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Raghuvir Singh Bhatty Vs. Ram Chandra Waman Subhedar - Court Judgment

LegalCrystal Citation
SubjectContract;Limitation
CourtAllahabad High Court
Decided On
Case NumberSecond Appeal No. 1186 of 1997
Judge
Reported in2001(4)AWC3140
Acts Specific Relief Act, 1963 - Sections 10, 20 and 21; Code of Civil Procedure (CPC), 1908 - Sections 100 - Order X, Rule 2; Indian Contract Act - Sections 73; Urban Land (Ceiling and Regulation) Act, 1976 - Sections 26, 27 and 27(4); Limitation Act, 1963 - Schedule - Article 54
AppellantRaghuvir Singh Bhatty
RespondentRam Chandra Waman Subhedar
Appellant AdvocateG.N. Varma and ;Swaraj Prakash, Advs.
Respondent AdvocateRavikant and ;Manoj Kumar Pandey, Advs.
DispositionAppeal partly allowed
Cases ReferredIn Vasudeo Harchand Kather and Anr. v. Bhailal Nadeeseth Rajpu
Excerpt:
.....about after four years that permission for transaction not granted and contract stood frustrated - suit for specific performance - question of running period of limitation - held, limitation began to run from date of intimation by defendant.(ii) contract - performance - sections 10, 20 and 21 of specific relief act, 1963 - contract for sale of land for building house - time not of essence to contract - sale agreement provided for completion of sale transaction within six months of agreement - delay in completion of transaction attributable to defendant and plaintiff both - prices of land gone up substantially - suit for specific performance - defendant can not be called upon to execute sale deed - damages awarded to plaintiff. - - this, the plaintiff feels, is a poor recompense to him.....j. sahai, j.1. this is a plaintiff's appeal in a suit for specific performance of a contract of sale of a plot of land in old kanpur. the trial court decreed the suit. the lower appellate court has reversed the decree for specific performance but has granted refund of the bare amount of earnest money without interest. this, the plaintiff feels, is a poor recompense to him in the deal which he had entered into on 23.10.1981 with the defendant. he had then paid a sum of rs. 41,670 as earnest money which was half the total price settled. the defendant was to obtain permission of sale from the competent authority, urban land ceiling and to inform the plaintiff about it. within 3 months thereof, the plaintiff would pay the balance money and get the sale deed registered. the whole transaction.....
Judgment:

J. Sahai, J.

1. This is a plaintiff's appeal in a suit for specific performance of a contract of sale of a plot of land in old Kanpur. The trial court decreed the suit. The lower appellate court has reversed the decree for specific performance but has granted refund of the bare amount of earnest money without interest. This, the plaintiff feels, is a poor recompense to him in the deal which he had entered into on 23.10.1981 with the defendant. He had then paid a sum of Rs. 41,670 as earnest money which was half the total price settled. The defendant was to obtain permission of sale from the competent authority, urban land ceiling and to inform the plaintiff about it. Within 3 months thereof, the plaintiff would pay the balance money and get the sale deed registered. The whole transaction of sale was to be over within a short span of six months. That, however, did not happen. It appears that the defendant did not apply for permission for a good three years, as there was some dispute between him and a third party over a portion of the land. In the meanwhile, prices of land in the town were shooting up. To make matters worse, on 15.4.1985 the Competent Authority, Urban Land Ceiling, declared an area of 2091 sq. mtrs of the defendant's land as surplus.

2. All this while the plaintiff and the defendant maintained a steady silence. After the execution of the agreement in October 1981, it appears that there was no correspondence between the parties. In 1982 the plaintiff claims to have given a notice but that has not been found to be proved. On 16.7.1985, the defendant played his first move - a notice to the plaintiff that in view of the order of the competent authority declaring surplus land, the agreement stands frustrated. This notice evoked a sharp response from the plaintiff who refuted the defendant's stand that the contract had frustrated and also pressed for specific performance of the agreement. The defendant, however, stood by his stand that the contract had frustrated and again gave a notice on 7.9.1995 sending therewith with a cheque for Rs. 41,670, the earnest money paid by the plaintiff. At this juncture on 3.10.1985, the appeal under the Ceiling Act was allowed and the surplus was reduced to 400 sq. yards. The plaintiff who seems to have had some inkling of this order sent his replies dated 25.10.1985 and 26.11.1986 referring to the order and demanding specific performance of contract. The plaintiff also returned the cheque sent by the defendant. After a long wait of two and a half years, the plaintiff filed the suit giving rise to the present appeal on 14.7.1988. During the pendency of the appeal, the Ceiling Act was repealed.

