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Karsandas Purshottamdas Vs. Gopaldas Trikamji - Court Judgment

LegalCrystal Citation
SubjectProperty
CourtMumbai
Decided On
Case NumberO.C.J. Appeal No. 28 of 1923 and Suit No. 15 of 1921
Judge
Reported inAIR1924Bom282; (1923)25BOMLR1144
AppellantKarsandas Purshottamdas
RespondentGopaldas Trikamji
Excerpt:
specific belief act (i of 1877), section 22 - specific performance-delay in completing sale-right to make time of the essence of the contract-rescission of contract-return of earnest money-earnest money a charge on the property-transfer of property act iv of 1882, section 55(6).; in october 1917, the defendant leased a plot of land from the bombay improvement trust, and built a house on it. he agreed, on october 10, 1919 to sub-let the premises to g. & co. for a period of three years, with an option to the sub-lessees to continue it for five years more. in december 1919, the defendant (greed orally to tell the premises including his lease-hold right for four lacs of rupees to the plaintiff and received rs. 25,000 as earnest money. the agreement was reduced to writing on march 12,.....lallubhai shah, kt., ag. c.j.1. the plaintiff filed this suit on january 7, 1921, claiming rs. 25,000 with interest.2. the defendant filed his written statement on february 19, 1921, in which ho pleaded that the plaintiff had no right to make time of the essence of the contract; that the time given under the notice was unreasonably short; that really the plaintiff had no right to specific performance until the improvement trust gave a completion certificate and executed a lease; that the plaintiff was aware of the disputes between him and the sub-lessees; that he was responsible for the delay which was due entirely to the conduct of the sub-lessees and to official routine of the improvement trust and that the plaintiff was not entitled to a return of the deposit money and to the costs,.....
Judgment:

Lallubhai Shah, Kt., Ag. C.J.

1. The plaintiff filed this suit on January 7, 1921, claiming Rs. 25,000 with interest.

2. The defendant filed his written statement on February 19, 1921, in which ho pleaded that the plaintiff had no right to make time of the essence of the contract; that the time given under the notice was unreasonably short; that really the plaintiff had no right to specific performance until the Improvement Trust gave a completion certificate and executed a lease; that the plaintiff was aware of the disputes between him and the sub-lessees; that he was responsible for the delay which was due entirely to the conduct of the sub-lessees and to official routine of the Improvement Trust and that the plaintiff was not entitled to a return of the deposit money and to the costs, charges and expenses in connection with the agreement. Be also counter-claimed that the plaintiff should be required to specifically perform the agreement, and to pay the balance of the purchase money with interest at nine percent, from October 29, 1920.

3. The suit came on for hearing on February 22, 1923, and the learned trial Judge delivered his judgment on March 5, 1923. Until then the lease by the Improvement Trust was not executed. The completion certificate was issued by the Trust Architect on December 2, 1922, and the last letter dated February 14, 1923, (Exhibit 140) shows that by that time the draft was nearly ready.

4. So far I have not referred to the correspondence between the defendant and his sub-lessees and between him and the Improvement Trust. It is not necessary to refer to it in detail at this stage. But it may be mentioned that from November 1919 to March 1920 and from March to December 1920 really the differences between the defendant and the sub-lessees were going on. The effect is stated by the witness Burjor Ardeshir Patel. The letter Exhibit D addressed by the Trust Architect to the defendant's architects contains a statement of the requisitions made by the Improvement Trust in February 1920. A similar letter (Exhibit Y) was written which shows what requisitions remained to be complied with then. The following extracts from the evidence of Mr. Patel show as to how some of these requisitions remained unattended to for a long time:

The building was completed from architect's point of view in October 1919, when completion certificate was sent to the Municipality. If all the minor requisition of the Improvement Trust had been complied with then we would have got their completion certificate. I expected in October 1919, it would be given shortly. The building must have been occupied in December 1919 as you assert, but I am not sure....

