(1) This appeal is from the decision of the Additional District Judge, Nellore given on 6th April, 1959 whereby he allowed the appeal filed by the 1st defendant and after disallowing the appeal preferred by the plaintiffs dismissed the plaintiffs' suit in toto.
(2) The necessary facts in order to appreciate the contentions raised before me are that the 1st defendant entered into an agreement to sell his lands admeasuring 27 acres 35 cents for a sum of Rs. 6,000/- to the plaintiffs, and after receiving an advance of Rs. 300/-, executed an agreement to that effect on 12th May, 1953, Ex. A-1. It was agreed under the terms of the said agreement that the balance will be paid on or before 4th June, 1953, and that the sale deed would be got executed and registered. It was stated that the plaintiffs took the balance of money on 4th June, 1953 to the 1st defendant, who declined to receive the same. It was alleged that the plaintiffs were ready and willing to perform their part of the contract, but the 1st defendant entered into an agreement to sale or relinquish his rights in favour of defendants 2 and 5, and executed an agreement to that effect on 22-6-1953. In pursuance of that agreement, a relinquishment deed was executed on 27-11-1955 during the pendency of the suit.
(3) The plaintiffs treating the conduct of the 1st defendant as breach of contract, instituted the present suit for specific performance, and deposited the balance of the price in the court along with the suit. This suit was filed in April, 1955.
(4) The defence set up by the defendants was that time being of essence of the contract, the contract came to an end on 4th June, 1953 when the plaintiffs failed to pay the balance of the price and got a document executed. They denied the assertion of the plaintiffs that the tender of the whole of the balance was made on 4th June. The 1st defendant stated that the plaintiffs came to the 1st defendant with a sum of Rs. 2,000/- only and wanted further time, but the 1st defendant declined to extend the time.
(5) Upon these pleadings, the trial court framed several issues and after recording evidence adduced by the parties, awarded the plaintiffs Rs. 2,000/- as damages and declined to give them the relief of specific performance holding that the plaintiffs made a false representation to the Court that on 4th June, 1953 they had tendered the whole of the balance of the sale price to the 1st defendant. The trial Court, however, found that the time was not of essence of the contract, that the plaintiffs were ready and willing to perform their part of the contract and that the 1st defendant committed breach of the contract. It also found that defendants 2 to 5 had the knowledge of the agreement with the plaintiffs, is not established.
(6) Aggrieved by that decision, both the plaintiffs and the 1st defendant preferred separate appeals. Plaintiffs preferred AS 78 of 1958, and the 1st defendant preferred AS 72 of 1958. These two appeals were heard together and were disposed of under a common judgment. The Lower Appellate Court disallowing the appeal of the plaintiffs allowed that of the 1st defendant and dismissed the plaintiffs' suit altogether. It concurred with the opinion of the trial court that the time was not of essence of the contract in this case. It also agreed with the opinion of the trial court that the plaintiffs were ready and willing to perform their part of the contract. It held that the tender of the entire balance of the sale price as pleaded by the plaintiffs, has not been proved by the plaintiffs and that it is false. It disagreed with the opinion of the trial court that the plaintiffs, in the alternative, are entitled to damages. The lower appellate court found that when the plaintiffs could not get the relief of specific performance, they cannot get even the damages. The lower Appellate Court, however, did not discuss whether defendants 2 to 5 had knowledge of the previous agreement with the plaintiffs. It dismissed the suit of the plaintiffs on the ground of delay and because of false representation made in regard to the tender. The plaintiffs attack this judgment in this appeal.
(7) The principal contention of the learned Government Pleader is that assuming that the plaintiffs could not prove the fact that they had tendered the entire balance of the sale price on 4th June, 1953 as pleaded by them and further assuming that there has been delay in the institution of the present suit, the plaintiffs, merely on those grounds, could not be deprived of the equitable relief, which they are claiming.
(8) In order to appreciate the implications of this contention, I have to consider S. 20 (Old 22) of the Specific Relief Act (hereinafter called the Act). A close analysis of Section 22 reveals that it at the outset lays down a general rule that the jurisdiction to decree specific performance is discretionary. In then sets out the nature of such discretion. It says that the court is not bound to grant such relief merely because it is lawful to do so. Such a discretion, however, is not to be arbitrarily exercised, but must be sound, and reasonable and guided by judicial principles, which exercise of discretion is capable of correction by a court of appeal. The section thereafter specifies in three successive paragraphs circumstances, under the first two of which, the court may properly exercise a discretion not to decree specific performance, whilst under the third, it may appropriately give a decree. The circumstances stated in the three provisions are, however, not exhaustive. They are merely illustrative of the general principle embodied in the first paragraph of the Section. It is neither possible not desirable to lay down any hard can fast rules regarding the principles which can be of absolute obligation and authority in all cases. It is also not possible to define exhaustively the special circumstances under which relief may appropriately be granted or refused.
