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Madamsetty Satyanarayana Vs. G. Yellogi Rao and Two ors. - Court Judgment

LegalCrystal Citation
SubjectProperty;Limitation
CourtSupreme Court of India
Decided On
Judge
Reported inAIR1965SC1405; [1965]2SCR221
ActsSpecific Relief Act - Sections 22; Limitation Act - Schedule - Article 113
AppellantMadamsetty Satyanarayana
RespondentG. Yellogi Rao and Two ors.
Cases ReferredBank Ltd. v. Nippon Menkwa Kabushiki Kaisha
Books referredHalsbury's Laws of England, Vol. 36; "Fry on Specific Performance", 6th Edn.
Excerpt:
the case debated on the circumstances for refusal of decree orders for specific performance under section 22 of the specific relief act, 1877 - it was held that the court could not refuse the relief of specific performance, except where some delay was caused - however, mere delay was not sufficient to empower a court to refuse the relief - - ' 13. learned counsel cited many english decisions in support of his argumentthat there shall be promptitude and diligence in enforcing a claim for specificperformance after a repudiation of the contract by the other party and thatmere continual claim without any active steps will not keep alive the rightwhich would otherwise be defeated by laches :see clegg v......question whether the high courtwent wrong, in the circumstances of the case, to give a decree for specificperformance of an agreement to sell in favour of the plaintiff. 2. the facts may be briefly stated : on august 23, 1954, at 10 a.m.defendants 1 and 2, through their auction agent, defendant 3, advertised andput their plots nos. 1 to 4 situated in narayanguda opposite to deepak mahaltheatre to public auction. in regard to plots nos. 2 and 3 the plaintiffoffered the highest bid of rs. 12,000/-. he wanted to purchase the plots forthe purpose of starting his business. when the plaintiff tendered one-fourth ofthe sale price as earnest money in accordance with the terms of the auction,the defendants unlawfully refused to accept it. on august 30, 1954, the plaintiffgave notice to the 3rd.....
Judgment:

Subba Rao, J.

1. This appeal by certificate raises the question whether the High Courtwent wrong, in the circumstances of the case, to give a decree for specificperformance of an agreement to sell in favour of the plaintiff.

2. The facts may be briefly stated : On August 23, 1954, at 10 a.m.defendants 1 and 2, through their Auction Agent, defendant 3, advertised andput their plots Nos. 1 to 4 situated in Narayanguda opposite to Deepak MahalTheatre to public auction. In regard to plots Nos. 2 and 3 the plaintiffoffered the highest bid of Rs. 12,000/-. He wanted to purchase the plots forthe purpose of starting his business. When the plaintiff tendered one-fourth ofthe sale price as earnest money in accordance with the terms of the auction,the defendants unlawfully refused to accept it. On August 30, 1954, the plaintiffgave notice to the 3rd defendant and sent copies thereof to the otherdefendants calling upon them to obtain from him the one-fourth amount of thesale price as earnest money within 24 hours and pass a receipt therefor andaccept the balance of the auction price within a period of one week thereafterin accordance with the conditions of the auction sale and to execute a saledeed duly registered in his favour. Defendants 1 and 2 did not give any replyto the said notice. The plaintiff filed the suit in the Court of the 4thAdditional Judge, City Civil Court, Hyderabad, on April 18, 1955, for directingthe defendants, inter alia, to execute the sale deed in his favour. Defendants2 and 3 in their written-statement admitted that there was an auction sale andthat plaintiff was the highest bidder; but the 1st defendant, on the otherhand, denied that there was any final bid or that it was accepted. He furtherstated that he gave up the idea of selling the plots and that after obtainingthe necessary permission from the Municipality he began to build shops on thesaid plots. The City Civil Judge held that the suit plots were knocked down atthe auction in favour of the plaintiff and that the 1st defendant refused totake the earnest money. He further held that though the plaintiff gave noticeas early as August 30, 1954, to the defendants, he did not take any steps toenforce his contract and that though he knew of the construction a couple ofmonths before he filed the suit he kept quiet and allowed the 1st defendant tocomplete his construction and, therefore, it was not a fit case where he could,in exercise of his discretion, give a decree for specific performance; insteadhe awarded to the plaintiff a sum of Rs. 500/- towards damages. On appeal, aDivision Bench of the Andhra Pradesh High Court, on a consideration of theevidence, came to the conclusion that the delay in filing the suit was due tothe illness of the plaintiff's wife and also on account of the demolition ofone of his houses by the Municipal Corporation, that he came to know for thefirst time on April 13, 1955, that the 1st defendant was raising a structure onthe suit plots and that without any loss of time within a few days thereafterhe filed the suit. The High Court also found that the 1st defendant did not actbona fide inasmuch as he chose to rush headlong in raising the structureevidently to defeat the claims of the plaintiff. On those findings, the HighCourt held that the Trial Court went wrong on principle in exercising its discretionin favour of the defendants and in refusing to grant a decree for specificperformance in favour of the plaintiff. In the result, the High Court set asidethe decree of the Trial Court and gave a decree for specific performance infavour of the plaintiff on his depositing a sum of Rs. 12,000/- together withstamp papers and registration charges within a month from the date of thedecree. It may also be mentioned that the learned counsel for the plaintiffmade an offer that his client was willing to pay a sum of Rs. 14,750/- towardsthe cost of the building put up by defendants 1 and 2 on the suit plots and theCourt recorded the same. But, the High Court left it to the said defendantseither to give vacant possession of the plots or with the structure thereonaccepting money for it, as they chose. The 1st defendant has preferred thisappeal by certificate to this Court making the plaintiff the 1st respondent,and defendants 2 and 3, respondents 2 and 3.

