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Chiranji Lal Vs. Jisuk Ram and ors. - Court Judgment

LegalCrystal Citation
SubjectProperty;Contract
CourtOrissa High Court
Decided On
Case NumberA.F.O.D. No. 5 of 1946
Judge
Reported inAIR1953Ori105
ActsContract Act, 1872 - Sections 55 and 74; Code of Civil Procedure (CPC) , 1908 - Sections 100; Transfer of Property Act, 1882 - Sections 55
AppellantChiranji Lal
RespondentJisuk Ram and ors.
Appellant AdvocateP. Misra, ;P.C. Chatterji, ;S.K. Ray and ;S.C. Palit, Advs.
Respondent AdvocateG.C. Das, ;S.N. Sengupta and ;R.N. Singh, Advs.
Cases ReferredKilmer v. British
Excerpt:
- motor vehicles act, 1988 [c.a. no. 59/1988]section 173(1) proviso; [d. biswas, amitava roy & i.a.ansari, jj] appeal without statutory deposit but within limitation/or extended period of limitation maintainability - held, if the provision of a statute speaks of entertainment of appeal, it denotes that the appeal cannot be admitted to consideration unless other requirements are complied with. the provision of sub-section (1) of section 173 permits filing of an appeal against an award within 90 days with a rider in the first proviso that such appeal filed cannot be entertained unless the statutory deposit is made. the period of limitation is applicable only to the filing of the appeal and not to the deposit to be made. it, therefore, appears that an appeal filed under section 173 cannot.....ray, c.j. 1. this is defendant 3's first appeal in a suit for specific performance of contract of sale. the appellant is the subsequent purchaser with notice of the contract. the plaintiffs allege that defendants 1 and 2 are members of a joint family of which defendant 2, the uncle, is the manager. they on behalf of their joint family agreed on 28-6-1941, to sell properties specified in the plaint-schedule, for a consideration of rs. 15,000/-. they received a sum of rs. 2,000/- in part payment of the consideration as earnest money on that very day. it was agreed, in the terms of ex. 6 (an agreement deed, dated, the same day) that the defendants would obtain permission of the khasmahal authorities for the sale, and, within sale deed, after proper execution, for registration, whereupon the.....
Judgment:

Ray, C.J.

1. This is defendant 3's First Appeal in a suit for specific performance of contract of sale. The appellant is the subsequent purchaser with notice of the contract. The plaintiffs allege that defendants 1 and 2 are members of a joint family of which defendant 2, the uncle, is the manager. They on behalf of their joint family agreed on 28-6-1941, to sell properties specified in the plaint-schedule, for a consideration of Rs. 15,000/-. They received a sum of Rs. 2,000/- in part payment of the consideration as earnest money on that very day. It was agreed, in the terms of Ex. 6 (an agreement deed, dated, the same day) that the defendants would obtain permission of the Khasmahal authorities for the sale, and, within sale deed, after proper execution, for registration, whereupon the plaintiffs would pay the balance of the consideration money, that is, Rs. 13,000/- in cash, before the Sub-Registrar. On receipt of the consideration money the defendants would makeover the registration ticket to the plaintiffs for taking delivery of the sale deed from the Sub-Registrar's office. The plaintiffs were then in possession of the disputed house as renters. It was also agreed that in default of the defendants' performance of their part of the contract, the plaintiffs would be entitled to enforce the same, and that on failure of the plaintiffs' carrying out their part, they forfeit the earnest money. They further allege that defendants 1 and 2, after various defaults, took a further sum of Rs. 225/- on 10-2-1943, towards the consideration money in order to enable them to purchase the stamp for executing the sale deed, but did not fulfil their part of the contract while the plaintiffs were ever ready and willing to perform theirs. It is further alleged that defendant 3 is a subsequent purchaser with notice of the contract and the sale deed in his favour is invalid and ineffective as against the plaintiffs' contract. Hence, the suit for specific performance on usual terms, or, in the alternative, for recovery of Rs. 5,000/- as damages for non-performance of contract and repayment of Rs. 2,225/- paid towards the consideration money with interest 12 per cent. per annum as against defendants 1 and 2.