3. I have heard Sri G.N. Verma, counsel for the appellants and Sri Ravi Kant, Sr. Advocate, counsel for the respondents.

4. Before adverting to the questions framed, I shall first consider the contention of Shri Ravi Kant that the suit was barred by limitation an issue decided against him, which as a respondent he submits, he can raise in this appeal especially as it goes into the jurisdiction of the Court to entertain the suit. It is submitted that the period of limitation would start running with effect from the expiry of six months of the date of contract, the time which the parties had agreed upon to complete the contract and that 3 years therefrom, the prescribed period of limitation under Article 54, the suit would be barred by time. Reliance has been placed upon the decisions in Tarlok Singh v. Vijay Kumar Sabharwal : [1996]3SCR879 , in which the agreement for sale provided that the sale deed was to be executed within 15 days from the date of vacation of the injunction order, which was operating against the defendant, and the injunction order having been vacated, with the dismissal of the suit and review application, it was held that the limitation would start running with effect from 15 days of the date of dismissal of the review application. The second case relied upon by him is Ramzan v. Hussaini (1996) 1 SCC 104, in which the agreement for sale of a house to the plaintiff provided that the sale deed would be executed by the defendant on the date of the plaintiff redeems the mortgage and it was held that the period of limitation would start running from the date of redemption and. therefore, the suit filed 14 years after the redemption was barred by limitation. The third case relied upon is T.L. Muddukrishna and Anr. v. Lalitha Kamchandra Rao : [1997]1SCR11 , wherein a specific date for execution of the sale deed was provided in the agreement and it was held that even though time may not be the essence of the contract, limitation would start running from the date provided in the agreement for performance of the contract. These cases have no application to the facts here. In the present case, permission of the Ceiling Authority was required and the sale deed was to be executed only after intimation to the plaintiff of the grant of permission. As the defendant gave no such intimation but for the first time in the notice dated 16.7.1985 served upon the plaintiff gave out that the contract had frustrated on account of refusal to grant permission by the Celling Authority, the limitation would start running from service of the notice and the finding that the suit filed on 14.7.1985 was within time does not suffer from any error of law.

5. Two substantial questions of law have been framed in this appeal. One whether on account of the repeal of Urban Land (Ceiling and Regulation) Act, 1976 and on the findings arrived at by the court below, the suit of the plaintiff is liable to be decreed? Second, whether on the findings recorded by court below on issue Nos. 4 and 10 the view taken by the lower appellate court that the plaintiff appellant was unable to establish that he was willing to perform his part of the contract is erroneous in law?

6. The trial court while deciding issue Nos. 1 and 2, held that defendant had indeed applied for permission under Section 27 of the Celling Act though not under Section 26 as he ought to have done and there being no evidence of refusal, it can be deemed that after the expiry of 60 days the permission sought for had been granted in the light of Section 27 (4) of the Act, The appellate court has reversed the finding holding that the disputed plot was not open land there being a construction in the shape of a garage standing thereupon, therefore, the provisions of Section 26 were inapplicable and the defendant was right in going under Section 27 of the Act. Relying upon the admission made by the plaintiffs counsel under Order X, Rule 2, C.P.C., it further held that the competent authority had refused permission on 1.2.1985. In the memorandum of appeal filed in this Court, there is no challenge to this finding of refusal of permission. Rather it has been stated in the grounds added by amendment that the finding on issues 1 and 2 has become redundant in view of the repeal of the Celling Act. Question No. 1 framed by the Court is in the same terms as set out in the memorandum and it is implicit in it that the findings were being accepted. But in the submissions made, counsel for the appellant has challenged this finding as being based on no evidence and being inconsistent with the stand that no orders have been passed on the application for permission taken in the defendant's notice dated 16.7.1985. No explanation to the admission made by the plaintiffs counsel in his statement under Order X, Rule 2, C.P.C. has, however, been given. In the absence of such explanation, the plaintiff would be bound by the admission particularly when this finding of refusal of permission has not been challenged in the memo of appeal and I will take this finding as correct.