(9) It can, however, broadly be stated that there is a presumption that specific performance is the proper remedy on a contract to convey immovable property. But it is only a presumption liable to be displaced. There is no absolute right to this remedy. The court exercises a discretion in such case and directs a specific performance unless of course, the court is satisfied that it would be highly unreasonable to do so. What incidents or consequences can be considered as 'highly unreasonable' naturally would depend upon the facts and circumstances of each case. It can, however, broadly be stated that in cases where persons have voluntarily and without any fraud or mistake entered into contracts, the equitable relief should normally be granted. By this extent that specific performance will only be excluded for special reasons on a contract for the conveyance of the immovable property. While declining to grant this equitable relief, it is necessary to give sound reasons. In the exercise of that discretion, the circumstances of the case, the conduct of the parties and their respective interest under the contract, are necessarily to be borne in mind.
(10) It is true that this equitable relief can be refused on the ground of delay. Where delay not amounting to a bar by any statute of limitation is pleaded as a defence to a suit for specific performance, the validity of that defence must be tried upon principles substantially equitable. It must, however, be remembered that such a pleading in regard to delay is necessary. If the point is not clearly raised in the written statement, it should not normally be permitted to be raised for the first time in the first or second appeal. It is true that specific performance may be refused on the ground of delay, even if the time is not the essence of the contract. Two factors, however, which are important in such cases are the length of the delay and the nature of the acts done during the interval which might affect either party and cause a balance of justice or injustice in taking the one course or the other so far as related to the remedy. What amount of delay will constitute a bar to relief by way of specific performance where time is not the essence of the contract, depends on the circumstances of each case.
In this connection, it is to be remembered that if delay in payment of the price has been acquiesced in by the vendor of the immovable property and no notice terminating the contract has been given, the court will normally decree specific performance. What must follow is that in order to disentitle the plaintiff of its equitable relief, there should not only be an inordinate delay, but such delay must have so changed the conditions or have brought about such state of things that granting this equitable relief would be unfair and unjust. Mere delay without its adverse consequences on the defendant cannot be a ground to withhold the relief. Where no new rights and interests have in the meanwhile, come into existence or where the other party would not be unreasonably prejudiced by the grant of equitable relief, delay in such cases, will in general be no bar to plaintiffs right to relief. Where the suit is within time and the delay does not amount to waiver, abandonment or acquiescence and which in no respect alter the position of the parties, does not in my opinion, disentitle the plaintiff to get the equitable relief of specific performance.
(11) It is true that the appellate court should not lightly interfere with the exercise of the discretion by the lower court, except when such discretion has been exercised on palpably erroneous principles. It must, however, be remembered that whether on certain facts the equitable relief prayed for should or should not be granted, is a question of law. Thus, this court even sitting in second appeal will interfere in the exercise of discretion if it is of the opinion that the discretion vested in the court under Section 22 of the Act has been exercised not in accordance with the well-recognised principles of equity.
(12) Specific performance of a contract being an equitable relief within the discretion of the court, the plaintiff who seeks equity must come with clean hands. Where he does not come with clean hands or where he is guilty of fraud or forgery or other sharp practices, he cannot be given any relief by way of specific performance. Where, however, his conduct is not of a grave nature and the case is otherwise a fit one, the above said rule may not apply. In Ramianam Bharthi v. Mt. Dhurandhar Kuer, : AIR1959Pat506 although it was found that the plaintiff was guilty of fraud, yet his Lordship was of the opinion that the fraud was not of a grave nature as to disentitle the plaintiff to the equitable relief. What has to be seen, therefore, in such cases is that whether the plaintiff is guilty of any fraud, forgery or any other objectionable conduct and if so, whether such conduct has resulted in prejudicing the interests of the defendants or giving unfair advantage to the plaintiffs. If the plaintiff's conduct has the effect of over-reaching the defendant and putting him to any loss, the plaintiff would certainly be disentitled to the equitable relief of specific performance.
(13) It is in this background that I have to examine carefully whether the two courts bellow have appropriately exercised the discretion under Section 22 of the Act. While the trial court declined to give relief to the plaintiffs on the ground of false representation, the lower appellate court declined the relief not only on the ground of false representation, but also on the ground of delay.
