Jagannatha Shetty, J.
1. This appeal has been preferred against the Judgment and Decree dated March 27, 1984 made by the II Addl. Civil Judge, Belgaum, in O.S.No. 115 of 1981.
2. Smt. Sudha, the appellant was plaintiff. She instituted the suit for specific performance of a contract for sale in regard to eastern half portion of Plot No.8 (CTS No. 3940) situate on Belgaum Club Road, requiring Respondents (defendants 1 and 2) to execute the sale deed in her favour by accepting the balance of sale consideration. Alternatively she prayed for a decree for a sum of Rs. 45,000/- by way of damages in the event of the Court for any reason declining to grant the relief of specific performance.
3. The contract sought to be enforced was founded by correspondence between the parties and the materialallegations in the plaint are :
Plot No. 8 measuring 14 guntas was originally owned by Dr.P.M. Bhoj who died leaving behind his widow defendant-1 and two children, of them one is a daughter married to an affluent family. She is, therefore, not interested in theproperty and has released her rights thereto in favour of defendant-1 and brother defendant-2. In the Municipal records, however, the property stood in the name of Siddaraj who is thebrother-in-law of Dr. Bhoj. Siddaraj is apracticing Advocate at Bangalore. After the death of Dr. Bhoj, defendants-1 and 2 left Belgaum to settle down at Bangalore. Siddaraj was looking after his widowed sister and her property. He was trying to dispose of the said plot and in that regard he was corresponding with his friend C. -v.- Kittur, a Chartered Accountant at Belgaum. Plaintiff'shusband Sudhakar Shanbhag who was also a close friend of Kittur wanted to purchase the plot in the name of his wife and conveyed his willingness to Siddaraj through Kittur.
Considerable correspondences were .made between Siddaraj, Kittur and Shanbhag from June 1976 to February 1977. The case of plaintiff was that Siddaraj offered to sell the entire plot for Rs. 80,000/- in two equal bits and Shanbhagunreservedly accepted that offer. The property was offered for sale in equal moieties to avoid any problem under the Karnataka Urban Land Ceiling Act. On February 5, 1977, plaintiff, in furtherance of her acceptance of the offer, sent two cheques of Rs. 2,500/- each as advance money. But Siddaraj informed Shanbhag that he was dropping the idea of sale till the khata in respect of the property was changed in the names of defendants 1 and 2. So he informed Shanbhag that he would not be encashing the cheques and would return the same. The cheques were eventually scored off by Siddaraj despite the request from Shanbhag to encash the same in the name of defendant-1. The khata was changed in the names of defendants 1 and 2 deleting the name of Siddaraj. On April 14, 1978, the parties entered into a written agreement for sale of only the western half portion of the plot for Rs.45,000/- followed by execution of the sale deed dated December 1, 1978. Plaintiff thus became the owner of the western half of the plot. Plaintiff has further stated that that sale was in part performance of the agreement earlier reached between the parties for sale of the entire plot. It was also stated that although the original agreed price was Rs. 80,000/- for theentire plot, since the western half was purchased for Rs.45,000/-, plaintiff would be ready and willing to pay Rs.45,000/-, for the eastern half also. She has always been ready and willing to perform her part of the contract. But defendants 1 and 2 entered into a secret deal with Jaffarali Khimjibhai Saith (defendant-3) for selling the eastern portion for rupees one lakh and thus committed breach of thecontract and, therefore, plaintiff is entitled to the relief of specific performance. Alternatively plaintiff has claimed Rs. 45,000/- by way of damages from the defendants for committing breach of the contract.
4. It appears that during the pendency of the suit, defendants 1 and 2 sold the remaining eastern portion of the plot to defendant-3.