2. All the defendants contested the suit. The sum and substance of their defence, so far as it is material for the purpose of the appeal, is that it is the plaintiffs who defaulted in performance of their part of the contract of which time was the essential condition, and that, as they have not come with clean hands, they are not entitled to the equitable relief of specific performance. The deft. 3 (the appellant) has in addition, set up the plea that he is bona fide purchaser for value without notice of the contract and hence not bound by it. This plea, however, has not been pressed either in this Court, or in the Court below with any amount of seriousness. For the purpose of this decision, it shall be taken to be an assumed position that in case the plaintiffs be held entitled to the relief of specific performance of contract, the appellant shall be bound by it.

3. Both parties indulged in various exaggerations and untrue allegations each trying to throw the blame on the other. But in consideration of the view that we are going to take in the appeal, any discussion as to the truth or otherwise of those allegations will be completely fruitless. For the better understanding of the respective parties' case, the following dates and events will be of material assistance. The alleged contract, admittedly, took place on 28-6-1942. In the deed of agreement, in which the terms of the contract were incorporated, the performance of the contract was not unilateral but bi-lateral. Each had certain part to perform in order to perfect the transaction. According to the plaintiffs, the defendants were to obtain consent of the Khasmahal, and present a stamped deed of sale, duly executed, for registration, whereupon the plaintiffs were to deposit the consideration money before the Sub-Registrar, and obtain in return the registration ticket in order to enable them to take delivery of the sale deed from the registration office. The deed is completely silent as to who was to bear expenses necessary for purchasing the stamp for the sale deed and getting it registered. The parties were in dispute on this point. This, however, has been set at rest by the decision of the arbitrators to which I shall refer presently. According to the defendants, aftertheir obtainment of Khasmahal permission for sale to the plaintiffs they repeatedly called upon the plaintiffs to pay money for purchase of the stamp and to be ready to perform their part of the contract, which, however, they failed to do. They (the defendants), therefore, served the plaintiffs with a registered notice, dated, 26-9-1941, repudiating the contract as cancelled due to the default of the plaintiffs. In the meantime, they had already applied, in Misc. Case No. 282 of 1942-43, to the Khasmahal authorities for granting them permission to sell the self-same properties for a consideration of Rs. 12,000/- to one Banarasi Dei wife of Bhikaraj. As Khasmahal Deputy Collector had previously given permission for sale to the plaintiffs he thought it proper that the plaintiffs should be given notice of this miscellaneous case, in which the plaintiffs filed an objection and served a notice dated 8-2-1943, on the defendants 1 and 2 calling upon them to execute and register the sale deed in pursuance of the agreement dated 28-6-1941 within three days of the receipt of the notice. At this stage, at the intervention of the Khasmahal Deputy Collector the parties referred their disputes to the arbitrators, Babu J. N. Mitra, for the plaintiffs and Rai Bahadur G. C. Praharaj, Advocate, for the defendants. The dispute mainly was if time was the essence of the contract and if due to lapse of time the plaintiffs had forfeited the rights on the contract, or, if the defendants had failed to perform their part of presenting the deed for sale for registration and were not till then entitled to call upon the plaintiffs to come forward with the balance of the consideration to pay. Besides time factor, another essential difference was who was to pay the costs of stamp and registration. To this reference, Bhikaraj, on behalf of Banarasi Dei, with whom a subsequent contract had been since made, was a party too. The arbitrators gave an award (Ex. A) setting the matters in dispute as between the parties on 21-1-1943, in the following terms: (1) The consideration will be Rs. 15000/- and the balance of Rs. 13000/- will be paid before the Sub-Registrar. (2) The purchaser will pay the costs of Kabala, Khasmahal permission etc. (3) An accounting will be made of the rent due from the date of the contract to this date. (4) An accounting will be made of the interest due to the creditor from the date of the contract to this date. (5) After adjustment of the above accounts, each party will get his dues from the other. (6) Whatever loans were contracted from the purchaser on Khata will be credited against the consideration money. (7) Whatever advance was given by Bhikaraj Babu will be refunded to him and he will also get compensation therefor. (8) The money shall be paid to the creditor and endorsed on the back of the bond in presence of the vendor and the purchaser. (9) If the creditor does not take the money Rs. 13000/- will be credited in the Imperial Bank. (10) The vendor will get the cheque from the bank and send it to the creditor. (11) Money shall be deposited by purchaser without objection within 31-1-43 with Jadu Babu, Bhikari Babu and Gopal Chandra Praharaj and upon such deposit, stamp will be purchased and engrossed. (12) If deposit of the balance of Rs. 13000/- is not made on 31-1-43, Kabala will be executed in favour of Bhikaraj on 1-2-43. This award was accepted by the parties and they subscribed it in acknowledgment of such acceptance. What is the status ofthis award in relation to the contract between the parties is one of the most significant problems that presents itself for solution, barring paras. 3, 4, 5, 6 and 7 which have no material bearing upon the question, at issue, it being admitted by one of the plaintiffs that the right to fulfilment of the contract of sale on either side was not to be affected in any way by compliance or otherwise with the contents of the said paragraphs. The parties have advanced conflicting arguments on the point. According to the defence, such of the agreed terms of the award, as related to the contract of sale, replaced the original contract, while according to the plaintiffs, the original contract stood totally unaffected by the so-called award. They challenged that the document had not the capacity of an award. I am in entire agreement with what the learned Subordinate Judge said with regard to the nature and character thereof. It neither superseded nor replaced the original agreement except on which it was silent, or on which, due to their ambiguity, the parties were in dispute. The award, therefore, has to be considered as a complement to the original contract. The two should be read and understood together to make out a whole contract between the parties. They were in dispute as to who was to bear the costs of execution and registration of the 'Kabala' and securing of Khasmahal permission & etc. On this point, the original contract was silent. As to which party was in default regarding performance of his part of the contract rested much upon this difference. If the defendants were to defray the expenses they must be fixed with the failure of performance as they did not present the duly executed sale deed for the purpose of registration. If the plaintiffs were to bear the costs they must be held to be in default for non-payment of the costs without which the defendants could not be in a position to purchase the stamp and execute the sale deed and present the same for registration.