Requisition (7) of Exhibit D was made in January 1919. We had not done that by October 1920. The Trust took this objection from the beginning when sanctioning the plan. It was an oversight of ours. The Trust waived it later on in 1922 almost at the end of the year, Requisition (9) of exhibit D would have been done by the contractor, if we had insisted on it. It must have been done at the end of 1921 or beginning of 1922. I have no reason to give for the delay except carelessness or negligence on the part of some one....

Requisition (9) I don't know when the first application for permission to put up the petrol tank was made. Narandas or his representative had to apply for it.

Requisition Clause 3(c) of the sub-lease Exhibit B. I will find out the dote of the first application to the Board to do those thing. I have here a letter to the Trust Architect about it dated December 23, 1920. I think it is the only application we made....

Requisitions of January 1919 (referred to in Exhibit D) were all matters which could have been done easily.... Regarding exhibit Y all the requisitions could have been completed within a short time except No. 9. The latter would take two or three months. We could have applied the same day. It would take two or three months for the Board to consider it. No. 10 could have been done in a short time. I don't know how long it took the Board to reply regarding No. 9 in this case. Permission was asked for on October 10, 1920, and reply was given on February 9, 1921, refusing sanction. Petrol tank was sanctioned on April 5, 1921.

5. The reasons for this non-compliance for such a long time may be found in the voluminous correspondence between the defendant and his sub lessees and the Improvement Trust. Ultimately the differences between the defendant and his sub-lessees led to a suit. The defendant filed Suit No. 4438 of 1922 against the sub-lessees in February 1922 for a declaration that the lease was forfeited and determined and for possession, compensation and injunction. The fifth defendant, i. e., the Bombay Motor Service Ltd., filed a written statement Exhibit A 28 in which they made a counter-claim in January 1923 for a renewal of the lease and for damages. This suit was pending at the time of the hearing of the suit; and is still pending.

6. At the hearing the following issues were raised:

1. Whether the plaintiff is entitled to require the defendant to complete the sale before the Improvement Trust executed a lease in favour of the defendant or agreed to execute a lease direct in favour of the plaintiff?

2. Whether the plaintiff was entitled to make time of the essence of the contract as he purported to do by his letter of October 7, 1920?

2A. Whether in any event the time allowed for completion by the said letter was a reasonable time?

3. Whether the delay in obtaining the lease from the Trust was due to any default on the part of the defendant?

4. Whether the plaintiff did not himself cause the delay by preventing the defendant through his (plaintiff's) son and partner from carrying out the requisitions made by the Trust?

5. Whether the plaintiff is entitled to any or if so w hat relief?

6. Whether the defendant is entitled to hi a counter-claim?

7. The learned trial Judge found issues Nos. 2, 2A and 3 in favour of the defendant. But on issue No. 1 he found that though the execution of a lease in favour of the defendant by the Improvement Trust or their agreement to pass such a lease in favour of the plaintiff was a condition precedent to the completion of the purchase the delay in getting such a lease could not debar the plaintiff from his ordinary rights (such as they are) to obtain specific performance of the agreement. On the remaining issues he found that the defendant was not entitled to specific performance, that the plaintiff was entitled to get back his earnest money but not the costs incidental to the contract. The plaintiff' was allowed a moiety of the costs of the suit.

8. The defendant has appealed from this decree and the plaintiff has filed cross-objections. We have, therefore, to consider the whole case.

9. The questions as relating to the reliefs are:

(1) Whether the defendant is entitled to a specific performance of the agreement under the circumstances of the case?

(2) If not, is the plaintiff entitled to recover (a) the deposit money (b) the costs incidental to the agreement?

(3) Whether the said items should be a charge on the moiety?

10. Before dealing with these questions it will be convenient to dispose of issues Nos. 1 and 4 as framed in the lower Court.

11. The view taken by the trial Court on issues Nos. 1 and 4 has not been seriously challenged before us.

12. As regards the first issue, it is necessary to have regard to the terms of Clause 6 of the agreement as follows:

6. Upon payment of the balance of the purchase money at the time and in the manner aforesaid and upon execution of the lease of the said premises by the City of Bombay Improvement Trust the vendor and all the necessary parties if any shall make and execute a proper assignment of the said lands, hereditaments and premises to the purchaser or to such other person or persons as the purchaser may nominate which assignment shall be drawn and prepared by the purchaser's attorneys provided however the city of Bombay. Improvement Trust executed a lease of the said premises direct in favour of the purchaser the assignment shall not be executed.