5. The defendants in their respective written statements denied the allegations of plaintiff. They contended, inter alia that there was no concluded contract at all between Siddaraj and Shanbhag for sale of the entire plot either in one bit or two bits for Rs. 80,000/- or Rs. 90,000/-. There was only a discussion in regard to sale, but the whole idea was dropped by Siddaraj till the Municipal records indicated the title of of defendants 1 and 2. After the khata was restored in the names of defendants 1 and 2, plaintiff agreed to purchase only the western half of the plot and accordingly, an agreement dated April 14, 1978 was written followed by the sale deed dated December 1, 1978. Plaintiff paid the consideration of Rs. 45,000/- since she purchased one more foot east to west so that she could construct a compound wall and still have a dear 50 feet inside. After that sale transaction, Shanbhag showed his inclination to purchase the eastern portion of the plot, but it was not considered by Siddaraj, since the price offered was much below the then prevailing market rate. So Shanbhag gave up the idea of purchasing the eastern half, which was later advertised in a local newspaper at Belgaum. Defendant-3 offered to purchase the same at a reasonable price and that offer was accepted and the deal was concluded on June 3, 1981. With these and other allegations, thedefendants have characterised the claim of plaintiff as false, frivolous and speculative.
6. Arising out of the pleadings, the Court below framed the necessary issues as follows :
1. Does plaintiff prove that defendants 1 and 2 agreed to sell the entire plot No. 8 measuring 14 guntas in consideration of Rs. 80,000/- in two bits ?
2. Does plaintiff further prove that she sent two cheques of Rs. 2,500/- each as advance amount for the sale of two bits of the plot No. 8 ?
3. Is plaintiff entitled for a specific performance of contract of suit plot ?
7. Before the Court below, Shanbhag has been examined as P.W-1 on behalf of plaintiff and Siddaraj as D.W-1 on behalf of defendants. There was no other oral evidence. Their documentary evidence consists of almost all thecorrespondence made in connection with the sale of the suit plot between P.W-1 and D.W-1 and also some other lettersexchanged between Siddaraj and Kittur. They have been marked as Exhibits P-1 to P-24 and D-1 to D-14.
8. On a consideration of the entire evidence on record, the Court below held : (i) That the parties in the initial stage negotiated for sale of the entire plot No. 8 with offers and counter offers, but there was no concluded contract in that behalf. None of the letters exchanged between P.W-l and D.W-1 would indicate that the parties had agreed on the consideration for sale of the entire plot. (ii) Plaintiff has not established that in pursuance of any concluded contract, the two cheques of Rs. 2,500/- each were given as advance to Siddaraj towards the sale price of the entire plot. The said cheques might have been given by Shanbhag to Siddaraj in anticipation of a contract to be concluded. And (iii) on April 14, 1978, plaintiff agreed to purchase only the western half of the plot and it was accordingly sold to her. If there had been any contract for sale of the entire plot, then along with the written agreement for sale of the western half, there would have been also a similar agreement recorded for sale of the eastern half. With these conclusions, the Court below has dismissed the suit.
Plaintiff has appealed to this Court
9. Mr.Mandgi for the appellant has challenged the correctness of the conclusions reached by the Court below with reference to all the correspondence made in connection with the sale of the plot. He also relied upon the oralevidence of P.W-1 to connect the missing link in the chain of letters exchanged thereto. Mr. K.I. Bhatta, who hasadvanced the main argument on behalf of all the Respondents, tried to justify the conclusions of the Court below. In the light of the submissions thus made, the principal point that arises for consideration is :
Whether the parties, on February 5, 1977, have entered into a contract for sale of the entire plot No. 8 for Rs. 80,000/- and if so, whether the sale of the western half of the plot on December 1, 1978 was in part performance of that contract ?
If this question is answered in the affirmative, then plaintiff must further prove that she has performed or has always been ready and willing to perform the terms of the contract to be performed by her. That is the requirement of Section 16 of the Specific Relief Act, 1963 to which we will make a reference later if found necessary.
