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TMI Blog2022 (12) TMI 1556X X X X Extracts X X X X X X X X Extracts X X X X ..... t it was the clear intention of the parties to treat time as the essence of the contract and that there was an undue delay on behalf of the Respondent to institute the suit, the relief of specific performance cannot be granted. It is clarified that this finding also holds true for the land subsequently released in favor of the Appellants. Whether it was Proved that Appellants were Willfully Avoiding Performance of Their Contractual Obligations? - HELD THAT:- The courts below have harped on the inability of the Appellants to procure the necessary NOC Under Section 7A of HUDA Act, to hold that they were non-cooperative and willfully avoiding the performance of their contractual obligation. However, as the learned Counsel for Appellants rightfully pointed out, the evidence on record clearly indicates that they gave duly signed blank proformas and relevant documents to the Respondent in order to obtain any necessary sanction or NOCs. The Respondent had fulfilled his contractual obligation under Under Clause 8 of the Sale Agreements by taking all necessary steps necessary to obtain NOC Under Section 7A of HUDA Act, there are merit in the Appellants' contention that no such NOC was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; in nature and instead his sole objective was to gain titular rights over the Concerned Property on the strength of Sale Agreements.
Conclusion - i) The Respondent's delay in seeking specific performance invalidated his claim. ii) The forfeiture of earnest money was deemed justified as it was not contested as 'penal' by the Respondent, and no specific claim for its refund was made.
The decree granted by the courts below was hinged on a logical fallacy wherein the Appellants were held to be unjustly enriched on the premise that the contract was rendered impossible to perform due to acquisition proceedings - Suit dismissed. X X X X Extracts X X X X X X X X Extracts X X X X ..... s obtained by them before the Date of Execution. The same was communicated to the Respondent via notice dated 10.07.2004. Their case is that in furtherance of the agreements, Appellants appeared before the Sub-Registrar, Gurgaon on the Date of Execution but the Respondent failed to appear before the Sub-Registrar for the purpose of executing the sale deed and payment of balance sale consideration. 7. The Appellants served legal notices dated 18.08.2004 on the Respondent giving an additional opportunity to him to appear before the Sub-Registrar on 01.09.2004 to execute the sale deed as per the terms of the Sale Agreements. It is pertinent to note that in the legal notices, it was explicitly mentioned that time was the essence of the contract. It was also clearly stated that as per the agreements, the Appellants were bound to forfeit the earnest money and treat the agreements as cancelled. Still, they were extending last opportunity to the Respondent to perform his contractual obligations. 8. It appears that 01.09.2004 was declared a holiday, hence the Appellants appeared before the Sub-Registrar on 31.08.2004 as well as on 02.09.2004. The Respondent, however, failed to appear for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Appellants were at fault for not taking effective steps in procuring the NOC Under Section 7A of Haryana Development and Regulation of Urban Areas Act of 1975 (hereinafter, 'HUDA Act'). However, the Trial Court then went on to hold that the Sale Agreements were either way rendered impossible to perform in view of the land acquisition proceedings and proceeded to grant decree of recovery of earnest money on the principle of unjust enrichment. The First Appellate Court upheld the decree granted by Trial Court on entirely identical reasons. 13. The High Court in its impugned judgment made two observations which are pertinent to note - first that no evidence was led by the parties to prove whether they took requisite steps to obtain the NOC Under Section 7A of HUDA Act and; second that presence of Appellants before the Sub-Registrar on 31.08.2004 or 01.09.2004 when last opportunity to execute the sale deed was granted to Respondent, was doubtful as the evidence of marking their presence was not proved and that legal notices dated 18.08.2004 were not served on the Respondent. The High Court, thus, went on to uphold the decree passed by the courts below, noting that in view ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... actual obligation. In other words, she argued that securing NOC Under Section 7A of HUDA Act was solely the responsibility of the Appellants, irrespective of the onus fastened on the Respondent Under Clause 8 of the Sale Agreements. She heavily relied upon the observations of the High Court regarding the Appellant's doubtful appearance before the Sub-Registrar and non-effectuation of service of legal notices dated 18.08.2004, to support the claim of willful non-performance on behalf of the Appellants. Secondly, she argued, that the Sale Agreements had been rendered impossible as the State of Haryana lawfully acquired the suit land. Hence, all the courts below have rightly directed the refund of the earnest money with interest. Additionally, she argued that the amount in question cannot be forfeited contrary to the settled principles enunciated by the Constitution Bench of this Court in Fateh Chand v. Balkishan Dass Fateh Chand v. Balkishan Dass (1964) 1 SCR 515 which bars forfeiture of earnest money when it is 'penal' in nature. Thirdly, she highlighted that the second appeal, which confirmed the decree passed in favor of Respondent, was heard ex-parte. Finally, she dre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed time; but the promisee is entitled to compensation from the promisor for any loss occasioned to him by such failure. Effect of acceptance of performance at time other than that agreed upon.