3. Mr. Lakshmaiah, learned counsel for the appellant, argued : (1) Theappellant repudiated the contract on the next day of the auction itself byrefusing to take money from the 1st respondent; the 1st respondent did notaccept the repudiation, but elected to keep the contract alive by asking theappellant to receive from him one-fourth of the amount as earnest money at anytime within 24 hours thereof and to obtain from him the entire balance withinone week thereafter; by so doing, he not only unilaterally varied the terms ofthe contract but committed a breach thereof in not paying the amount; havinghimself committed a breach of the contract, he could not specifically enforceit. (2) Time is the essence of the contract, as the object of purchase by the1st respondent was to start a business; therefore, the 1st respondent shouldhave pursued his remedy with promptitude and diligence. It was not enough toassert his right by issuing a notice, but he should have taken steps to enforceit; his inaction and indifference for 7 1/2 months without making any attemptto enforce his right would disentitle him to the discretionary relief ofspecific performance. (3) The reasons for the delay, namely, that the 1strespondent's wife was ill or that one of his houses was demolished by theMunicipal Corporation, were obviously untenable excuses, for both the reasonsexisted even before the auction was held.

4. Mr. A. Viswanatha Sastri, learned counsel for the 1st respondent, on theother hand, contended as follows : (1) Mere delay in filing a suit for specificperformance could not possibly be a ground for exercising a discretion againsta plaintiff, as the Limitation Act prescribed a period of 3 years for flingsuch a suit. (2) Under the Indian law relief of specific performance could berefused only if the plaintiff abandons or waives his right under the contract;and in the present case the appellant had not established either abandonment orwaiver by the 1st respondent of his right under the contract, for indeed assoon as he saw that the appellant had laid foundations for putting upstructures on the plots, he rushed without any delay to the court and filed thesuit. (3) In the circumstances of the instant case there is no scope forholding that the appellant could have had any reasonable belief that the 1strespondent had waived or abandoned his right, for it was the positive case ofthe appellant that there was no concluded sale at all.

5. We cannot allow the learned counsel for the appellant to raise before usthe first question, namely, that the 1st respondent did not accept therepudiation but kept the contract alive and committed a breach thereof, withthe result that he disqualified himself to file the suit for specific relief,for the said plea was not raised in the pleadings, no issue was raised inrespect thereof and no arguments were addressed either in the Trial Court or inthe High Court. As the question is a mixed question of fact and law, we cannotpermit the appellant to raise it for the first time before us.

6. At the outset we shall construe the relevant sections of the SpecificRelief Act and the Limitation Act unhampered by judicial decisions.

7. Specific Relief Act : Section 22. The jurisdiction to decree specificperformance is discretionary, and the Court is not bound to grant such reliefmerely because it is lawful to do so; but the discretion of the Court is notarbitrary but sound and reasonable guided by judicial principles and capable ofcorrection by a Court of appeal.

8. The following are cases in which the Court may properly exercise a discretionnot to decree specific performance :-

I. Where the circumstances underwhich the contract is made are such as to give the plaintiff an unfairadvantage over the defendant, though there may be no fraud ormis-representation on the plaintiff's part.

Illustrations

* * * *

II. Where the performance of thecontract would involve some hardship on the defendant which he did not foresee,whereas its non-performance would involve no such hardship on the plaintiff.

Illustrations

* * * *

The following is a case in whichthe Court may properly exercise a discretion to decree specific performance :-

III. Where the plaintiff hasdone substantial acts or suffered losses in consequence of a contract capableof specific performance.