13. According to this it was necessary to have a lease from the Improvement Trust or to get the Improvement Trust to agree to pass a lease in favour of the plaintiff, before the purchase could be completed. But it does not follow that the plaintiff' was bound to wait for any length of time in order that the defendant may place himself in a position to fulfil that condition. In Clause 2 of the agreement the time limit of two months was fixed. It is true that the time is not of the essence of the contract; but it shows that the parties intended taut the condition under Clause 6 was to be fulfilled at least within a reasonable time, if not in two months. Whether the defendant has exceeded the limit of reasonable time or not is a question which I shall deal with separately. But the fact that the defendant has not obtained a lease from the Improvement Trust or succeeded in securing the consent of the Improvement Trust to accept the plaintiff as a nominee for the defendant by itself is no ground for delaying the performance of the contract beyond reasonable time.

14. As regards the fourth issue, there is no evidence in the case that the plaintiff caused the delay by preventing the defendant through his (plaintiff's) son from carrying out the requisitions made by the Trust. In fact the plaintiff's son ceased to be a partner from March 22 in the firm of the defendant's sub-lessees; and there is nothing in the case to show that the plaintiff had any knowledge of the development and causes of disputes between the defendant and his sub-lesaees. The only direct knowledge that he had was due to the letter of March 15, 1920, addressed to him by the sub-lessees' solicitors (part of Exhibit J). A week after that the plaintiff's son ceased & to be a partner in the firm of the sub-lessees : and the mere fact that his son was a partner in that firm up to March 22, and that subsequently in November 1920 the plaintiff became a director of the limited company, which took over the concern of the sub-lessees, cannot be held to be evidence in support of the inference that the sub-lessees were put up to create trouble for the defendant by the plaintiff. The learned Judge has accepted this view : and it is not challenged. Even as regards the knowledge of the correspondence between the defendant and the sub-lessees after March 15 there is no evidence. It is significant that in the correspondence the defendant never taxed the plaintiff with any responsibility for the delay caused by the sub-lessees.

15. It is urged on behalf of the appellant in support of the appeal that the learned Judge having found that the plaintiff was not entitled to make time of the essence of the contract in October 1920, that the time allowed by the notice was not reasonable, and that the defendant not being responsible for the delay caused in obtaining the lease from the Improvement Trust, the defendant is entitled to specific performance of the agreement. On the other hand it is urged that the findings of the trial Court on issues Nos. 2, 2A and 3 are not correct, that even assuming that as between the defendant and the sub-lessees the sub-lessees were in the wrong and that as between the defendant and the Improvement Trust, the delay was due to the official routine of the Trust and not to any omission on the part of the defendant, still the plaintiff was not bound to wait for any indeterminate length of time ; that he acted reasonably in giving notice in October and that the time allowed under the notice was reasonable under the circumstances. It is further urged that the lower Court is not right in holding that the defendant is not at all responsible for the delay. It is contended that in any view of the case it would be unfair to allow specific performance of the agreement under the circumstances, and that as no kind of default is attributable to the plaintiff, he is entitled to the return of his purchase money. Several decisions have been cited at the bar; but I think it will be enough to refer to Jamdshe Khodaram Irani v. Burjorji Dhunjibhai and Stickney v. Reeble [1915] A.O. 386.

16. In the former case their Lordships observe at page 33 of the report as follows:

But equity will not assist where there has been undue delay on the part of one party to the contract, and the other has given him reasonable notice that he must complete within a definite time. Nor will it exorcise its jurisdiction when the character of the property or other circumstances would render such exercise likely to result in injustice.

