2024 (11) TMI 710 - SC - Indian Laws

Review Jurisdiction - error apparent on the face of record or not - Suit for specific performance was partially decreed by directing the registration of the suit property in favour of the petitioner proportionate to the extent of the consideration paid - Doctrine of Lis pendens - HELD THAT - The petitioner was ready and willing to perform the contract in terms of Section 16(c) of the Specific Relief Act. The first agreement to sell noted that the purchaser paid a sum of Rs.11,30,00 as earnest money. Subsequently, the petitioner paid Rs. 13,00,000 on the same day by cheque and paid another Rs. 5,00,000 by Demand Draft on 9 April 1997. If the petitioner was unwilling to perform the contract, he would not have paid nearly 75 percent of the sale consideration. Thus, the petitioner with the payment of the additional sum above the earnest money, has proved his readiness and willingness to perform the contract. Further, this aspect must be analysed in the backdrop of the explanation to Section 16(c) of the Specific Relief Act which states that if the contract involves the payment of money, it is not necessary that the plaintiff actually tenders the money. It cannot be concluded that the petitioner was not ready or willing to perform his part of the contract merely because the balance sale consideration was due to be paid. Section 10, before the amendment in 2018 stated that the Court can exercise its discretion to award specific performance of contract where (a) there exists no standard for ascertaining the actual damage caused by the nonperformance of the act agreed to be done; or (b) when the act agreed to be done is such that compensation in money for its non-performance would not afford adequate relief. The Explanation provided that unless there is anything to the contrary, the court shall presume that the compensation in money is not an adequate relief for the breach of a contract to transfer immovable property. There is nothing in the agreements to sell to rebut this statutory presumption. On an application of the facts to the principles in Sections 10 and 16 of the Specific Relief Act, it is opined that this is a fit case for this Court to exercise its discretion to direct specific performance. Doctrine of Lis pendens - HELD THAT - The doctrine of lis pendens that Section 52 of the Transfer of Property Act encapsulates, bars the transfer of a suit property during the pendency of litigation. The only exception to the principle is when it is transferred under the authority of the court and on terms imposed by it. Where one of the parties to the suit transfers the suit property (or a part of it) to a third-party, the latter is bound by the result of the proceedings even if he did not have notice of the suit or proceeding. The purpose of lis pendens is to ensure that the process of the court is not subverted and rendered infructuous. In the absence of the doctrine of lis pendens, a defendant could defeat the purpose of the suit by alienating the suit property. This purpose of the provision is clearly elucidated in the explanation clause to Section 52 which defines pendency . Amending Act 20 of 1929 substituted the word pendency in place of active prosecution . The Amending Act also included the Explanation defining the expression pendency of suit or proceeding . Pendency is defined to commence from the date of institution until the disposal . The argument of the respondents that the doctrine of lis pendens does not apply because the petition for review was lying in the registry in a defective state cannot be accepted. The review proceedings were instituted within the period of limitation of thirty days. The doctrine of lis pendens kicks in at the stage of institution and not at the stage when notice is issued by this Court. Thus, Section 52 of the Transfer of Property Act would apply to the third-party purchaser once the sale was executed after the review petition was instituted before this Court. Any transfer that is made during the pendency is subject to the final result of the litigation. Having concluded that the errors apparent on the face of the record identified above go to the root of the reasoning on both the issues of limitation and specific performance, the judgment of this Court dated 25 August 2022 is recalled. The judgment of the High Court dated 23 April 2021 is restored. The review petitions are allowed.

Summary

Issues Involved:

1. Whether the suit instituted by the petitioner was barred by limitation.
2. Whether the suit for specific performance must be decreed.
3. Interpretation of the contractual terms regarding time being of essence.
4. Application of the doctrine of lis pendens.

Issue-wise Detailed Analysis:

1. Limitation:

The Supreme Court initially held that the suit was barred by limitation, as the suit had to be instituted within three years from the time fixed for completing the performance, which was interpreted as three months from the sale agreements. The Court relied on Clause 3 of the agreements, which stipulated a three-month period for the completion of obligations, and concluded that the suit should have been filed by June 2000. However, upon review, it was found that the interpretation of Clause 3 was erroneous. The clause provided consequences for both parties' failures, not just the purchaser's, and the agreements did not fix a date for performance. Thus, the limitation period should be calculated from when the petitioner had notice of the refusal of performance, which was on 14 April 2000. Therefore, the suit filed on 30 July 2002 was within the limitation period.

2. Specific Performance:

The initial judgment concluded that the petitioner was not entitled to specific performance due to a lack of readiness and willingness to perform the contract, as the balance consideration was not paid within the stipulated three months. This was based on the erroneous interpretation that time was of the essence. The review found that the petitioner had paid a substantial portion of the consideration, indicating readiness and willingness. The respondents had also failed to fulfill their obligations to provide necessary documents, which was not challenged. The Court concluded that the petitioner was ready and willing to perform the contract and that specific performance should be decreed.

3. Interpretation of Contractual Terms:

The Court initially interpreted Clauses 3, 21, and 23 to conclude that time was of the essence, particularly relying on a previous agreement from 1994 that did not involve the petitioner. This interpretation was found to be an error apparent on the face of the record. The agreements did not fix a specific time for performance, and the consequences for non-performance applied to both parties. The review clarified that the agreements did not make time of the essence for the completion of the contract, and the petitioner's actions demonstrated readiness and willingness to perform.

4. Doctrine of Lis Pendens:

The respondents argued that the doctrine of lis pendens did not apply because the review petition was in a defective state when the suit property was alienated. However, the Court clarified that lis pendens applies from the date of institution of the proceedings, which in this case was when the review petition was filed within the limitation period. Thus, any transfer made during the pendency of the review petition is subject to the final outcome of the litigation.

Relief:

The review resulted in recalling the prior judgment of 25 August 2022, restoring the High Court's judgment dated 23 April 2021, which decreed specific performance to the extent proportionate to the consideration paid by the petitioner. The review petition was allowed, and the pending applications were disposed of accordingly.