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TMI Blog2011 (8) TMI 1390X X X X Extracts X X X X X X X X Extracts X X X X ..... Nos. 363, 364, 366/1 of Velachery village, Mamblam, Guindy Taluk, Registration District of Madras, and entered into an agreement for sale of the suit property (hereinafter 'the agreement') for a consideration of Rs. 1,00,00,000/- with M/s. Ramaniyam Real Estates Private Limited (Plaintiff), which was a company incorporated under the Companies Act, 1956 and engaged in the business of constructing buildings. 4. The agreement dated 7th July, 1995 was the subject matter of suit between the above parties. As per the agreement Rs. 10,00,000/- of the sale consideration was to be paid upfront as earnest money, and the remainder of Rs. 90,00,000/- was to be paid at the time of the registration of the sale deed. At the time of agreement, the suit property was encumbered by way of security with M/s. State Bank of India, Guindy Branch (Defendant No. 2) and therefore one of the conditions of the agreement was that Defendant No. 1 would get the suit property released from such encumbrance before the final payment of Rs. 90,00,000/- was to be made. Apart from this encumbrance, it was stated in the agreement, the suit property was to be without any other encumbrance; vide clauses 2 and 6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such land or part thereof by way of sale, mortgage, gift, lease or otherwise until he has furnished a statement under Section 7 and a notification regarding the excess vacant land held by him has been published under Sub-section (1) of Section 11; and any such transfer made in contravention of this provision shall be deemed to be null and void. 9. The section thus enjoined that landowners holding excess vacant land are to furnish a statement under Section 7. In this case, 19 cents were considered excess urban vacant land vide case No. R.C.6160/86 and Defendant No. 1 filed its statement under Section 7. 10. Section 9 provided for preparation of a draft statement as regards the excess vacant land. Under Clause (5) of Section 9, the Competent Authority, so designated under the Tamil Nadu Act, was to consider objections preferred by a land owner, and then pass orders with respect to the question of excess land. Defendant No. 1 preferred its objections before the Competent Authority. The objections however were dismissed. The Defendant No. 1 then preferred an appeal before the Special Commissioner (Land Reforms), Madras and the appeal was kept pending. 11. In accordance with Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an extent of 19 cents has been declared as excess vacant land under Section 9(5) of Tamil Nadu Urban Land (Ceiling and Regulations) Act, 1978 that an appeal is pending before the Special Commissioner (Land Reforms), Madras and that the transferor has also applied to the State Government for exemption under Section 21 of the said Act but the same has been rejected and the matter is pending in W. P. No. 13906/1988, before the High Court, Madras. 2. It transpires, therefore, that the transferor intends to transfer the entire extent of 66 cents, inclusive of the 19 cents of land which is declared as excess vacant land by the Competent Authority under the Urban Land Ceiling Act, which is prohibited by Section 6 of the Tamil Nadu Urban Land (Ceiling and Regulations) Act, 1978..... In view of the prohibition contained in Section 6, quoted above, the agreement entered into between the parties on 7.7.95 to transfer the entire land, including the excess vacant land of 19 cents, shall be deemed to be null and void. In view of this legal prohibition, we are unable to process the 37-I statement filed by you and therefore, the same is lodged in this office. If you are so advised, you may fil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dor, resisted the suit by submitting that the agreement to sell was with respect to the entire suit property, i.e. 66 cents, and thus could not have been split into separate agreements to sell for 47 cents and 19 cents. It submitted that in view of the bar placed because of Section 6 of the Tamil Nadu Act and the consequential refusal by the appropriate authority under the income tax department to allow the execution of the sale, the contract itself had become frustrated and thus unenforceable in law. 20. It was further urged that time was the essence of the contract and it was for the Plaintiff purchaser to seek exemption for the said 19 cents land from the urban land ceiling department, which however it failed to do. As a result of this failure, the sale could not be affected within a year's time. This clearly rendered the contract void in terms of clauses 8 and 10 insofar as the contract was not performed within a year's time. Hence, Clause 9 was attracted and the contract stood cancelled for default of the Plaintiff. It submitted that in terms of Clause 9, the proposed vendor (Defendant No. 1) refunded the earnest money to the Plaintiff-purchaser. However the cheque se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions of Section 6 of the Tamil Nadu Act. On the contrary, in all these communications, the only position that the Defendant No. 1 had insisted upon was the satisfaction of the conditions mentioned in Clause (7) of the agreement, viz., permission for the sale of 19 cents by the urban land ceiling authorities. The learned Division Bench noted that if this was the stance of the Defendant No. 1, it could not be allowed to resist the suit on the grounds of illegality of contract. 26. However, it disagreed with the decision of the learned Judge to the extent the repeal of the Tamil Nadu Act did not in itself released 19 cents of the excess vacant land from the proceedings initiated under that Act. It held that Section 3 of the Repeal Act provided that repealing of the Tamil Nadu Act would not affect the vesting of any vacant land under Sub-section (3) of Section 11 of the Tamil Nadu Act in cases where the possession of such vacant land had been taken over by the State Government. Relying upon and following decision of a Full Bench of the High Court in P. Gopirathnam and 4 Ors. v. Ferrodous Estate (Private) Limited, represented by its Power of Attorney Holder Sri G. John Arthur 199 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... od of one year expired by 6th July, 1996. Within that period the Plaintiff-purchaser could not get clearance from the Urban Land Ceiling Authorities nor could they obtain the exemption under the Act for permission to sell a part of the property in respect of which the suit for specific performance was filed. 