendments which determine whether they are in the realm of procedural or substantive law. 46. The High Court's reliance on Adhunik Steels Limited v. Orissa Manganese and Minerals (P) Ltd. [(2007) 7 SCC 125], was also misplaced. In that case, the Court was concerned with the interpretation of Section 9 of the Arbitration Act, that deals with granting of injunctions. The specific question before the Court was whether the provisions of the CPC or the provisions of the Specific Relief Act have a bearing on Section 9 of the Arbitra....
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.... performance of which would not be specifically enforced, the granting of an injunction to perform a negative covenant. Thus, the power to grant injunctions by way of specific relief is covered by the Specific Relief Act, 1963." However, the conclusion in the above paragraph, taken in isolation, would not support the final outcome in the aforesaid case, wherein it was held that an injunction order granted under Section 9 of the Arbitration and Conciliation Act would involve consideration of settled principles under the Code of Civil Procedure or the Specific Relief Act. It was nowhere stated in the aforesaid case that the Specific Relief Act of 1963 stricto sensu provided for only procedural mechanism. We find it difficult to read the aforesaid case in the manner alluded to by the High Court. 48. In any case, the amendment carried out in 2018 was enacted to further bolster adherence to the sanctity of contracts. This approach was radical and created new rights and obligations which did not exist prior to such an amendment. Section 10, after amendment, reads as under: 10. Specific performance in respect of contracts. - The specific performance of a contract shall be e....
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....tute is not to be construed to have a greater retrospective operation than its language renders necessary, but an amending Act which affects the procedure is presumed to be retrospective, unless the amending Act provides otherwise. We have carefully looked into the new substituted Section 15 brought in the parent Act by the Amendment Act, 1995 but do not find it either expressly or by necessary implication retrospective in operation which may affect the rights of the parties on the date of adjudication of the suit and the same is required to be taken into consideration by the appellate court. In Shanti Devi v. Hukum Chand [(1996) 5 SCC 768] this Court had occasion to interpret the substituted Section 15 with which we are concerned and held that on a plain reading of Section 15, it is clear that it has been introduced prospectively and there is no question of such section affecting in any manner the judgment and decree passed in the suit for pre­emption affirmed by the High Court in the second appeal. We are respectfully in agreement with the view expressed in the said decision and hold that the substituted Section 15 in the absence of anything in it to show that it is retrospec....
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....ny arbitrary application. In Saradamani Kandappan v. S. Rajalakshmi and other [(2011) 12 SCC 18], this court held a under:­ 42. 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 a 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 [(1993) 1 SCC 519] and other cases. Be that as it may. 43. Till the issue is considered in an appropriate case, we can only reiterate what has been suggested in K.S. Vidyanadam [(1997) 3 SCC 1]: (i) The courts, while exercising discretion in suits for specific performance, should bear in mind that when the parties prescribe a time/period, for taking certain steps or for completion of the transaction, that must have some significance and therefore time/period....
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....e not available at that moment and you asked my clients to renew their efforts by end of Jan' 2000 and thereafter you have promised to complete the transaction by executing the sale deed in favour of my client." (emphasis supplied) 61. Aforesaid notice, at best reflects an intention by the vendor to renegotiate the terms, which was not accepted in toto by the vendor. 62. The next aspect which this Court needs to consider is whether the parties had requisite willingness and readiness to perform the contract. The aforesaid requirement is one of the essential ingredients under Section 16 of the Specific Relief Act, 1963 which reads as under: 16. Personal Bars to relief.­ Specific Performance of a contract cannot be enforced in favour of a person­ ... (c) who fails to aver and prove that he has performed or always been ready and willing to perform the essential terms of the contract which are to be performed by him, other than terms the performance of which has been prevented or waived by the defendant. 63. It is clear that in order to prove readiness and willingness, the burden is on the purchaser to prove that they were always ready and ....
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....nless such duty is expressly stipulated, good faith standard cannot be implicitly read into any contract. 66. This Court does not subscribe to acceptance of a general standard of good faith to imply broader good faith obligations only to give a go­by to the explicit conditions for maintaining the sanctity of contract. Such broad standards will have potentially far reaching consequences. This Court agrees that such an implicit reading would come into play post the 2018 Amendment to the Specific Relief Act which enables specific performance of contracts to uphold their sanctity. However, from the facts and circumstances of this case, we cannot accept that such higher standards of good faith was relevant. 67. On the aspect of the vendor's obligation to provide requisite and necessary documents, DW1 (Smt. Katta Sujatha Reddy), has averred that all the documents were available. It is only after the purchaser was satisfied about the sound title that he entered into the agreement to sell. 68. In the light of the above, it is clear that Section 16(c) of the Specific Relief Act would only come into force if the purchaser was ready and willing to perform the contract within the ....
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....2 of the Specific Relief Act, 1963. This issue arises from the fact that the purchaser is said to have paid 90 percent of the sale consideration and in lieu thereof, the High Court has held that the purchaser is entitled to ninety percent of the scheduled land. 75. Although this argument appears to be attractive in the first gloss, however a deeper examination of the same would paint a contrary picture. Section 12 of the Specific Relief Act, 1963 reads as under: 12. Specific performance of part of contract. - (1) Except as otherwise hereinafter provided in this section, the court shall not direct the specific performance of a part of a contract. (2) Where a party to a contract is unable to perform the whole of his part of it, but the part which must be left unperformed by only a small proportion to the whole in value and admits of compensation in money, the court may, at the suit of either party, direct the specific performance of so much of the contract as can be performed, and award compensation in money for the deficiency. (3) Where a party to a contract is unable to perform the whole of his part of it, and the part which must be l....
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....t. Such a person would come within the words "party in default". The inability to perform may arise by deficiency in quantity of subject­matter or deficiencies or some legal prohibition or such other causes. None of such causes is present in the instant case. 21. Section 12 of the Act does not apply where the inability to perform specific performance on part of contract arises because of the plaintiff's own conduct as held in Abdul Rahim v. Maidhar Gazi [Abdul Rahim v. Maidhar Gazi, 1928 SCC OnLine Cal 20 : AIR 1928 Cal 584] . In Graham v. Krishna Chunder Dey [Graham v. Krishna Chunder Dey, 1924 SCC OnLine PC 63 : (1924­25) 52 IA 90 : AIR 1925 PC 45] it has been laid down that the Explanation in the section exhaust all the circumstances in which part­performance can be granted. Section 12(2) deals with the situation where a party is unable to perform and such part is only a small proportion in value and capable of compensation in form of money. It was not a case covered in Section 12(2) at all. Under Section 12(3) party in default is entitled to specific performance on payment of whole consideration or for the part left unperformed but here in the instant c....