7. As regards the question whether the permission ought to have been applied for under Section 26 or under Section 27 of the Act, the factual part of this finding about the existence of the garage has not been challenged in his notice dated 25.10.1985 the plaintiff had himself induced the defendant to pursue the application under Section 27 and in view of this stand as well as of the terms in which the question has been framed, the finding of the lower appellate court that the defendant was right in applying under Section 27 cannot be questioned. The matter to say the least is not free from complication and if the defendant followed the path of Section 27 believing that it was the proper one, a subsequent analysis of the two provisions leading to the conclusion that the other course was more appropriate would not be a ground to hold the defendant in breach or to decree specific performance ignoring the passage of time lost while the defendant was pursuing a course which though inappropriate was believed by the parties to be the right one over a sufficiently long period of time.

8. Shri Verma contends that admittedly the possession of the land, declared surplus, never having been taken over by the State, there was no acquisition at all and the defendant continues to be the owner of the land. On account of repeal of the Ceiling Act, it is urged permission at all is now required and the appeal being a continuation of the suit, a decree for specific performance can be passed. In support, he has cited certain decisions that subsequent events and change of law can be taken note of. These are Lachmeshwar v. Keshwar Lal and Ramesh Kumar v. Kesho Ram : AIR1992SC700 . Shri Ravi Kant, on the other hand, contends that on account of the rejection of the permission on 1.2.1985 and the land having been declared surplus, the contract stood frustrated. He relies upon the decision of the Apex Court in K. Narendra v. Riviera Apartments (P.) Ltd : [1999]3SCR777 , in which the Supreme Court while dealing with a similar contention held that as the respondent could not obtain permission, the contract had frustrated and that the subsequent event of the repeal of the Ceiling Act could to be pressed in to revive the contract as to decree specific performance. In that case, just as in the present one, permission under the Ceiling Act could not be obtained even after a lapse of about 16 years but that was a case of a commercial contract for erecting a multi-storeyed building which had become incapable of performance as a portion of the land sought to be sold had been acquired, the sanction of the building plans originally granted had been withdrawn and it became impossible for the builders, the purchasers respondents in that case to honour their commitment of giving to the appellant the vendor his share in the flats to be constructed under the agreement. The distinguishing feature of that case is that even on the date of the decision of the Apex Court, the contract was incapable of being performed without variation of its material terms. Specific performance is a discretionary relief and while considering that question on the peculiar facts before it, the Apex Court observed that the effect of repeal could not be pressed to revive the contract, which had frustrated. That is not the position here. With the passage of time and change of circumstances, it may have become inequitable to direct specific performance, a question we shall examine, but the contract has not become incapable of performance. It is clear that on account of repeal of the Celling Act there remains no hurdle in law in enforcing even today the contract on the very terms agreed upon by the parties without any variation. The result of these discussions is that the contract had frustrated on account of failure to obtain permission but the repeal of the Ceiling Act has removed the legal hurdle of impossibility in enforcing the contract on the terms agreed upon and there is in law no bar today in passing a decree for specific performance.

9. This, however, answers only a part of the question framed. The second part of the question in effect is whether the suit ought to be decreed and implicit in it on what terms. The answer to this question would depend upon the answer to the second question as well as on the other factors, which are to guide the discretion of the Court in the matter of passing a decree for specific performance or compensation as the case may be. We will, therefore, leave this question here and pass on to the second question but before doing so. I may refer to two decisions of the Apex Court cited by Shri Ravi Kant to drive home his submission about the contract having frustrated beyond redemption--they are Satyabrata Chose v. Mugneerarn Bangur & Co : AIR1954SC44 , in which the concept of frustration was explained to mean not mere literal impossibility but also an impracticability in performing the contract ; In re HEH The Nizam's Jewellery Trust AIR 1980 SC 17, where the doctrine of frustration was applied in the case of contract of sale of trust property which became incapable of performance on account of injunction and other judicial orders. None of these cases dealt with a situation which exists here--a situation, which may be described as an eclipse upon the contract cast by the refusal of the permission which the repeal removed. I have already held that at a certain stage of events, the contract had frustrated subject to the effect of repeal and as such, it is not necessary to deal with these cases in any greater detail.