17. In Stickney v. Keeble the passage at page 400 is relevant:

I will merely observe that the date fixed for completion in a contract for the sale of land is no leas a part of the contract than any other clause, but equity will grant relief where a party seeks to make an unfair use of the letter of his contract in this respect, having regard to the state of the law relating to real property in England. It is safe to say that that relief will always be refused when to grant it would be essentially unfair. In the view I take of the facts,...it would be essentially unfair that in this case the vendors, who, either by themselves or by those for whose action they alone are chargeable as against the purchaser, have caused great delay in completion should be enabled to forfeit the depot it of a purchaser against whom no one has attempted to make good any delay whatever.

18. The observations at pp. 418 and 419 also have a bearing upon the present case but I shall quote only the concluding observations at page 419:.Indeed, the dominant principle has always been that equity will only grant specific performance if, under all the circumstances, it is just and equitable so to do. It would be unjust and inequitable to allow the vendor to put forward his own unnecessary delay in the face of the purchaser's frequent requests for expedition as a ground for allowing him further time or as rendering the time limited by such a notice as that to which I have referred an unreasonable time.

19. It is needless to refer to the sections of the Specific Relief Act and the Indian contract Act as it is not suggested-and in view of the decision in Jamshed v. Burjorji it cannot be suggested-that the effect of the statutory provisions is in any sense different.

20. The question whether the plaintiff was entitled to give notice in October making time of the essence of the contract and the further question whether the time allowed was reasonable or not are questions of fact which must be determined with reference to the circumstances of this case. Now so far as the plaintiff is concerned it is clear that soon after the contract he commenced to press the defendant to expedite matters so as to avoid delay. After his letter of March 27, the defendant's solicitors did not write at all to the plaintiff's solicitors. The plaintiff wrote three letters in May but the defendant did not reply to any of them. The plaintiff waited up to October 7, when he gave notice making time of the essence of the contract and giving the defendant three weeks. It is true that the plaintiff was aware of the sub-lease, though there is nothing to show that the plaintiff was aware of the differences which had gone on between the defendant and the sub-lessees from March to October. I am willing to accept the view taken by the trial Court that the sub-lessees were making trouble and the defendant could not avoid the delay. But I do not think that the prolonged disputes between the defendant and his sub-lessees could afford any adequate ground for making the plaintiff wait for any length of time. He had agreed to pay a heavy price for this property. According to him the prices in 1920 had gone up very high, and as a prudent purchaser he was entitled to take account of the possibility of a fall in the market value of immoveable property after it had gone up so high. According to him in 1921 the prices in fact commenced to go down. The plaintiff's evidence on this point is unchallenged and it is a fact which may be referred to as having come to the notice of this Court in the course of litigation of this kind on the Original Side. Thus it seems so me that after waiting for more than six months, though the original time fixed was two months, in October he could with propriety say that he could not wait any more. The question to my mind is not whether the delay was one for which the defendant was responsible as against the sub-lessees and the Improvement Trust : but whether the defendant having accepted certain contractual obligations towards the plaintiff, he was not guilty of undue or unnecessary delay as regards the plaintiff. In the absence of any such obligation towards the plaintiff, he might have taken all the time he took with his sub-lessees and the Improvement Trust. But the question to my mind is whether he can be said to have acted in a spirit of give and take with the third parties so as to avoid delay beyond reasonable limit in the fulfilment of his obligation towards the plaintiff. The correspondence between the defendant and the sub-lessees and the defendant and the Improvement. Trust fails to disclose that the defendant acted in that spirit. I accept the conclusion reached by the learned trial Judge as indicated in the following passage:

I have come to the conclusion that he cannot in any event be held responsible for all the delay that ensued. This delay was mainly due to four causes. In the fore-front comes the unfortunate dispute between the defend-and and his sub-lessees. Secondly, the delay was due to the necessity of getting the sanction of the Improvement. Trust to various things. Thirdly, there was a user of the premises by the sub-lessees in a manner which was objected to by the Improvement Trust. And fourthly there was a non-compliance by the defendant with certain requisitions made by the Improvement Trust.