(14) I have already stated that mere delay without its consequences adverse to the interest of the defendants would not be enough to refuse the relief to the plaintiffs. Admittedly, the plea of delay was not raised by the defendants in the written statement nor was it shown that what adverse effects this delay had on the interests of the defendants. It is true that defendants 2 to 5 have made a reference to the improvements which they made to the land, but those improvements do not seem to have been made after they entered into the agreement to purchase from the 1st defendant. These improvements, according to them, were made as they were claiming the occupancy rights. Admittedly there is no evidence of any improvement made in the land.
Assuming, therefore, that there has been delay of several months in instituting the suit after the agreement to sale or relinquish was entered into with the defendants 2 to 5 by the 1st defendant, even then, merely because of such delay, the plaintiff's cannot be non-suited. This plea of delay was not pressed on the trial court. It is the appellate court for the first time which considered it as a sufficient ground to disentitle the plaintiffs. In the absence of any plea in this behalf, and in the absence of any evidence as to how the delay alters the position of the parties and how it would be inequitable because of delay to grant the relief to the plaintiffs, it is obvious that the equitable relief cannot be withheld.
(15) That this view is correct, is supported by a recent decision of the Supreme Court in Satyanarayana v. Yelloji Rao, : 2SCR221 . Therein Subba Rao, J., who wrote the opinion for the Court said at page 1408:
'Under S. 22 of the Specific Relief Act, relief of specific performance is discretionary but not arbitrary: discretion must be exercised in accordance with sound and reasonable judicial principles. The cases providing for a guide to Courts to exercise discretion one way or other are only illustrative; they are not intended to be exhaustive. As Art. 113 of the Limitation Act prescribes a period of 3 years from the date fixed thereunder for specific performance of a contract, it follows that mere delay without more extending upto the said period cannot possibly be a reason for a Court to exercise its discretion against giving a relief of specific performance. Nor, can the scope of the discretion, after excluding the cases mentioned in S. 22 of the Specific Relief Act, be confined to waiver, abandonment or estoppel. If one of these three circumstances is established no question of discretion arises, for either there will be no subsisting right or there will be a bar against its assertion. So, there must be some discretionary field unoccupied by the three cases, otherwise the substantive section becomes otiose. It is really difficult to define that field. Diverse situations may arise which may induce a court not to exercise the discretion in favour of the plaintiff. It may better be left undefined except to state that the section says, namely, discretion of the Court is not arbitrary, but sound and reasonable guided by judicial principles and capable of correction by a court of appeal.'
It was further observed at page 1410:
'While in England merely delay or laches may be a ground for refusing to give a relief of specific performance in India merely delay without such conduct on the part of the plaintiff as would cause prejudice to the defendant does not empower a court to refuse such a relief.'
(16) Similar is the case with regard to false representation. While narrating the facts, I have stated that it was alleged by the plaintiffs that they went with full amount of balance on 4-6-1953 to pay to the 1st defendant, and that he declined to receive the same and complete the contract. The 1st defendant, however, pleaded that the plaintiffs had come to him, but stated that they did not bring the full amount of the sale price but brought only Rs. 2,000/- and wanted extension of time, which the 1st defendant declined to give. Thereafter the plaintiffs gave notice on 5-6-1953, to which a reply was given by the 1st defendant on 9-6-1953. Both the courts below, on an appreciation of evidence have found that the tender pleaded by the plaintiffs of the full balance of the sale price is not proved and that it was falsely made. Sitting as I am in second appeal, it is not possible for me to re-evaluate the evidence. I would, therefore, take it that the plaintiffs were guilty of making untrue representation to the court that they tendered the entire balance of the sale price and that the 1st defendant declined to receive it.
The question naturally arises as to whether this false representation disentitles the plaintiffs to the equitable relief under S. 22 of the Act. As stated earlier, mere false representation is not enough. It has to be further shown by the defendants that this false representation resulted in adversely affecting their interest, or it altered the position of the parties in such a way that it would be inequitable to grant relief to the plaintiffs. First of all, this objection was never raised in the written statement. Nor there is any evidence to show how this false representation affected the defendants injuriously. Without any pleading in this behalf and without any satisfactory proof of its consequences on the 1st defendant, it would be a wrong exercise of the discretion if the plaintiffs were refused this equitable relief. Both the courts below have not looked at the case from this point of view. They thought that mere false representation would be enough to disentitle the plaintiffs to the equitable relief under Section 22 of the Act. The Courts below are obviously wrong in reaching that conclusion.