4. Next, arises the question who of the parties has been in default of performance of his part of the contract. According to the defence, time being of the essence of the contract, it is the plaintiffs who were in default. The plaintiffs on the other hand, urge that time was not the essential condition for performance. They rely upon the equitable doctrine that the Court should relieve against the lapse of time particularly in cases of contracts for sale of lands. It is urged by Mr. G. C. Das, the learned counsel for the plaintiffs-respondents, that Section 55. Contract Act, does not shut the door against application of the equitable rule of construction of such contracts that relieves against the consequences of lapse of time by looking to the substance rather than the letter and relieves against forfeiture. Section 55 reads:

'When a party to a contract promises to do a certain thing at or before a specified time, or certain things at or before specified times, and fails to do any such thing at or before the specified time, the contract, or so much of it as has not been performed, becomes voidable at the option of the promisee, if the intention of the parties was that time should be of the essence of the contract.....'

The emphasis is upon the words 'if the intention of the parties was that time should be of the essence of the contract'. It has been authoritatively held that the canon of construction of a contract for sale of lands obtaining in Englandin the equity jurisdiction would also apply to India. Such canons are not applicable to contracts on the commercial side. I think I should make it clear that it is too late in the day to question this proposition. Mr. Das, in this respect, relies upon the case of -- 'Jamshed Khodaram v. Burjorji Dhunjibhai', 40 Bom 289 (PC). In this case, their Lordships of the Privy Council adopted the proposition laid down by Lord Cairns in -- Tilley v. Thomas', (1867) 3 Ch. 61. They quoted a passage which can be re-quoted here for facility of reference and understanding :

'The construction is and must be, in equity the same as in a Court of law. A Court of Equity will indeed relieve against, and enforce, specific performance, notwithstanding a failure to keep the dates assigned by the contract, either for completion, or for the steps toward completion, if it can do justice between the parties, and if (as Lord Justice Turner said in --'Roberts v. Berry', (1853) 3 D M & G 284) there is nothing in the 'express stipulations between the parties, the nature of the property, or the surrounding circumstances', which would make it inequitable to interfere with and modify the legal right. This is what is meant, and all that is meant, when it is said that in equity time is not of the essence of the contract. Of the three grounds.....mentioned by Lord Justice Turner 'express stipulations' requires no comment. The 'nature of the property' is illustrated by the case of reversions mines, or trades. The 'surrounding circumstances' must depend on the facts of each particular case'.