10. The doctrine of specific performance was one of the earliest examples of the maxim that equity acts in personam. The doctrine is apparently an unique feature in English Contract Law though it is notorious for its complexities. It is also notorious for technicalities in view of the hair's breadth nature of many of its distinctions made by Chancery Courts. The doctrine originated in the realization that there were many cases in which the remedy available at common law was not adequate. The normal remedy for breach of contract was the recovery of damages at common law. But in many instances, and especially where a vendor refused to convey the land agreed to be sold, a mere award of damages would defeat the just expectations of the purchaser. So the doctrine of specific performance was evolved to ensure that justice is done to the aggrieved party, and so the Equity Courts started giving specific performance instead of damages, directing the party in default to do the very thing which he contracted to do. The decisions of English Equity Courts have been generally applied in India under theSpecific Relief Act, 1877 as principles of equity, justice and good conscience. The law on the subject has now been broadly incorporated under the Specific Relief Act, 1963 which is one of the most important pieces of legislation. This Act hasprovided certain guidelines to Courts as to when specificperformance could be ordered and when not. However, it appears that this enactment is not exhaustive. (See: HungerfordInvestment Trust Ltd., -v.- Haridas Mundhra, AIR 1972 SC 1826:( 1972 ) 3 SCC 684 and Babu Lal -v.-. Hajari Lal Kishore Lal, : 3SCR94 . The Court's discretion to do more perfect and complete justice between the parties has been expressly preserved under Sections 10, 11, 20 and 21. It, therefore, goes without saying that the Court is not bound to grant a decree of specific performance merely because it is lawful to do so. Such a discretion, however, like any other discretion is not to be arbitrarily exercised, but must be based on sound, reasonable and judicial principles capable of correction by a Court of Appeal.
11. A contract is an agreement and comes into existence when one party makes an offer which the other party accepts. Section 2(b) of the Contract Act defines 'contract' as an agreement enforceable by law. We are concerned in this case with a contract by correspondence and we have,therefore, to examine whether the letters between the parties consituated a binding contract for the sale and purchase of the entire plot No. 8. The passage from Fry on Specific Performance, 6th Edn,, P. 264 reads as follows :
'It is one of the first principles of a case of this kind that where the contract, or note or memorandum of the terms of the contract, has to be found in letters, the whole of the correspondence which has passed must be taken into account.'
In 'The Law of Contract' by Cheshire and Fifoot, 10th Edn.., P.35, it is stated :
'....the task of Courts is to extract the intention of the parties both from the terms of their correspondence and from the circumstances which surround and follow it.'
We may also state that where the letters between the parties are not precise in terms as to offer or acceptance and if one party, however, asserts that there was offer andacceptance, the Court must find out whether the acceptance was absolute in terms of the offer made. Unless such terms are reasonably ascertained, the Court will not enforce the terms of the contract.
12. With these principles in mind, we may now proceed to consider the letters exchanged between the parties :
Siddaraj (D.W-1) wanted to sell the plot in two equal parts in respect of which there is no dispute. His idea,however, was not to sell the two parts to two different parties. It was intended as he has stated to facilitate the grant ofnecessary permission for sale from the authority under the Urban Ceiling Act. He was afraid that the Government might come forward to purchase if the whole of the plot was notified for sale. Shanbhag (P.W-l) had no objection to purchase the plot in two bits provided his counter offer was accepted. This has been made clear from Exhibit P-2 dated June 4,1976 written by P.W-l to D.W-1.
P.W-1 started with a counter offer of Rs.70,000/- including the development charges which was Rs. 800/- per gunta. Under Exhibit P-2, he modified that counter offer stating :
' ...Now, however, I am willing to offer Rs. 60,000/- for the entire plot and bear the developmental charges...I have met you on numerous occasions in connection with this plot and hope that you will accept my offer....'
Exhibit P-4 dated July 2, 1976 was a reply letter from D.W-1. Therein he did not accept the counter offer of P.W-1. On the contrary, he said :
'....I cannot at all agree to any thing below Rs.80,000/- from you only since I am really keen that you should take it. For anyone else, it will be more than that.
