2011 (7) TMI 1293 - SC - Indian Laws

Execution of the sale deed - time for payment essence of the contract - HELD THAT - considering the facts of the case We are of the view that the failure of the appellant to pay the balance and failure to pay the last instalment clearly amounted to breach and time for such payment was the essence of the contract the respondents were justified in determining the agreement of sale which they did by notice. Therefore rejection of the prayer for specific performance is upheld. dismissal of the suit for injunction - HELD THAT - The appellant was not put in possession of the suit properties in part-performance of the agreement of sale. Under clause 15 of the agreement of sale she was only entrusted with the suit schedule properties as a caretaker until possession is given on receipt of the entire sale consideration. As neither the entire sale consideration was paid nor possession delivered the plaintiff remained merely a caretaker and on cancellation of the agreement of sale by the respondents the plaintiff became liable to leave the suit schedule properties as the possession continued to be with the defendants. We have held that the cancellation of agreement was justified and upheld the rejection of the suit for specific performance. In the circumstances the dismissal of the suit for injunction by the learned Single Judge affirmed by the Division Bench is also not open to challenge. Dismissal of the suit for recovery - HELD THAT - the liability to refund the advance has nothing to do with the appointment of the plaintiff as caretaker or the obligation of the plaintiff to return the property on cancellation of the agreement. Having regard to the facts and circumstances we are of the view that the rate of interest shall be increased to 12% per annum instead of 9% per annum. that In the High Court the learned counsel for the appellant during arguments clearly stated that the appellant was not pressing for any decree against the fourth respondent in view of the finding that the amount paid was part of the consideration for movables. Therefore the dismissal of suit for 1, 25, 000 is also upheld. We also find no reason to interfere with the dismissal of the suit. That the evidence of the fourth defendant (examined as DW2) was sufficient to put forth the case of the defendants and there was no need to examine the other three defendants who did not have full or complete knowledge of the transactions. In the circumstances we find no merit in the contention that the suits ought to have been decreed as defendants 1, 2 and 3 did not step into the witness box. Contempt Petition - This Court while granting leave in the special leave petitions made an interim order that the respondent shall not encumber the property in any manner. HELD THAT - Receiving advances or amounts in pursuance of an MOU would not also amount to creating an encumbrance. The MOUs said to have been executed by respondents 1 to 3 provide that agreements of sale with mutually agreed terms and conditions will be entered between the parties after clearance of all pending or future litigations. Therefore the MOUs are not even agreements of sale. In these circumstances it is not possible to hold that the respondents have created any encumbrances or violated the order. Hence these contempt petitions are liable to be rejected. Relief of specific performance - agreement of sale was cancelled - we have affirmed the decision of the learned Single Judge and the Division Bench that the plaintiff is not entitled to the relief of specific performance it cannot be said that the plaintiff had filed false frivolous and mischievous suits. In view of the above in terms of the agreement and in terms of its offer the plaintiff was entitled to recover the amounts paid by her. A sum of 2, 25, 000 was paid under the agreement of sale to defendants 1 to 3. The finding of the learned Single Judge that the sum of 1, 25, 000 paid by the plaintiff to the fourth defendant was also the consideration for the movables in addition to the consideration of 3, 75, 000 under the agreement of sale was not been challenged by the defendants. In the circumstances the Division Bench was justified in granting a decree in favour of the plaintiff for 3, 50, 000 with interest. These appeals are therefore liable to be dismissed.

Summary

Issues Involved:
1. Whether the time stipulated for payment of balance consideration was the essence of the contract.
2. Whether the parties had agreed upon a sequence of performance requiring payment only after the respondents satisfied the appellant regarding their title.
3. Whether the respondents committed fraud by failing to disclose encumbrances over the properties.
4. Whether an adverse inference should be drawn due to the non-examination of defendants 1 to 3.

Detailed Analysis:

Re: Issue (i) - Time as the Essence of the Contract:
The court examined whether the time stipulated for payment was the essence of the contract. The agreement explicitly stated that the balance consideration was to be paid in three installments, with specific dates, and any delay would lead to cancellation of the agreement. The court noted that the terms of the agreement clearly indicated that time was of the essence for payment but not for the execution of the sale deed. The appellant's failure to adhere to the payment schedule justified the respondents' cancellation of the agreement.

Re: Issue (ii) - Sequence of Performance:
The appellant argued that the sequence of performance required the respondents to first satisfy her regarding the title before she could pay the balance. The court found no express provision in the contract that made payment conditional upon the satisfaction of title. The agreement's terms indicated an unconditional promise to pay the balance in installments, independent of the title's satisfaction. Thus, the appellant's contention was rejected.

Re: Issue (iii) - Fraud and Non-Disclosure of Encumbrances:
The appellant claimed that the respondents committed fraud by not disclosing existing encumbrances. The court found that the appellant's husband and legal advisor had examined the title deeds before the agreement, and there was no evidence of fraud or deliberate suppression of information by the respondents. The court concluded that the appellant's failure to pay the installments could not be justified on the grounds of alleged non-disclosure of encumbrances.

Re: Issue (iv) - Adverse Inference for Non-Examination of Defendants:
The appellant contended that an adverse inference should be drawn due to the non-examination of defendants 1 to 3. The court noted that the fourth defendant, who had complete knowledge of the transaction, had given evidence. It was unnecessary for the other defendants to duplicate the evidence. The court found no merit in the contention that the suits should have been decreed due to the non-examination of the other defendants.

Conclusion:
The court upheld the rejection of the suit for specific performance and the dismissal of the suit for injunction. The court also upheld the dismissal of the suit for recovery of Rs. 1,25,000 from the fourth respondent. However, the court modified the interest rate on the refund of Rs. 3,50,000 to 12% per annum from the date of cancellation of the agreement to the date of payment. The appeals were allowed in part, and the contempt petitions were dismissed. The court directed the parties to bear their respective costs.