10. That brings us to the second question in the case--the readiness and willingness of the plaintiff to perform his part of the contract. The literal terms in which the question has been framed do not comprehend the issue of readiness but comprehend willingness alone but the parties' counsel have understood the question in its true import as including the issue of readiness too and have addressed their arguments in that light as would be clear from the oral and written submission made. The trial court had answered the question in favour of the plaintiff. It held that the defendant had in terms of the agreement never given intimation to get the sale deed executed and delayed in taking steps for permission. The plaintiff had paid as much as half of the total consideration and was ready and willing to perform his part. The appellate court has reversed the finding and has held that the plaintiff maintained an absolute silence for a period of 4 years from the date of the agreement upto his reply dated 12.8.1985, in which, in answer to the defendant's notice he claimed specific performance of contract. From the plaintiffs silence and inaction over a long period of time, the appellate court has held that he was not ready and willing to perform his part of the contract.

11. Shri G.N. Verma has challenged this finding on the ground that delay in this suit for specific performance on the facts as they are is immaterial. If the suit, it is urged, is instituted within the period of limitation, mere delay unless so long that it amounts to abandonments or waiver of the plaintiff's right or makes inequitable the grant of a discretionary relief is no ground to refuse specific performance. He relies upon the decision of the Apex Court in Moti Lal Jain v. Ramdasi Devi : AIR2000SC2408 , in which this proposition of law in effect is no doubt stated. A similar view has been expressed in Madamsetty Satyanarayana v. C. Yelloji Rao : [1965]2SCR221 . In that case, the distinction between the law upon the point in England and that in India was drawn. While in England, there is no statutory limitation for bringing a suit for specific performance, the matter being part of equity jurisdiction wherein the doctrine of laches has been evolved to refuse in case of delay considering the other circumstances too, the relief of specific performance, in India there is a statutory period of limitation prescribed and as such, mere delay is no ground for refusing the relief, unless it has caused prejudice to the defendant and it becomes inequitable to grant the relief. Abandonment or waiver, however, are grounds disentitling the plaintiff to a decree for specific performance.

12. It is well-settled that in transactions where time is the essence of the contract, delay is fatal. Shri Ravi Kant contends that by fixing the time limit of six months for execution of the sale deed, it was clear that time was meant to be the essence of the contract. It is equally well-settled that ordinarily in contracts relating to sale of immovable property other than commercial transactions which the present one does not appear to be, as the plaintiff wants the land for building a house for himself, time is not the essence of contract. Mere fixation of the period within which the contract is to be performed is not a decisive test either vide Gomathinayagm v. Palaniswami : [1967]1SCR227 There is in the present agreement no recital that the parties intended time to be of the essence nor is there anything else therein to indicate so. The sale deed was to be executed after permission from the Competent Authority. Land Ceiling--the grant or refusal of which takes an uncertain span of time. It cannot be said in these circumstances that the time was the essence of contract. Indeed no such contention appears to have been advanced before the courts below.