I would, therefore, request you to please make up your mind and have it for that price and thereby help my sister and her family. That is the net amount that must come to her hands at the end of the sale. In your own interest it is better we offer and you buy it in two bits.
I am sure I have not demanded too much. On the other hand, it is too low considering the quality and size of the plot. If you are willing, you may please write to me and I shall try to meet you early. In case, and I do not want this to happen, you are not prepared to pay this veryreasonable price, please let me know so that I may start negotiating with others.'
It is clear from the above letter that D.W-1 wanted Rs. 80,000/-net for the entire plot excluding all otherincidental expenses. Exhibit P-5 dated September 15, 1976, is another letter written by D.W-1 reiterating that his sister was not willing to part with the plot for anything less thanRs.50/-per square yard which works out to Rs. 80,000/- for the whole plot.
After the above correspondence, there was some discussion between P. W-l and Kittur, since Kittur was the mediator between the two. All the letters written by P. W-l to D.W-1 were written at the instance of Kittur or at his dictation. That has been admitted by P.W-l in his evidence. The discussion between Kittur and P.W.-l has been reflected under Exhibit P-6 dated November 10, 1976 written by Kittur to D.W-1. It gives an indication of the maximum amount for which P.W-l was willing to purchase the plot. It reads :
'I am writing this letter at the instance of Mr. Shanbhag who isinterested in finalising the deal of purchase of your plot. He may be willing to finalise for Rs. 65,000/-. After purchase he has to pay for development charge to Municipality at Rs. 800/- per gunta if he applies for Building permission. Besides the cost of Registration etc., has to be borne by him. Under the above circumstances you may please consider this aspect and see if this negotiation could be materialised.
You may please write to me in reply about this matter.'
It is clear from this letter that P.W-1 was not willing to purchase the plot for Rs. 80,000/- and his maximum counter offer was only Rs. 65,000/-. D.W-1 promptly replied to that letter of Kittur. In Exhibit P-23 dated November 11, 1976, he made it clear that his sister, in any event, would not be willing to come down below Rs. 75,000/- and if P.W-1 was not willing to have that price, he would be advertising in the local newspaper and also put up a board at the plotinviting the public to purchase.
13. What then followed is not clear from the letters. Admittedly, there was no correspondence from P.W-1 accepting the said final offer of D.W-1. Mr. Mandgi, however wants us to infer that there was a contract entered into in the first week of February 1977 and in support thereof he wants us to accept the evidence of P.W-1 who has stated ;
'....Accordingly in the first week of February 1977 I went to Bangalore and met Mr. Siddraj and defendants 1 and 2, we discussed about the price of the plot. They insisted for the price of Rs. 80,000/-. Ultimately I told that the plaintiff will agree for the said price of Rs. 80,000/-. Then, I gave two cheques each of Rs. 2500/- as advance money for two bits. The defendant-1 accepted the said two cheques...'
Mr. Mandgi also urged that D.W-1 has admitted the receipt of the said cheques though not under the above circumstances, but the lower Court has believed the version of P.W-1 that he did deliver the cheques at Bangalore.