The quotation from Lord Cairns' judgment was followed for the purpose of further elucidation of the point by the following observations extracted from their Lordships' judgment:'Their Lordships will add to the statement just quoted these observations. The special jurisdiction of equity to disregard the Letter of the contract in ascertaining what the parties to the contract are to be taken as having really and in substance intended as regards the time of its performance may be excluded by any 'plainly expressed stipulation.' But to have this effect the language of the stipulation must show that the intention was to make the rights of the parties depend on the observance of the time limits prescribed in a fashion which is unmistakable. The language will have this effect if it plainly excludes the notion that these time limits were merely of secondary importance in the bargain, & that to disregard them would be to disregard nothing that lay at its foundation. Prima facie equity treats the importance of such time limits as being subordinate to the main purpose of the parties, and it will enjoin specific performance notwithstanding that from the point of view of a Court of law the contract has not been literally performed by the plaintiff, as regards the time limit specified. This is merely an illustration of the general principle of disregarding the letter for the substance which Courts of Equity apply, when, for instance, they decree specific performance with compensation for non-essential deficiency in the subject-matter.

But equity will not assist where there has been undue delay on the part of one to the contract and the other has given him reasonable notice that he must complete within a definite time. Nor will it exercise its jurisdiction when the character of the property or other circumstances 'would render such exercise likely to result in injustice'. In such cases, the circumstances themselves, apart from any question of expressed intention, exclude the jurisdiction. Equity will further infer an intention that time should be of the essence from what has passed between the parties prior to the signing of the contract.' Before dealing with the facts of the present case, in the light of the law as laid down above, I should refer to another decision of the Privy Council in which the same law -- Lord Viscount Haldane in the case of -- 'Steedman v. Drinkle', AIR 1915 PC 94, has expressed himself in the following words:

'Courts of Equity, which look at the substance as distinguished from the letter of agreements, no doubt exercise an extensive jurisdiction which enables them to decree specific performance in cases where justice requires it, even though literal terms of stipulations as to time have not been observed. But they never exercise this jurisdiction where the parties have expressly intimated in their agreement that it is not to apply, by providing that time is to be of the essence of their bargain. If, indeed, the parties, having originally so provided, have expressly or by implication waived the provision made, the jurisdiction will again attach.'

5. Next, emerges the question whether, in the facts of the instant case, equity will help the plaintiffs. If the original contract stood by itself, there would be no serious controversy about the intention of the parties, as gathered, not only from the terms of the contract but also from what passed before and after, that it was that each should perform his part of the contract with due diligence and within reasonable time. But the situation is completely upturned on account of the subsequent agreement arrived at between the self-same parties through and under the so-called award. The parties have agreed to be bound by it as an integral part of the contract under review. Mr. Das wants to argue that this subsequent agreement amounts to a mere extension of time and that this extension should not by itself alter the contract so as to affect, adversely to one of the parties and favourable to another, the original intention, namely, that the contract should be fulfilled within reasonable time. Acceptance, on the part of the plaintiffs, of the extension of time as fixed in the award would not, according to the learned counsel, amount to a waiver of the original condition as to time, namely, reasonable time. This argument, however, overlooks the particular circumstance of the case. The award was accepted by the parties as a substantial variation with regard to the time condition of the contract in order to prevent injustice to the defendants. The defendants 1 and 2 had entered into a contract for sale in order to pay off the debts that were outstanding with the disputed property held as a security for the purpose. On these debts interest was accruing from day to day. There was no provision in the sale contract that any delay in plaintiffs' performance of their part of the contract would be compensated by the plaintiffs bearing the burden of the liability of interest as accruing from time to time till perfection of the contract contemporaneously with payment of the consideration. In the meantime, the defendants, out of their anxiety to pay off the debts andmotivated by their own construction of the original agreement that it was at an end dueto plaintiffs' failure to further the steps towards its perfection, had entered into a contract with Banarasi Dei and had received money in advance as earnest money for sale of the identical property. It appears from the decision of the arbitrators that the defendants were made liable to pay compensation to said Banarasi Dei besides refund of the earnest money. Over and above, the parties were at dispute as to which of them was at fault in carrying out the contract and whether the time limit or the reasonable time permissible under the contract had expired. With these as surrounding circumstances, it would be difficult to hold that it was not finally settled between the parties as one of the governing terms of the contract that _ time should be of the essence of the contract. I would here pointedly refer to the last two paras. of the award which, fairly construed, leave no manner of doubt that time was of the essence. Para. 11 made it incumbent upon the plaintiffs to deposit at least the balance of the consideration money if not also the costs of Kabala, Khasmahal permission &c.;, within 31-1-43, the said date being the last date of the period available for performance. Its imperative character is emphasised by entitling the vendors to exercise sale deed in favour of Bhikraj, on 1-2-43, the date next succeeding the lapse of time limits. In the earlier part of the award, there have been certain directions as to how the parties could each perform his part of the contract without taking recourse to what has been stated in paras. 11 and 12. For example, in para. 1, it is stated the balance of Rs. 13000/- will be paid before the Sub-Registrar. This does not conflict with the requirement that finally and without objection money shall be deposited within 31-1-43 with Jadu Babu, Bhikari Babu and G.C. Paraharaj and upon such deposit stamp will be purchased and engrossed. On failure thereof each shall be entitled to appropriate remedy. The parties could, after the outstanding disputes were settled which had till then proved as a clog to furtherance of steps towards perfection of transaction of sale, amicably, as between themselves, carry on the terms in the manner and in the order indicated in paras. 1, 2, 8, 9 and 10, but in case that was not done the plaintiffs were called upon to deposit the money at a certain specified time. He was warned that he should not be heard to raise any sort of objections whatsoever if he failed to fulfil this condition of deposit of the balance. On their failure, the defendants were released from the shackles of the agreement and were let free to dispose of the property free from this contract to Banarasi Dei who should otherwise have had to be content with refund of earnest money and compensation. This failure as to deposit would not only entail a liability on the defendants to sell the holding to Banarasi Dei but should attract a corresponding right to her. So circumstanced it would be difficult to hold otherwise than that time was of the essence of the contract.