Illustrations

* * * *

The First Schedule to theLimitation Act

---------------------------------------------------------------------

Description of suit Period of Time from which

Limitation period begins to run

----------------------------------------------------------------------

Art. 113. For specific Three years The date fixed for the

performance performance, or, if

of a contract. no such date is fixed,

when the plaintiff

has noticed that

performance is refused.

----------------------------------------------------------------------

9. Under section 22 of the Specific Relief Act, relief of specificperformance is discretionary but not arbitrary : discretion must be exercisedin accordance with sound and reasonable judicial principles. The casesproviding for a guide to courts to exercise discretion one way or other areonly illustrative; they are not intended to be exhaustive. As Art. 113 of theLimitation Act prescribes a period of 3 years from the date fixed thereunderfor specific performance of a contract, it follows that mere delay without moreextending up to the said period cannot possibly be a reason for a court toexercise its discretion against giving a relief of specific performance. Norcan the scope of the discretion, after excluding the cases mentioned in section22 of the Specific Relief Act, be confined to waiver, abandonment or estoppel.If one of these three circumstances is established, no question of discretionarises, for either there will be no subsisting right or there will be a baragainst its assertion. So, there must be some discretionary field unoccupied bythe three cases, otherwise the substantive section becomes otiose. It is reallydifficult to define that field. Diverse situations may arise which may induce acourt not to exercise the discretion in favour of the plaintiff. It may betterbe left undefined except to state what the section says, namely, discretion ofthe court is not arbitrary, but sound and reasonable guided by judicialprinciples and capable of correction by a court of appeal.

10. Mr. Lakshmaiah cited a long catena of English decisions to define thescope of a court's discretion. Before referring to them, it is necessary toknow the fundamental difference between the two systems - English and Indian -qua the relief of specific performance. In England the relief of specificperformance pertains to the domain of equity; in India, to that of statutorylaw. In England there is no period of limitation for instituting a suit for thesaid relief and, therefore, mere delay - the time lag depending uponcircumstances - may itself be sufficient to refuse the relief; but, in Indiamere delay cannot be a ground for refusing the said relief, for the statuteprescribes the period of limitation. If the suit is in time, delay issanctioned by law; if it is beyond time, the suit will be dismissed as barredby time : in either case, no question of equity arises.

11. With this background let us look at the English textbooks and decisionsrelied upon by the learned counsel for the appellant. In Halsbury's Laws ofEngland, Vol. 36, at p. 324, it is stated :

Where time is not originally of the essence of thecontract, and has not been made so by due notice, delay by a party inperforming his part of the contract, or in commencing or prosecuting the enforcementof his rights, may constitute such laches or acquiescence as will debar himfrom obtaining specific performance. The extent of delay which has this effectvaries with circumstances, but as a rule must be capable of being construed asamounting to an abandonment of the contract. A much shorter period of delay,however, suffices if it is delay in declaring an option or exercising any otherunilateral right; and if the other party has already given notice that he doesnot intend to perform the contract, the party aggrieved must take proceedingspromptly if he desires to obtain specific performance.'

12. In 'Fry on Specific Performance', 6th Edn., at p. 517, it issaid :

Where one party to the contract has given noticeto the other that he will perform it, acquiescence in this by the other party,by a comparatively brief delay in enforcing his right, will be bar : so that inone case two years' delay in filing a bill after such notice, in another caseone year's delay, and in a third (where the contract was for a lease ofcollieries) five months' delay was held to exclude the intervention of theCourt.'

13. Learned Counsel cited many English decisions in support of his argumentthat there shall be promptitude and diligence in enforcing a claim for specificperformance after a repudiation of the contract by the other party and thatmere continual claim without any active steps will not keep alive the rightwhich would otherwise be defeated by laches : see Clegg v. Edmondson [1857]114 R.R. 336, Eads v. Williams [1854] 43 E.R. Chan. 671, Labmann v. McArthur[1868] L.R. 3 Ch. A.C. 496, Watson v. Reid [1830] 39 E.R. Chan. 91, andEmile Erlanger v. The New Sombrero Phosphate Company [1878] L.R. 3 A.C. 1218.But as stated earlier, the English principles based upon mere delay can have noapplication in India where the statue prescribes the time for enforcing theclaim for specific performance. But another class of cases which dealt with thedoctrine of laches have some bearing in the Indian context. In the LindsayPetroleum Company v. Prosper Armstrong Hurd, Abram Farewell, and John Kemp[1874] L.R. 5 P.C.A. 221, Sir Barnes Peacock defined the doctrinethus :

Where it would be practically unjust to give aremedy, either because the party has, by his conduct, done that which mightfairly be regarded as equivalent to a waiver of it, or where by his conduct andneglect he has, though perhaps not waiving that remedy, yet put the party in asituation in which it would not be reasonable to place him if the remedy wereafterwards to be asserted, in either of these cases, lapse of time and delayare most material.'