(17) Reliance was placed on Strigineedi Subbarayudu v. Kopanathi Tatayya, 1937 Mad WN 1158. The facts of that case were as follows:-
Plaintiff sued for specific performance of an agreement with the 1st defendant, dated 13-7-24 for the sale of certain immovable property. The agreement provided that the consideration should be paid within three months, 4th respondent entered into agreement with the 1st respondent to buy the property on 30-12-1925 and the conveyance was completed on 2-2-1926. The present suit was filed on 13-7-1927. Fourth respondent purchased the property with notice of the suit agreement. Plaintiff alleged that he tendered the full purchase money within two months of the agreement, but this was found against, plaintiff sat by while 4th respondent spent money on improving the property; 4th respondent also discharged a mortgage on the property. It was in these circumstances that it was held by the Bench of the madras High Court that the plaintiff was not entitled to specific performance because he gave false testimony and because to grant him the relief would be doing injustice to the 4th respondent. It was observed that the plaintiff who is capable of setting up a false case cannot expect a Court of equity to grant him relief.
This decision far from helping the defendants does disservice to them. It would be a mistake to read this judgment to say that mere false representation has been found enough to disentitle the plaintiffs to the equitable relief. A careful reading of that judgment would clearly indicate that apart from false representation, it was found in that case that the plaintiff sat by while the 4th respondent spent money on improving the property, and the 4th respondent also had discharged a mortgage on the property. Granting of equitable relief in such circumstances would have naturally affected adversely to the interest of the 4th respondent and that is why it was found that to grant relief to the plaintiff would be doing injustice to the 4th respondent. Both the findings in that case have necessarily to be read together and not separately. It is only when both the things co-exist that the plaintiffs would be disentitled. As it was found in that case that not only a false representation was made but the positions of the parties had considerably altered and in those circumstances the Court declined to give relief to the plaintiff in that case. I do not, therefore, consider that this case has decided in any manner contrary to what I have stated above. In fact, in my opinion, it support the conclusion to which I have arrived at.
(18) I am, therefore, satisfied that both on the grounds of delay and false representation, the plaintiffs in the circumstances mentioned above, could not be deprived of the relief. The Courts below have erred in exercising the discretion in refusing to grant a relief. This Court is, therefore, not only entitled to grant such relief, but considers it a duty to interfere and grant the relief to the plaintiffs.
(19) The next question which arises for consideration is whether the relief of specific performance can be granted against defendants 2 to 5. The trail Court found on evidence that defendants 2 to 5 had no knowledge of the agreement entered into by the 1st defendant with the plaintiffs. The lower appellate Court, as stated above, did not consider directly this point. While considering another point, it observed that the plaintiffs have failed to prove that defendants 2 to 5 had knowledge of the previous agreement. This approach is obviously wrong. The onus to prove that they are bona fide purchasers without notice lies upon defendants 2 to 5. It is to their evidence the lower Courts ought to have looked to. If any authority is required for the proposition, Bhup Narration Singh v. Gokul Chand Mahton, AIR 1934 PC 68 and Shankarlal Narayandas v. New Mofussil Co., Ltc., AIR 1946 PC 97, can profitably be quoted. Admittedly, there is no satisfactory evidence adduced by defendants 2 to 5 to show that they did not have any knowledge of the agreement which the 1st defendant had entered into with the plaintiffs. It is relevant in this connection to note that the plaintiffs issued notice on 5-6-1953 and the 1st defendant gave reply on 9-6-1953. The 1st defendant, therefore, was put on notice that the plaintiffs intended to enforce their rights under the agreement. The manner in which the 1st Defendant entered into an agreement with defendants 2 to 5 and the circumstances of the case clearly show that they had knowledge. Furthermore, they got the relinquishment deed executed long after the suit was instituted. I am, therefore, not prepared to hold that defendants 2 to 5 had no knowledge of the agreement with the plaintiffs.
(20) In other respects, the findings of the Courts below are binding upon me. It was clearly found that the time is not of essence of the contract, that the plaintiffs were ready and willing to perform their part of the contract and that the 1st defendant committed breach of the contract. No argument also was advanced in this behalf before me, on behalf of the respondents.
(21) In the view which I have taken, it is not necessary to consider whether the plaintiffs are entitled to any damages. The plaintiffs would have been entitled to damages if the main relief of specific performance had been declined. It was then perhaps necessary to consider whether the plaintiffs can demand damages without expressly preferring any appeal against the decision in AS. 72 of 1958, and whether they would be entitled to any damages. All those questions do not arise in the view which I have taken.
(22) For the aforesaid reasons, I allow the Second Appeal, set aside the judgments and decrees of the Lower Courts and decree the plaintiffs' suit with costs of all the courts. No leave.
(23) Appeal allowed.