6. Besides, it cannot be ruled out that the plaintiffs have been guilty of laches and undue delay in omitting such steps as they would have taken to further the progress towards completion of the transaction. They were all along making all sorts of pleas for avoiding to pay the stamp & registration costs which, in the absence of the contract, to the contrary they werebound in law to incur. They have, even in the face of the accepted decision of the arbitrators as to that disputed point, averred in the plaint that they have paid a sum of Rs. 225/- not towards the said costs but as part payment of the balance of the consideration. This conduct has been rightly criticised by the defendants, as unclean and unfair. They cannot be allowed to go behind the accepted terms of the award. Viscount Haldane has made it clear that the parties can defeat the equity jurisdiction by plain, clear and decisive expression that time limit would be of the essence of the contract. He has also pointed out that time limit should be adhered to where its disregard would cause injustice to either of the parties and that equity will not come to the rescue where there has been undue delay in performance by a party.

7. Sri Charles Odgers, who has borne the heat and burden of the day in modernising & bringing up to date revised twentieth edition of Chitty's Treatise on Contracts and has, inter alia, been responsible for Chap. VI of the Book, has succinctly but most effectively expressed the meaning and implications of the maxim 'Time is not the essence of the contract.' I should quote the passage here:

'As regards a contract for sale of land: 'Courts of law have always held the parties to their bargain in this respect, with the result that if the vendor is' unable to make a title by the day fixed for completion the purchaser can treat the contract as at an end' and recover his deposit with interest and the costs of investigating the title. In such cases, however, equity having a concurrent jurisdiction, did not look upon the stipulation as to time in precisely the same light. Where it could do so without injustice to the contracting parties it decreed specific performance notwithstanding failure to observe the time fixed by the contract for completion, and as an incident for specific performance relieved the party in default by restraining proceedings at law based on such failure. This is really all that is meant by and involved in maxim that in equity time fixed for completion is not of the essence of the contract, but this maxim never had any application to cases in which the stipulation as to time could not be disregarded without injustice to the parties, for example, when the parties for reasons best known to themselves or where there was something in the nature of the property or the surrounding circumstances which would render it inequitable to treat it as a non-essential term of the contract'

Bearing this in mind, I would hold that, in the present case, time of performance could not be relieved against as non-essential part of the contract.

8. The next attack that is flung at the appellant's case is that all that is said and done is adequately countermanded by the defendants' conduct in accepting the aforesaid sum of Rs. 225/- on 10-2-43 for the purpose of purchasing the requisite stamp for the sale deed and undertaking to produce a draft. How far this subsequent conduct would renovate or rejuvinate the already terminated contract of 28-6-1941, is quite another matter. But the contention as put forth above and the contenion that the plaintiffs were ready to make a deposit of the sum of Rs. 13,000/- which can be safely assumed as a fact in the light of the evidence that bears uponit and thus did not commit any act of default will bear scrutiny.