14. This passage indicates that either waiver or conduct equivalent towaiver along with delay may be a ground for refusing to give a decree forspecific performance. In Caesar Lamare v. Thomas Dixon [1873] 6 H.L.C. 414, Lord Chelmsford said :

The conduct of the party applying for relief isalways an important element for consideration.'

15. The House of Lords in Emile Erlanger v. The New Sombrero PhosphateCompany [1878] L.R. 3 A.C. 1218, approved the passage in The LindsayPetroleum Petroleum Company v. Prosper Armstrong Hurd, Abram Farewell, and JohnKemp [1874] L.R. 5 P.C.A. 221, which we have extracted earlier.

16. It is clear for these decisions that the conduct of a party which putsthe other party in a disadvantageous position, though it does not amount towaiver, may in certain circumstances preclude him from obtaining a decree forspecific performance.

17. Now we shall consider some of the Indian decisions cited at the Bar. ADivision Bench of the Allahabad High Court held in Nawab Begum v. A. H. Creet[1905] I.L.R. All. 678, that great delay on the part of the plaintiff inapplying to the Court for specific performance of a contract of which heclaimed the benefit was of itself a sufficient reason for the Court in theexercise of its discretion to refuse relief. But it will be seen from the factsof that case that, apart from the delay the conduct of the plaintiff was suchthat it induced the other party to change his position to his detriment. ADivision Bench of the Patna High Court in Rameshwar Prasad Sahi v. M. AnandiDevi [1960] I.L.R. Pat. 79, held on the facts of that case that the delayin bringing the suit for specific performance was always fatal to a suit, andthat it amounted to an abandonment of the contract and waiver of his rights tosue for specific performance. If the learned Judges meant to lay down that meredelay would amount to abandonment of a right, we find it difficult to agreewith them. The decision of the Calcutta High Court in Gostho Behari v. OmiyoProsad [A.I.R. 1969 Cal. 361, recognized that mere delay was sufficient todeny the relief of specific performance, but pointed out that though it was notnecessary to establish that the plaintiff had abandoned his right, the Courtmay, in view of the conduct of the plaintiff coupled with his delay that hadpropositioned the defendant, refuse to give the equitable relief. In ChamartiSuryaprakasarayudu v. Arardhi Lakshminarasimha [1914] 26 M.L.J. 51 a Division Bench of the Madras High Court rightly pointed out that delaybe itself was not a ground for refusing to give a decree in a suit for specificperformance. Sadasiva Aiyar, J., observed :

I think that it is an error of law to hold thatmere delay amounts to a waiver or abandonment apart from other facts orcircumstances or conduct of the plaintiff indicating that the delay was due toa waiver or abandonment of the contract on the plaintiff's part.'

18. Seshagiri Aiyar, J., said much to the same effect, thus :

There is nothing in the Specific Relief Act whichsays that laches in bringing a suit will by itself be a ground for refusingspecific performance. ................................ Having regard to thefact that a special period of limitation has been fixed for bringing a suit forspecific performance, I think the legislature has not intended that mere lachesshould be one of the grounds for refusing specific performance.'

19. We do not think, though the observations of Sadasiva Aiyar, J., arerather wide, that the learned Judges intended to lay down that unless there isa waiver or abandonment by the plaintiff of his rights to sue for specificperformance, he should be nonsuited, for if that was the law, as we havepointed out earlier, the substantive part of section 22 of the Specific ReliefAct would become nugatory. A Division Bench of the Calcutta High Court in JaduNath Gupta v. Chandra Bhushan : AIR1932Cal493 , again emphasized the factthat the English doctrine of delay and laches showing negligence in seekingrelief in a Court of equity cannot be imported into the Indian law in view ofArt. 113 of the Limitation Act. But it pointed out that where the conduct ofthe plaintiff was such that it did not amount to abandonment but showed waiveror acquiescence especially when inaction on his part induced the defendant tochange his position, the plaintiff ought not to be allowed any relief. Thiscase brings out not only the distinction between English and Indian law butalso that waiver or abandonment of a right is not a pre-condition for refusingrelief of specific performance.