21. I do not wish to express any opinion as to the merits of the disputes between the defendant and his sub-lessees. It is enough to say that the plaintiff is not in any sense responsible for the same, and the defendant's share in the responsibility for this delay cannot be held to be entirely negatived. In fact he seems to me to have acted with a certain degree of indifference as he thought the prices were high and that he was not undergoing any risk by delaying the matter. While I am on this point I may note that in the beginning the plaintiff seems to have been anxious to buy. He gave Rs. 25,000 on December 19, 1919; and the correspondence between the defendant's solicitors and the plaintiff's solicitors between that date and the date of the agreement distinctly tends to show that the plaintiff was more anxious to buy than the defendant to sell (see Exhts. 6, 7, 8, 9, 10 and 11). Thus, though I accept for the purpose of this appeal the learned trial Judge's view that the defendant was not solely responsible for the delay in relation to the sub-lessees and the Improvement Trust. I think that the plaintiff was in no sense responsible for the delay and that though as between himself and the third parties the defendant may not be responsible, as between himself and the plaintiff the defendant was responsible. I do not think that the plaintiff could wait indefinitely long: and as, according to the statement of Mr. Patel, the requisitions of the Improvement Trust referred to in Exh. D were all matters which could have been done easily, I cannot absolve the defendant from his responsibility for the delay so far as the plaintiff is concerned. Thus the plaintiff was, in my opinion, entitled in October 1920 to give reasonable notice to the defendant that he must complete the contract within a definite time.

22. The next question is whether the time allowed under the notice (Exh. U) was reasonable This question must be answered with reference to the circumstances of the case. The time given was three weeks. On October 16, when the defendant replied to the notice, he did not reveal the fact that the Improvement Trust had refused to entertain the defendant's application to give the lease to the plaintiff on March 24, and he simply said that the disputes between him and the sub-lessees had not been finally settled. Further he insisted upon a construction of the terms of the agreement, which, while dealing with issue No. 1 in the trial Court, I have held to be untenable. In fact according to the defendant's view the plaintiff was bound to wait until the lease was executed by the Improvement. Trust, i.e., in view of the events that have happened the plaintiff should have waited up to March or April 1923. With such an answer, from the defendant, it mattered not then whether he allowed three weeks or thirteen weeks under the notice. As a matter of fact the plaintiff waited for nearly two months after the expiration of the time fixed in this notice. I agree with the trial Court that it is difficult to determine what time is reasonable. But in view of the attitude of the defendant the difficulty appears to me to be appreciably reduced. I asked the learned counsel in the course of the argument as to what time he would suggest as being reasonable assuming that the plaintiff was entitled to give such a notice. He suggested in reply that six months at least should have been allowed. I do not accept the reasonableness of the suggested reply : but on the facts even that would not have been sufficient. Therefore if the plaintiff had to fix the time. I think that he was not reasonably bound to give more than three weeks as the time fixed in the agreement was two months and as he had waited for more than four months after the expiration of the said two months without any explanation from the defendant as to how much longer he would have to wait and further as the attitude of the defendant made it immaterial whether the time allowed by the plaintiff was a few weeks more or less. I hold that the time allowed was reasonable under the circumstances.

23. These findings render unnecessary any elaborate discussion of the question whether the defendant is entitled to specific performance.

24. If I am right as to the effect of the letter of October 7 there is an end of the defendant's case.

25. Apart from that I think that the learned trial Judge is right in his view that it would be unfair to allow specific performance to defendant or to let him retain the deposit money. I should consider it unfair to allow specific performance to the vendor for the following reasons:

First, up to the time the suit was decided, he was not in a position to fulfil his contract. As observed by the learned trial Judge 'he (the defendant) has not even yet got a lease from the Improvement Trust which is necessary before a good title can be conveyed.

26. Secondly, it would be essentially unfair to the plaintiff to decree specific performance as the plaintiff cannot be put in the game position in which he would have been if the contract had been performed in reasonable time in view of the fluctuation in the market price.

27. And, lastly, the litigation between the defendant and the sub-lessees introduces an element of some uncertainty which may be said to prejudice the position of the plaintiff; though I must say that I do not attach such importance to this circumstance as the learned trial Judge has done.