9. The plaintiffs rely upon this aspect from the view point of the original contract unaltered or unaffected by the acceptedly settled terms of the award. They have not even made the faintest reference to it in their case passing over the incident as if nothing of the kind had happened. The monetary offer in the shape of an allegedly unsuccessful effort for making deposit in the Imperial Bank and communicating their readiness with money to the Khasmahal Deputy Collector was evidently not an unconditional one. Their readiness to pay was subject to the condition of their (the defendants) producing the amount in difference between the sum of Rs. 13,000/- and the total sum till then duo to the creditor, the mortgagee of the disputed holding. The deposit, in the finally settled terms and conditions of the award, was not subjected to any such pre-requisite condition. An offer to be valid in law must be unconditional. Subjected as it is, in the present case, to a condition of their own imagination, the plaintiffs' offer would be no offer in law. It is clear that the defendants' acceptance of the sure of Rs. 225/- on 10-2-43 was not by way of fulfilling the terms of the original contract as modified by the accepted award.

10. Plaintiffs' witness No. 1 (D.K. Mardaraj, then in charge of Khasmahal department) is a material witness supporting the plaintiffs' version that they were ready with the sum of Rs. 13,000/- since 31-1-43. But the witness is also clear that they in tendering the sum insisted that the defendants should produce the rest of the money necessary to discharge mortgage money in full. That the offer was not in pursuance of the agreement as evidenced by Ex. A (the award, an unimpeachable documentary evidence) is clear from the following chronology of events. On 19-1-43, the parties informed the Khasmahal Officer to postpone Misc. Case No. 232 of 1942-43 (the petition of the defendants to get permission to sell to Banarasi Dei) in order to enable them to settle the matter. He adjourned the case to 25-1-1943. The order sheet dated this day is not before us. On 24-1-1943, the award was given by the arbitrators which was accepted and subscribed the same day by the parties. Mr. Mardaraj deposes that on 25-1-1943, the parties intimated to him the terms of settlement to the effect that 'They agreed that Jisuk Ram and Baidynath would pay about Rs. 13,000/- and the Parwars would pay about Rs. 5,000/- and the sum total of which would be paid to Chiranjilal to redeem the mortgage.' He says:

'I (thereupon) fixed 31-1-43 for payment by way of deposit in the Imperial Bank. Parties agreed to deposit by 31-1-43, hence I adjourned the date of the case to 5-2-43.'

If this story is accepted, it would mean that on the very next day of the award the parties went back over the terms of the award and arrived at fresh terms. In the absence of any record to this effect we cannot give effect to it. It seems Mr. Mardaraj is confused between the terms settled by arbitrators and those later after the breach that must have been understood to have occurred on 30-1-43 by the plaintiffs' default. 30th January was not a date fixed for the case. Why should the plaintiffs take money to the Khasmahal Deputy Collector? At any rate, that was not the way of complyingwith the terms of the contract as settled in the award. On 6-2-43, the Khasmahal Deputy Collector endorses in the ordersheet of the case the terms of compromise between the parties. It reads:

'Heard parties. They have come to a final settlement & want time till 10-2-43 for purchasing stamps for the sale which will be registered on 12-2-43 after the purchaser and the seller pay their respective quotas to redeem the mortgaged property. The mortgagee be present on that date. Party defaulting will have no further relief from this Court,'

On 10-2-43, the plaintiffs paid and defendants received a sum of Rs. 225/- for purchase of stamps. This is in keeping with the terms as recorded by Khasmahal Officer in the order quoted above. It is hence clear beyond all doubts that this conduct of the defendants does neither amount to extension of time limited in Ex. A (the award) nor to a waiver of the right flowing from the breach of the essential timely performance of the contract. This conduct must be appraised in the setting of further developments that occurred after 30-1-43 and might have given rise to a fresh contract within the frame work of the original agreement but with substantial variations. The order is silent as who was to bear the stamp, registration and Khasmahal permission expenses. The plaintiffs still claim to have paid the sum of Rs. 225/-as part of the consideration money while the defendants repel it. Ex. 10 militates against the plaintiffs' claim. In this connexion, read Ex. 10 dated 10-2-43:

'Received Rupees 225/- Two hundred and twenty-five for purchasing stamp for execution of Kabala in favour of Jeesuk Ram and Baijnath of Nayasarak, Cuttack'.

11. The case of the respective parties will appear from the following extracts from the proposed drafts of sale deed by them. Defendants' draft reads:

'You (vendees) filed objection. It was settled that we should abide by the arbitration of the lawyers of the parties. But you did not act according to their decision. At last as we have to execute a sale deed under orders of the Khasmahal Officer we hereby agree to execute a sale deed.....'