13. It has been found by the court below, and that finding has not been challenged by the respondent, that the plaintiff was not guilty of abandonment. In the absence of any waiver or abandonment on the part of the plaintiff, the role of delay, which is the basis of the finding of the lower appellate court that the plaintiff was not ready and willing to perform his part of the contract, has to be examined. Laches have been attributed to the plaintiff in the first phase from October 1981 to August 1985 (4 years). It is to be noted that out of this period, three years as found by the appellate court were lost on account of delay (whether sufficiently explained or not) by the defendant in applying for permission without which the plaintiff could not have got the sale deed executed. The moment the defendant gave notice in July, 1985 that the contract had frustrated on account of the order of the Ceiling Authority, the plaintiff refuted the stand and pressed for specific performance--a stand repeated in both his letters that followed and supported by the gesture of sending back the defendant's cheque. The second phase of the delay attributed is from January, 1986 when the plaintiff sent his last letter to the defendant upto July, 1988 when the suit was filed. This delay has not been found to be explained but it is to be noted that at this stage, it was the defendant's own case that the contract had frustrated on account of the order of the ceiling authority refusing permission and declaring surplus land. Mere delay, in the absence of abandonment or waiver where time is not the essence of the contract, is not a ground for inferring want of readiness or willingness so as to refuse specific performance. The law laid down by the Apex Court on the effect of delay in a suit for specific performance has not been applied by the lower appellate court which upon a misconceived notion of law upon that point has on mere delay reversed the finding of the trial court and has held that the plaintiff was not ready and willing to perform his part of the contract, a finding which cannot be sustained from the proved facts and circumstances of the case including the payment by the plaintiff of a very considerable part of the consideration. The trial court's finding that the plaintiff has established his readiness and willingness deserves to be affirmed. Sri Ravi Kant then submitted that it is not permissible to disturb the finding upon this point in second appeal as no substantial question of law is involved. He cited certain decisions, namely, Roop Singh v. Ram Singh : [2000]2SCR605 . Balakrishna Das v. Natabar Bahera : (2000)9SCC29 and M.G. Hegde v. Vasudev D. Hegde : (2000)2SCC213 , upon the scope of interference in second appeal, which of course I have considered but which I do not propose to discuss, as they do not apply to the situation here. Failure to apply the law authoritatively laid down and deciding an issue on a misconceived notion of law and adopting an erroneous legal approach certainly taints the finding arrived at and does involve a substantial question of law in the case. Vide Jagdish Singh v. Natthu Singh, : AIR1992SC1604 and Ratanlal Bansilal and Ors. v. Kishori Lal Geonk and Ors : (1993)1CALLT162(HC) .

14. Having thus considered the effect of delay on the issue of readiness and willingness, we shall now examine its effect upon the grant of the discretionary relief of specific performance. In Chand Rani v. Kamal Rani : AIR1993SC1742 , it was held that in the case of the sale of immovable property even where time is not the essence of the contract, the Court may infer that it is to be performed within a reasonable time if the conditions appear from the express terms of the contract ; or from the nature of the property : or from the surrounding circumstances, for example : the object of making the contract.

15. In K.S. Vidyanandam v. Vairavan : AIR1997SC1751 , the Supreme Court had occasion to consider a contract of sale of house property situated in the town of Madurai where prices had been going up sharply for the last two decades. The agreement was entered into on 15.12.1978 for a consideration of Rs. 60,000. The sale deed was to be executed within a period of six months. The suit for specific performance was instituted about 2 1/2 years after the agreement. The Apex Court held that even though time may not be the essence of the contract, the time limit set out in the agreement for completion of the contract by the parties could not be ignored with impunity and the Court should look into all the relevant circumstances and determine whether its discretion to grant specific performance should be exercised. The Court relied upon its previous decision in the case of Chand Rani v. Kamal Rani (supra). Ignoring time stipulated by the parties in the agreement on the ground that the suit was instituted within the period of limitation would mean denying the discretion vested in the Court by Sections 10 and 20 of the Specific Relief Act. Having laid down the law thus, the Apex Court allowed the appeal and dismissed the suit for specific performance but passed a decree for refund of earnest money as was done by the trial court. The Apex Court held that it was not a case of mere delay but one of total inaction on the part of the plaintiff for 2 1/2 years which was all the more glaring as it was coupled with substantial rise in prices.