29. It is not the case of the Plaintiff-purchaser that the vendor in any way delayed the signing of application or petition necessary for getting such permission for clearance. From some correspondence exchanged between the parties it is clear that purchaser took a few steps but could not get the clearance within the time agreed by it. The Vendor, however, by a letter dated 4th September, 1996 cancelled the agreement in terms of Clause 9 of the agreement and returned the advance money of Rs. 10,00,000/- vide a cheque in terms of Clause 9. The said letter written by the vendor is set out below: CITADEL FINE PHARMACEUTICALS Ref: 3852/96 4th September 1996 M/s. Ramaniyam Real Estates Pvt. Ltd., Rep. by Mr. V. Jagannathan, Managing Director, 'Sruthi'. No. 11, 2nd Main Raod, Gandhi Nagar, Madras 600 020. Dear Sir, Re: 1. Our letter dated 11.7.96 2. Your letter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gned by the contract; either for completion or for the steps towards completion, if it can do justice between the parties, and if (as Lord Justice Turner said in Roberts v. Berry 3 D.M. and G. 284 at 289 there is nothing in the 'express stipulation 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.... (page 32 of the report) 33. The learned Law Lord made it clear that equity can operate in the construction of a contract "unless excluded by any clearly expressed stipulation". However, it was made clear that equity will not assist where there has been undue delay on the part of one party to the contract and one party has given notice to the other party that the defaulting party must complete the contract within a definite time. A further caution was added by saying that equity will not assist when other circumstances will result in injustice on application of equitable principle. In the words of Lord Haldane the principles have been formulated as follows: ...Nor will it (equity) exercise its jurisdiction when the character of the property or other circum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... breaker on the basis that he has committed a fundamental breach of the contract ("a breach going to the root of the contract") depriving the innocent party of the benefit of the contract ("damages for loss of the whole transaction. (page 1410) 38. Fry in his Treaties on the Specific Performance of Contracts (Sixth Edition) has dealt with this aspect in paragraph 1075: "Time is originally of the essence of the contract, in the view of a Court of Equity, whenever it appears to have been part of the real intention of the parties that it should be so, and not to have been inserted as a merely formal part of the contract. As this intention may either be separately expressed, or may be implied from the nature or structure of the contract, it follows that time may be originally of the essence of a contract, as to any one or more of its terms, either by virtue of an express condition in the contract itself making it so, or by reason of its being implied.... (page 502) 39. In paragraph 1079, the learned author has explained the position further by saying the time may be implied as essential in a contract from the nature of the subject matter with which the parties ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on and the Court can take judicial notice of the fact that in the city of Chennai the price of real estate is constantly escalating and the clear intention of the parties, as it appears from the stipulations of the agreement, was to treat time as the essence of the contract. 44. Having regard to the aforesaid principles the court cannot attribute a different intention to the parties and cannot specifically enforce the contract at the instance of the Plaintiff-purchaser who has failed to perform his part of the obligation within the time stipulated. 45. In K.S. Vidyanadam and Ors. v. Vairavan reported in (1997) 3 SCC 1 this Court explained how discretion is to be exercised by the Court before granting specific performance. This Court held that in cases of urban properties in India it is well known that prices are going up sharply over the last few decades particularly after 1973. In Vidyanadam (supra) the court was dealing with a property in Madurai in the State of Tamil Nadu and it was argued before this Court by referring to the Madras High Court judgment in S.V. Sankaralinga Nadar v. P.T.S. Ratnaswami Nadar AIR 1952 Mad 389 that mere rise in price is no ground for denying the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the surrounding circumstances make it clear that the parties intended time in this case was intended to be of the essence of the contract. 48. Keeping the above principle if we look at the portion of Law in India, it is clear that under Section 9 of the Specific Relief Act, 1963 it is provided as follows: 9. Defences respecting suits for relief based on contract.- Except as otherwise provided herein, where any relief is claimed under this Chapter in respect of a contract, the person against whom the relief is claimed may plead by way of defence any ground which is available to him under any law relating to contracts. 49. It is clear from Section 9 of the Specific Relief Act, 1963 that Section 55 of The Indian Contract Act, 1872 enables a Defendant against whom suit for the specific performance has been filed to raise the defence under Section 55 of the Indian Contract Act. 50. Section 55 of the Indian Contract Act which deals with a contract, in which time is of essence is as follows: Section 55 - Effect of failure to perform at a fixed time, in contract in which time is essential. - When a party to a contract promises to do a certain thing at or before a specified time, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... we may refer to the Principle of Equitable Remedies by I.C.F. SPRY, Fourth Edition (Sweet & Maxwell, 1990). Dealing with the question of 'Clean Hands' the learned author opined that where the Plaintiff is shown to have materially misled the court or to have abused its process, or to have attempted to do so, the discretionary relief of specific performance can be denied to him. In laying down this principle, the learned author relied on a decision of the English Court in the case of Armstrong v. Sheppard and Short Ltd. (1959) 2 Q.B. 384 at page 397. (See SPRY Equitable Remedies page 243). 56. This Court has also taken the same view in the case of Arunima Baruah v. Union of India and Ors. reported in (2007) 6 SCC 120. At paragraph 12, page 125 of the report, this Court held that it is trite law that to enable the court to refuse to exercise its discretionary jurisdiction suppression must be of a material fact. This Court, of course, held what is a material fact, suppression whereof would disentitle the suitor to obtain a discretionary relief, would depend upon the facts and circumstances of each case. However, by way of guidance this Court held that material fact would mean ..... X X X X Extracts X X X X X X X X Extracts X X X X
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