This draft was not approved by the plaintiffs, and they through their pleader Shri C. M. Acharya offered a different draft. The following relevant extract from the latter draft will throw light on the still subsisting difference between the parties. It is as follows:

'We (vendors) have obtained khasmahal permission to sell to you on 9-9-41; but due to various differences between us the sale deed could not be executed and registered. In the meantime we have come to settlement and have accordingly informed the terms thereof on 6-2-43 to the Khasmahal Officer. Accordingly we are to execute and register the sale deed'.

Besides it may be noted that according to the draft offered by the defendants the balance consideration to be paid stated was Rs. 13,000/-while that of the plaintiffs stated Rs. 12,775/-, a figure arrived at after deducting Rs. 225 paid towards purchase of stamp &c.; From the draft tendered by the plaintiffs it appears that the terms of settlement were intimated to Kasmahal Officer on 6-2-43 and not on 15-1-43 as deposed by P. W. 1. Hence his statement to that effectcannot be acted upon. It shows the unclean hands of the plaintiffs in the suit. There is postscript to Ex. 13 (the draft tendered by the plaintiffs). There it is stated that 'We (the vendors) shall pay the balance of mortgage money that would remain due after payment of Rs. 12,778/-, the balance of the consideration paid by you (the vendees) to Chiranjilal the creditor and release the property sold from mortgagee.' This conflicts with P. W. 1's version that the parties agreed that each would be paying his quota to pay the entire mortgage money to the creditor. Assuming the plaintiffs tendered Ex. 13 to the defendants, they thereby wanted fulfilment of a contract different from the one entered into. It is, therefore, clear from what I have said above that acceptance of money and purchase of stamp, if any, for effecting the Kabala was not in pursuance of the original agreement as modified by the accepted terms of the award in pursuance of a subsequent arrangement. The plaintiffs' case, however, is not based on the latter and we are not called upon to decide the present case thereon. The plaintiffs cannot be allowed to spring a new case upon the defendants, in appeal. Their suit must stand or fall on their case as made in the pleadings on which the parties joined issues and adduced evidence. The result is that the plaintiffs are in default and are not entitled to the relief of specific performance of the contract set up by them. This disposes of the present appeal before us which it has already been declared succeeds and is allowed with costs.

12. It, however, does not completely dispose of the plaintiffs' suit. The plaintiffs prayed for some alternative reliefs. In para. 20 (b), they prayed in the alternative for recovery of Rs. 5,000/- as damages for non-performance of contract and repayment of Rs. 2,225/- paid out of the consideration with interest at 12 per cent, per annum against defendants 1 and 2. In answer to this prayer, defendants 1 and 2 repudiated the plaintiffs' title to such relief and advanced a counterclaim of Rs. 1,067/14/3 as damages with costs for which court-fee was paid. This damage was claimed in the manner indicated in Schedule A to their written statement which is quoted herein below:

SCHEDULE A

Details of damages claimed.1.Deficit in consideration....Rs. 1,500/-2.Interest from 28-6-41 to 24-4-43 paid tothe mortgagee, on the principal of Rs. 12.000/-on account of non-performance of contract by theplaintiffs..Rs. 1,475/-3.Compensation paid to Banarasi Dei....Rs. 50/-4.Costs incurred in Miscellaneouscases in the Khasmahal department for getting permission for sale of the disputed holding..Rs. 253/13/3

Total....Rs. 3,278/13/3 Deduct money advanced....Rs. 2,000 Money recovered after returning the stamp to the Collector....Rs. 210/15

Total....Rs. 2,210/15/-

Balance claimed....Rs. 1,067/14/3

13. The plaintiffs' suit was decreed and eventually the defendants 1 and 2 could be granted the relief of damages, as claimed by them.