16. Even though in this transaction, time may not have been the essence of the contract, it has yet to be seen whether the contract had to be performed within a reasonable time. There is intrinsic evidence upon this point in the agreement itself. The provision of six months for execution of the sale deed is a material term, which expresses the intention of the parties as regards the time for completion of the contract and it cannot be disregarded. It is also provided that within three months of receiving intimation from the defendant about the grant of the permission, the plaintiff must pay the balance consideration and obtain the sale deed and if the plaintiff fails in performing his part, the defendant was free to sell the land to any other person. These clauses in the agreement do clearly indicate that the contract had to be performed within a reasonable time. In this backdrop, the delay of 4 years on the part of the plaintiff to press upon the defendant to obtain permission and to execute the sale deed and thereafter a further delay of a little less than 3 years from the date of intimation by the defendant that the contract had frustrated upto the date of filing of the suit is material. Indeed, the suit was filed almost at the end of the period of limitation--more than six years after the parties had expected to complete the transaction.

17. If the defendant did not give any intimation about the permission from the celling authorities for a period of six months, from the date of the contract, the plaintiff could have given a notice to the defendant for obtaining permission from the Ceiling Authority. It was also open to the plaintiff thereafter to have filed a suit and to have prayed that permission from the Ceiling Authority be sought. But nothing of the kind was done by the plaintiff. In the meantime, the prices of property had sharply escalated. The plaintiff was conscious of this fact and in the plaint, he charged the defendant for having avoided to execute the sale deed on account of escalation of the price. The defendant too in his written statement though denying this to be the ground for not executing the sale deed, admitted that the price of land had risen steeply. After a lapse of 7 years, considering the sharp escalation of prices during this time, it would be inequitable to call upon the defendant to execute the sale deed when the plaintiff too had contributed to the delay.

18. The last question is whether the plaintiff is entitled to any compensation - a relief added at the stage of this appeal. Sri Ravi Kant objects to this issue being considered on the ground that no question thereon has been framed but I am of the opinion that apart from the fact that the issue is implicit in the first question, the nature of relief to be granted after the questions framed have been answered is always a matter which the Court would have to consider even though no specific question has been framed. The parties' counsel were allowed to make their submissions upon this aspect. The appellant submits that the defendant had committed breach of contract. The parties had agreed that sale deed would be executed within six months from the date of the execution of the contract of sale and during this period, the defendant was to obtain permission from the competent authority. The defendant, however, did not apply for permission for a good three years and thus committed breach of contract. It is the defendant's own case that the contract had frustrated. Admittedly, the prices of property had gone up sharply which is the case of both the parties and in these circumstances, the defendant cannot be allowed to wriggle out of the contract without compensating the plaintiff.

19. The measure of compensation has been provided in Section 21 of the Specific Relief Act which makes applicable the principles of payment of compensation under Section 73 of the Indian Contract Act. However, the difficulty that has arisen in this case is that there is no evidence regarding the market value of the property. The only evidence on record is that the prices of the property had escalated. In this situation, two courses are open either to make an inquiry or to follow the practice of granting nominal damages. In Lal Singh v. Tejmal AIR 1954 Ajmer 75, the Court had refused to grant specific performance on account of the rise in prices of property coupled with the delay on the part of the plaintiff as is the case here and it was held that the plaintiff was entitled to nominal damages. In Vasudeo Harchand Kather and Anr. v. Bhailal Nadeeseth Rajpu : AIR1994Bom124 , also there was steep rise in the prices of land but there was no evidence about the extent of the escalation. The Court held that the plaintiff was entitled to nominal damages. In that case, the Court directed refund of the earnest money together with nominal damages and interest. In K. Narendra (supra), the Apex Court has held that to some extent, the assessment of quantum of compensation is a matter of guess work.

20. In view of the law laid down in the decisions mentioned above, I am of the opinion that the ends of justice would be met if the plaintiff is allowed refund of earnest money together with damages amounting to Rs. 20,000 and interest upon the earnest money from 23.10.1981 the date of the contract at the rate of 12% per annum upto the date of payment.

21. In the result, this second appeal is allowed in part. The judgment and decree of the courts below are set aside and the suit of the plaintiff for specific performance is dismissed but is decreed for the refund of earnest money of Rs. 41,670 and interest thereupon from 23.10.1981 at the rate of 12% per annum upto the date of payment and is also decreed for a sum of Rs. 20,000 as damages.


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