--If, in case of a contract voidable on account of the promisor's failure to perform his promise at the time agreed, the promisee accepts performance of such promise at any time other than that agreed, the promisee cannot claim compensation for any loss occasioned by the non-performance of the promise at the time agreed, unless, at the time of such acceptance, he gives notice to the promisor of his intention to do so. 22. The Sale Agreements in the present case clearly indicate the intention of the parties to treat time-bound performance as an essential condition. They stipulate that in case the sale deed was not executed on the Date of Execution, the Sale Agreements were liable to be treated as cancelled, and the earnest money was to be forfeited. Even in the legal notices dated 18.08.2004, through which last opportunity was extended to Respondent to execute the sale deed, the factum of time being an essential condition for performance was reiterated. On the other hand, no evidence or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat has been suggested in K.S. Vidyanadam [(1997) 3 SCC 1]: (i) The courts, while exercising discretion in suits for specific performance, should bear in mind that when the parties prescribe a time/period, for taking certain steps or for completion of the transaction, that must have some significance and therefore time/period prescribed cannot be ignored. (ii) The courts will apply greater scrutiny and strictness when considering whether the purchaser was "ready and willing" to perform his part of the contract. (iii) Every suit for specific performance need not be decreed merely because it is filed within the period of limitation by ignoring the time-limits stipulated in the agreement. The courts will also "frown" upon suits which are not filed immediately after the breach/refusal. The fact that limitation is three years does not mean that a purchaser can wait for 1 or 2 years to file a suit and obtain specific performance. The three-year period is intended to assist the purchasers in special cases, as for example, where the major part of the consideration has been paid to the vendor and possession has been delivered in part-performance, where equity shift ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e not made out by the Respondent. 27. However, even assuming in arguendo, that Respondent had fulfilled his contractual obligation under Under Clause 8 of the Sale Agreements by taking all necessary steps necessary to obtain NOC Under Section 7A of HUDA Act, we find merit in the Appellants' contention that no such NOC was required in the first place as the Concerned Property was agricultural land on the Date of Execution. In this respect, learned Counsel for the Appellants correctly pointed out that the Concerned Property was brought under the Municipal Corporation of Gurugram vide notification dated 02.06.2008 only. 28. The Respondent in his counter affidavit has taken a stance that the Concerned Property was an 'urban area' as per Section 2(o) of the HUDA Act, which includes lands situated within five kilometres of a notified municipal area. However, this stand cannot sustain for the reason that neither he raised such plea before the courts below nor adduced any evidence to suggest that on the Date of Execution, the Concerned Property was within the five kilometre radius of Municipal Area as specified Under Section 2(o) of the HUDA Act. 29. Finally, we must shift o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... liefs shall not be granted by the court unless "it has been specifically claimed". The proviso to Sub-section (2) further says that even if such relief was not specifically claimed in the plaint, it is the discretion of the Court to permit the Plaintiff to amend the plaint "at any stage of the proceedings" and allow him to include the claim for refund of the earnest money or deposit paid. The relevant part of the provision of SRA Act reads as follows - 22. Power to grant relief for possession, partition, refund of earnest money, etc.-- (1) Notwithstanding anything to the contrary contained in the Code of Civil Procedure, 1908 (5 of 1908), any person suing for the specific performance of a contract for the transfer of immovable property may, in an appropriate case, ask for-- (a) possession, or partition and separate possession, of the property in addition to such performance; or (b) any other relief to which he may be entitled, including the refund of any earnest money or deposit paid or made by him, in case his claim for specific performance is refused. (2) No relief Under Clause (a) or Clause (b) of Sub-section (1) shall be granted by the Court unless ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o have been caused thereby, to receive from the party who has broken the contract reasonable compensation not exceeding the amount so named or, as the case may be, the penalty stipulated for. (Emphasis Applied) 33. Learned Counsel for the Respondent submitted that merely because an amount is stipulated as earnest money would not justify its forfeiture. Instead, reliance was placed on Fateh Chand Fateh Chand (n 2). to state that the courts were duty bound to ascertain reasonable compensation in each case. In this respect, it would be prudent for our analysis to extract the following paragraphs from Fateh Chand Fateh Chand (n 2). which are relied upon by the Respondent - 11..... In all cases, therefore, where there is a stipulation in the nature of penalty for forfeiture of an amount deposited pursuant to the terms of contract which expressly provides for forfeiture, the court has jurisdiction to award such sum only as it considers reasonable, but not exceeding the amount specified in the contract as liable to forfeiture.... x-x-x- 15. Section 74 declares the law as to liability upon breach of contract where compensation is by agreement of the parties pre-determined, or where ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f sale consideration and (c) intended to be in the nature of 'guarantee for the due performance of the contract', and (d) the binding agreement between the parties provides its forfeiture in the event of breach of contract. 35. In our considered opinion, Section 74 of Contract Act primarily pertains to the grant of compensation or damages when a contract has been broken and the amount of such compensation or damages payable in the event of breach of contract, is stipulated in the contract itself. In other words, all pre-estimated amounts which are specified to be paid on account of breach by any party under a contract are covered by Section 74 of Contract Act as noted by this Court in Kailash Nath Associates v. DDA Kailash Nath Associates v. DDA (2015) 4 SCC 136, para 43.7. In Fateh Chand Fateh Chand (n 2)., the Constitution Bench ruled that Section 74 dispenses with proof of "actual loss or damage" and attracts intervention by Courts where the pre-estimated amount is 'penal' in nature. We may at this juncture also note the following observations made by this Court in ONGC Ltd. v. Saw Pipes Ltd. ONGC Ltd. v. Saw Pipes Ltd. (2003) 5 SCC 705.- 64..... Sec ..... X X X X Extracts X X X X X X X X Extracts X X X X
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