20. The result of the aforesaid discussion of the case law may be brieflystated thus : While in England mere delay or laches may be a ground forrefusing to give a relief of specific performance, in India mere delay withoutsuch conduct on the part of the plaintiff as would cause prejudice to thedefendant does not empower a court to refuse such a relief. But as in Englandso in India, proof of abandonment or waiver of a right is not a preconditionnecessary to disentitle the plaintiff to the said relief, for if abandonment orwaiver is established, no question of discretion on the part of the Court wouldarise. We have used the expression 'waiver' in its legally acceptedsense, namely, 'waiver is contractual and may constitute a cause of action: it is an agreement to release or not to assert a right' : see Dawson'sBank Ltd. v. Nippon Menkwa Kabushiki Kaisha [1935] L.R. 62 IndAp 100. Itis not possible or desirable to lay down the circumstances under which a Courtcan exercise its discretion against the plaintiff. But they must be such thatthe representation by or the conduct or neglect of the plaintiff is directlyresponsible in inducing the defendant to change his position to his prejudiceor such as to bring about a situation when it would be inequitable to give himsuch a relief.

21. Bearing these principles in mind let us now look at the facts of thecase. Both the lower Courts found that the appellant repudiated the contracteven on the next day of the auction, i.e., August 24, 1954. The 1st respondentissued a notice to the appellant on August 30, 1954, asking him to obtain fromhim one-fourth of the auction price as earnest money at any time within 24hours and the balance within a period of one week thereafter and execute a saledeed in his favour. The appellant did not reply to this notice. The 1strespondent in his evidence says that he could not take effective steps toenforce the contract for a period of 7 months as his wife was ill and as theHyderabad Municipal Corporation had demolished one of his houses. The HighCourt accepted the explanation given by the 1st respondent for the delay in histaking steps in enforcing the contract. In the affidavit filed by the 1strespondent in the Trial Court on October 18, 1955, he stated that his house hadbeen demolished by the Municipal Corporation before a year and a half and hiswife was also seriously ill for the 'last two years' and that,therefore, he was worried. From this statement it is argued that both thecircumstances which are said to have been the reasons for the delay were inexistence even before the auction and, therefore, the High Court went wrong inaccepting the explanation of the 1st respondent for the delay. It is true thatthe 1st respondent's wife was ill even before the auction, but she continued tobe ill even after the auction and there is clear evidence that she was beingtreated in a hospital. This continual illness of the 1st respondent's wife musthave unnerved him and when the High Court accepted his evidence we cannot saythat it went wrong. It is also true that the notice by the MunicipalCorporation to demolish the house was given two months prior to the auction,but there is nothing on the record to show when the house was actuallydemolished. Some time must have elapsed between the notice and the actualdemolition. The only evidence in regard to the demolition of the house is thatof the 1st respondent; and it is not suggested in the cross-examination thatthe demolition of the house was before the auction. On the uncontradictedevidence of the 1st respondent, we must hold, agreeing with the High Court,that the 1st respondent was in a worried state of mind because of the said twocircumstances which might have been responsible, to some extent, for his nottaking immediate active and effective steps to enforce his right. The mostimportant circumstance in the case is, when did the 1st respondent come to knowof the commencement of the building operations by the appellant on the suitsite The 1st respondent says in his evidence that 7 or 8 months after theauction he passed by the suit site and saw foundations had been dug therein anda few days thereafter he filed the suit. The appellant, on the other hand, saysin his evidence that he started the construction after the disputed auction andthat it was completed in 5 or 6 months. Though he says in the cross-examinationthat he applied to the Municipality for permission to build, he did not produceeither a copy of that application or the sanction issued to him by theMunicipality. He is not even prepared to deny that he got the sanction only inMarch 1955. The Trial Court surmised without any evidence that at the time the1st respondent saw the foundations the stage of the construction indicated thatthe building operations must have commenced two months earlier. The High Courtrightly pointed out that it was a pure surmise and accepted the evidence of the1st respondent that a few days after he saw the foundations being dug in thesuit site he filed the suit. But all these are beside the point, for it is notthe case of the appellant that because of the 1st respondent's conduct he wasinduced to put up the building at a heavy cost : his case throughout was thatthere was no contract at all. If so, there was no question of his being inducedto act to his detriment because of the conduct of the 1st respondent.Therefore, except for some delay, there are no circumstances within the meaningof the aforesaid decisions which should induce a Court to refuse in itsdiscretion to give a relief of specific performance. The High Court rightlyheld that it was a fit case where the plaintiff should have been given a reliefof specific performance.

22. In the result, the appeal fails and is dismissed with costs.

23. Appeal dismissed.


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