It is true that the lower Court has accepted the statement of P.W-1 that he delivered the said cheques to D.W-1. There is also no difficulty for us to proceed on that basis, since D.W-1 was fair enough to admit the receipt of the cheques. Unfortunately, it is not enough for us to besatisfied as to the formation of the contract alleged by P.W-1. The case involves a necessary principle of construction of contracts which is quite different from construing a statute or a testamentary disposition. In considering a statute or a will we are considering the intention of one body only - be it
14. The critical point in this case therefore is, whether P.W-1 has established by acceptable evidence that he had agreed to purchase the entire plot in the first week ofFebruary 1977 for Rs. 80,000/- as offered by D.W-1 and gave two cheques of Rs. 2,500/- each as advance. From the letter Exhibit P-6 written by Kittur, it will be seen that P. W-l was not interested in finalising the transaction for any thing above Rs. 65,000/-. That letter was written on November 10, 1976. On November 11, 1976, under Exhibit P-23, D.W-1 made a final offer of Rs. 75,000/- leaving no scope for P.W-1 for further bargaining. He also made it clear in that letter that he would invite offers from the public if P.W-1 was not willing to purchase the plot for Rs.75,000/-. Anybody in the position of P.W-1 who is interested to purchase the plot, would not have waited a day more to reply to the said letter, if not to communicate his willingness to D.W-1. He could have at least written to D.W-1 not to offer the site for public to purchase. He could have intimated that he wouldpersonally meet him and enter into a contract if he was unwilling to commit himself openly with his counter offer. P.W-1 did not do any such thing. According to him, he silently waited for about three months till the first week of February 1977 to enter into a contract on the terms suggested by D.W-1, It would be difficult for us to accept his version on the face of the wide gap that existed between the offer and Counter offer made by the parties. It would be still difficult for us to understand his generousattitude to bargain for Rs. 80,000/- when D.W-1 was willing to accept Rs. 75,000/- from him as a friendly gesture.
15. Mere giving the two cheques of Rs. 2,500/- each to D.W-1 as advance or earnest money does not by itself prove the consensus between the parties as to other terms of the contract. Firstly, the said cheques were not encashed and they were scored off by D.W-1 under intimation to P.W-1. That is evident from the letter Exhibit P-7 dated February 11 1977 from D.W.1 to P.W-1 wherein it has been stated :
'I have been giving discussions with my advocate friends here. The netoutcome is that I should not think of selling it now till the matter regarding my sister and nephew's ownership to the plot is fully established in the various departments of theGovt....So it is better we drop this idea of sale for the present till all these matters arc decided favourably........
For the above reasons, I do not wish to encash the cheques.........'
Secondly, P.W-1 was very vague in his reply letter Exhibit P-8 dated February 14, 1977. Therein, he did not give any indication as to hiswillingness to pay Rs. 80,000/- or Rs. 75,000/- at any time when the site is free from problems for its sale. He only referred to the undisclosed sentiments with which he had issued the cheques and depended on God to solve the problems smoothly. He has stated thus :
'.....I. firmly believe that whatever problems you have, will be solved smoothly by the grace of God. While issuing cheques I have done so with some feelings behind it, therefore, I request you not to return the cheques. You may encash the cheques in your sister's name........'
D.W-1, on the other hand, had nothing to conceal. He did not want to take a risk by entering into a contract with P.W-1 before removing all the problems eclipsing theownership of his sister in respect of the plot. On February 19, 1977 he wrote to Kittur under Exhibit P-9 explaining his position:
'Mr. Shanbhag has replied to me, agreeing with me almost fully. He has offered to assist me to the extent possible. In the end, however, he has stated that he has issued the cheques with certain feelings and as such they need not be returned but credited to my sister's a/c. I have not yet replied to him. In the meanwhile, when 1 was discussing about this matter, it was decided that I should not encash them at all till all this complicated matter is solved favourably....It might take a year or more. So there is no point in taking any advance now. You may please inform Sri Sbanbhag over the phone about this, when you are free....'
These letters clearly indicate that there was no consensus between the parties as to terms of sale of the plot when P. W-1 delivered the cheques to D.W-1 on February 5,1977. The parties appear to have not entered into a binding contract on that day for sale of the entire plot. The question ofgranting specific performance to plaintiff, therefore, does not arise.
16. The subsequent conduct of the parties and their correspondence confirm the conclusion that we have reached. In this context, it will be useful to refer to the following passage from Fry on Specific Performance, 6th Edn., P.265 :
'The effect of subsequent letters may perhaps be thus stated. If the subsequent correspondence leads to the conclusion that at the date of the letters relied on as the memoranda of the contract there was no contract in fact, then the plaintiff must fail :if, on the other hand, the whole evidence shows that at that date there was a consensus between the parties upon theterms expressed in the letters relied upon, then the subsequent correspondence, unless amounting to a new contract or an agreement for rescission can have no effect upon the existence of the contract.'