Defendant 3 advanced this appeal against the decree; but the defendants 1 and 2 did neither join in the appeal nor prefer any separate appeal. The question of defendants' eligibility to claim damages has not been raised before us at the bar by the said defendants. The plaintiffs-respondents press for the relief of refund of the money paid by them to the defendants. That in case of non-performance of contract the plaintiffs should forfeit the earnest money is in the nature of a penalty and in terms of the original agreement was not to be governed by the condition of time limit. The time limit, as an essential feature of the contract, was introduced, for the first time, in the decision of the arbitrators which was accepted by the parties to be acted upon as if it were an integral part of the original contract. There too, it was not laid down as a condition that on plaintiffs' failure to deposit the full consideration, they should forfeit the earnest money & other sums paid. The stipulation with regard to the said forfeiture should, therefore, be considered, in its setting in the original agreement, as unaffected by the later variation. Besides, as a rule of law, even if time be of the essence of the contract for sale, they may be held entitled to the relief against forfeiture in equity. The case reported in -- 'Steedman v. Drinkle', AIR 1915 P C 94 affords a clear and cogent illustration that notwithstanding the plaintiffs' failure to secure the relief of specific performance of contract of which time was of the essence, they can be relieved from forfeiture of the earnest money. In that case, plaintiffs-respondents brought an action claiming specific performance and in the alternative relief from forfeiture under the terms of the agreement for sale. The trial Judge, Newlands J. thought that the appellant was entitled under the terms of the agreement providing that time should be of its essence to cancel it on the default which had been made. He was willing, however, to relieve the respondents from the forfeiture of the amount paid under the agreement. The plaintiffs, however, did not accept this offer and appealed. The Supreme Court, holding that the case was governed by the Board's decision in -- 'Kilmer v. British-Columbia Orchard lands Ltd.', (1913) A C 319, decided that the stipulation that payments already made might, on forfeiture, be retained, was really a stipulation for penalty, and should be relieved against. They, however, reversed the decision cancelling the contract and ordered specific performance. On these facts, their Lordships of the Privy Council held:

'As to the relief from forfeiture, their Lordships think that the Supreme Court were right in holding for the reasons assigned in the former decision of this Board that the stipulation in question was one for a penalty against which relief should be given on proper terms. But as regards specific performance they are of opinion that the Supreme Court were wrong in reversing Mr. Justice Newlands' judgment.'

14. As already stated, the parties in the final settlement governing the agreement amongst them did not expressly provide that on the plaintiffs' failure to observe the time factor On the contract they shall forfeit the earnest money paid and the defendants 1 and 2 should be entitled to retain them. Even if such a stipulation were made, it would be open to this Court, in exercise of its equity jurisdiction, torelieve them from penalty. In this view, the plaintiffs are entitled to a decree for restoration of the moneys paid by them from time to time. It may be recalled that Rs. 225/- had been paid for the purchase of stamp. The stamp that was purchased was returned to the Collector as it appears from Schedule A of the written statement, already quoted, for a sum of Rs. 210/15/-. The total sum, therefore, now retained by defendants 1 and 2 comes to Rs. 2,210/15/-. The question arises whether the plaintiffs will put to terms in the matter of this alternative relief. In consideration of the finding that the plaintiffs were guilty of laches which entailed recision of the contract, they are liable to make good the loss suffered by the defendants. The defendants were compelled to sell the disputed property to defendant 3 'for a consideration of Rs. 13,500/- as against Rs. 15,000/- for which they had contracted with the plaintiffs. They thus suffered a loss of Rs. 1,500/-. That this is so has been found by the trial Court as a fact. The Court observes:

'This third defendant deposed that the consideration of his Kabala was set off against the mortgage bonds and defendants 1 and 2 paid him a sum of Rs. 2,1000/- in cash on 24-4-43 and the discharge of the mortgage debt was endorsed on the back of the mortgage bonds under the signatures of both parties as per Exts. F and F(1). The first defendant has also stated that he paid a sum of Rs. 2,1000/- to the third defendant in cash. This evidence is not challenged by the plaintiffs.'

On this finding, the plaintiffs had been directed to pay the said sum of Rs. 13,500/- to defendant 3 as condition precedent to specific performance of the contract. This amount, therefore, is genuinely the consideration for which the disputed property was sold. Accordingly, the defendants suffered a loss of Rs. 1,500/-- This sum will be set off against the sum of Rs. 2,210/15/-now retained by the defendants. The balance will be payable by them to the plaintiffs. The plaintiffs, therefore, shall be entitled to a decree for recovery of Rs. 710/15/- from defendants 1 and 2 with interest at 6 per cent, per annum till realised from the date of the decree with proportionate costs throughout.

15. In the result, the trial Court's judgment and decree are reversed, the appeal of defendant 3 succeeds and the plaintiffs' suit for specific performance of contract dismissed with costs throughout. The plaintiffs' claim for alternative relief against defendants 1 and 2 is allowed in part with proportionate costs throughout.

Narasimham, J.

16. I agree.


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