28. As to the deposit money it is clear that the plaintiff cannot be said to be in default in any sense, unless the notice given in October 1920 can be said to amount to a default on his part. I do not see how the notice can constitute such a default. Even assuming that the defendant was not responsible for the delay, it would be a case in which there was default on neither side. If in such a case for any reason the Court refuses to grant specific performance in the exercise of its discretion the plaintiff would be entitled to a return of the purchase money. The following observations of Cotton L.J. in Howe v. Smith (1884) 27 Ch. D. 89 are pertinent (p. 95):

I do not say that in all cases where this Court would refuge specific per-formance the vendor ought to be entitled to retain the deposit. It may well be that there may be circumstances which would justify this Court in declining, and which would require the Court, according to its ordinary rules, to refuse to order specific performance, in which it could not be said that the purchaser had repudiated the contract, or that he had entirely put an end to it so as to enable the vendor to retain the deposit In order to enable the vendor so to act, in my opinion there must be acts on the part of the purchaser which not only amount to delay sufficient to deprive him of the equitable remedy of specific performance, but which would make his conduct amount to a repudiation on his part of the contract.

29. This view was followed in Balvanta v. Bira I.L.R. (1897) 23 Bom. 56. If the plaintiff was justified in giving notice on October 7, as I hold he was, the plaintiff would be entitled to a return of the deposit money. As regards the sum of Rs. 653-8-0, I think that in the view I take the plaintiff is entitled to the sum. If I had not taken a view favourable to the plaintiff as to the notice of October 7, I would not have allowed this sum.

30. In conclusion I may add that I agree with the learned trial Judge that this is a case in which parties ought to be restored to the position they were in before the agreement; and the variations that we make in the decree are more or leas incidental. Under Section 55, Sub-section 6, Clause (b), of the Transfer of Property Act, the plaintiff is entitled to a charge on the property in respect of the sum of Rs. 25,000.

31. In the result I would dismiss the appeal with costs and allow the cross-objections to the extent indicated below with costs. The decree of the trial Court is affirmed subject to the following variations:- (1) Decree the plaintiff's claim for Rs. 653-8-0; (2) declare that the deposit money is a charge on the property in question; and (3) the plaintiff' to have his costs of the suit.

Crump J.

32. I agree that the judgment under appeal ought to be confirmed. I find no reason whatever to doubt that the learned trial Judge has correctly appreciated the facts, but on those facts I should myself hold that plaintiff' was entitled to call upon the defendant to complete the contract as he did by his letter of October 7, 1920, and that the time allowed was in the circumstances reasonable.

33. In my opinion each case must of necessity be judged upon its own facts. Here the agreement to sell was made on March 12, 1920. It is common knowledge that the market for immovable property in Bombay was at that time anything but stable The parties fixed two months for completion, and though that does not in itself make time of the essence of the contract the time so fixed is a term of the contract and cannot be entirely disregarded. Defendant could not complete the contract without obtaining a lease from the Improvement Trust, but surely it would be a reductio ad absurdum to hold that plaintiff was bound to wait for that event however long the delay might be. Defendant was unable to obtain that lease until after the decision of the suit, viz., March 5, 1923. If the argument for defendant were to prevail we must hold that plaintiff was bound to wait for over three years.

34. Now there has been no attempt to show that plaintiff was in any way responsible for the delay. The learned trial Judge has found that the delay was due partly to defendant's failure to comply with certain requisitions, partly to the disputes between defendant and his sub-lessees. It cannot be said that defendant was not in part at least to blame. The dispute with the sub-lessees was his misfortune but I cannot understand why in equity plaintiff should be compelled to wait indefinitely because defendant's sub-lessees were obstructive. I find nothing in the cases cited to compel me to accede to this proposition.

35. As to the time fixed-three weeks-that was, in my opinion, reasonable having regard to the long delay which had already occurred, and the comparatively simple nature of the requisitions of the Improvement Trust as deposed to by defendant's own architect.

36. On these short grounds I agree with the judgment of the learned Chief Justice and the orders proposed.


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