In the beginning of 1978, the parties have renewed negotiation for sale of the plot. Under Exhibit P-10 dated March 27,1978, D.W-1 invited P.W-l to go over to Bangalore to conclude the agreement and on April 14, 1978, they must have met together to settle the terms of the contract. On the same day, the parties to the suit have entered into a written agreement Exhibit P-11. It was for sale of the westernportion of the plot. The area agreed to be sold was a little more than one half. The whole plot measures 15254 sq. ft., i.e., 1417 sq. metres. Plaintiff agreed to purchase 7683 sq.ft., i.e.. 714 sq. metres for which she agreed to pay Rs.45,000/-. She also paid Rs. 5000/- as advance. This was the only written agreement between the parties. This agreement,however, makes no reference to any other understanding reached or to be reached. P.W-1 is a businessman. If there had been a binding contract between the parties for sale of the entire plot for Rs. 80,000/- as alleged by P.W-1, he would not have, in our opinion, failed to make a reference to that in Exhibit P-11. Pursuant to ExhibitP-11, the sale deed was executed on December 1, 1978. Even in the sale deed, plaintiff has not reserved her right to purchase the remaining portion of the plot. It has thus no reference to the earlier negotiation or any subsequent thinking. For all intents and purposes Exhibit P-11 appears to be an independent agreementunconnected with the earlier negotiation for sale of the entire plot. We cannot, therefore, accept the submission of Mr. Mandgi that the agreement Exhibit P-11 has been entered into in part performance of the earlier contract.
17. Apart from that, there are other two letters to which we may usefully make a reference. Exhibit D-2 dated June 16,1978 was written by P.W-1 to D.W-1. The significant portion of the letter reads :
'My Engineer brother has asked me to try for remaining half so that a good house can be constructed according to my desire .....You may discuss this with your sister and let me know your opinion......'
This letter was written after the agreement Exhibit P-11 and it wholly destroys the case of plaintiff. P.W-1 hasevidently consulted his Engineer brother in regard to construction of a house in the portion which he had agreed to purchase under Exhibit P-11. His Engineer brother, from the point of view of planning for a good house with a big compound, has advised P.W-1 to try for the remaining half of the plot. Upon that advice, P.W-1 wrote D.W-1 to discuss about the matter with his sister. If there was already aconcluded contract on February 5, 1977 for sale of the entire plot, the letter Exhibit D-2 was unnecessary, or the tenor of the letter would have been quite different.
Earlier to Exhibit D-2, P.W-1 had written a letter Exhibit D-1 dated May 5, 1978 requesting D.W-1 to consider the sale of the remaining portion of the plot. Therein he has stated :
'Regarding the remaining 1/2 plot I still feel you should consider it in the interest of both.'
In this context, we may also refer to the letter of D.W-1 to Kittur which will further strengthen our conclusion that there was no contract between the parties for sale of the entire plot. On May 21, 1977, Kittur wrote to D.W-1 stating that he would consult his brother and see how he could succeed in securing the highest price for the plot. He has also stated therein that he would consult his Architect Sri B.K. Joshi as to whether the plot could besub-divided to get a better price. If there was a concluded contract on February 5, 1977 as between plaintiff and defendants, there wasabsolutely no necessity for Kittur, the common friend of both the parties, to find out other means of securing the highest price for the plot.
We are, therefore, firmly of the opinion that there was no binding contract between the parties on February 5, 1977 for sale of the entire plot and the Court below was justified in dismissing the suit.
In the result, the appeal fails and is dismissed with costs,
KJSJ & MPCJ
March 27, 1985
Upon pronouncing the judgment, Mr. Mandgi, Learned Counsel for the appellant, makes an oral application seeking a certificate for appeal to the Supreme Court.
We do not think that the case involves any substantial question of law which needs to be decided by the Supreme Court.
The certificate prayed for is, therefore, refused.