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TMI Blog2022 (8) TMI 1565X X X X Extracts X X X X X X X X Extracts X X X X ..... hukla, Adv. JUDGMENT KRISHNA MURARI, J. 1. Leave granted in all the matters. C.A. NO. 5822 OF 2022 (ARISING OUT OF SLP (C) NO. 13565 OF 2021) 2. The present civil appeal arises out of the impugned judgment dated 23.04.2021 in A.S. No. 998 of 2010, passed by the High Court for the State of Telangana at Hyderabad. 3. Siddamsetty Infra Projects Pvt. Ltd., who is the respondent herein, had filed a suit for specific performance against the appellants, Smt. Katta Sujatha Reddy and Smt. Kamireddy Geetha Reddy, who were respondents 6 & 8 respectively, among others in the suit. 4. A conspectus of the facts necessary for the disposal of the appeals is as follows: One late D Narayana, predecessorininterest of the respondent no. 2 and 3, was the owner of an agricultural land bearing Sy. No. 300309, admeasuring 141.05 acres, situated in Budvel Village, Rajendra Nagar Mandal, Ranga Reddy District, Hyderabad. The appellants herein acquired certain extent of the land from the aforesaid predecessorininterest through an agreement dated 19.03.1994. In pursuance to this agreement, two registered Joint GPA'S dated 28.03.1994 were executed in the name of the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shy; with interest @36% per annum as pleaded in the plaint? 5. To what relief? 8. In response to issues (1) and (2), taking into consideration the evidence available on record, the trial Court held that the purchaser was never put in possession of the property. On the issue of payment, it was held that the purchaser never made the total payment of Rs. 34,70,000/ under the agreement of sale. It was discovered during the course of cross and chief examination, that the purchaser had issued a cheque for Rs. 5,00,000/ which was dishonoured. This information was not shared by the purchaser and hence the purchaser had suppressed material evidence. 9. The trial Court further held that the burden of proof lies on the person who pleads that time is the essence of the contract. It was further observed that in respect of an immovable property, time is not the essence of the contract unless the same is explicitly mentioned in the agreement of sale and the parties through their conduct have treated time as the essence of the contract. The lower Court observed that Clause 3 in the contract stipulates a time bar of 3 months for the payment of the sale consideration and furn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of the matter which are as under; 1. Whether the suit is barred by limitation? 2. Whether the purchaser proved it's possession over the suit schedule property? 3. Whether the plaintiff was ready and willing to perform his part of the contract and paid balance sale consideration within the stipulated time in the suit agreements? 4. Whether the trial court is right in holding that the time is not the essence of the contract and whether the same can be attacked by the defendants without filing cross objections? 5. Whether the trial court is right in not exercising its discretion for granting relief of specific performance? 6. Whether Section 10 of the Act as substituted by Act 18 of 2018 is prospective or retrospective in nature? 7. To what relief? 14. In response to point (1), the High Court has held that Clause 3 of the agreements did not stipulate time as the essence of the contract. Moreover, the vendor has not exercised the option of forfeiting the advance amount as per Clause 3 of the agreements. The High Court further held that the trial Court has erred in making the distinction between time fixed for payment of sale consideration and time for performanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clause 3 of the contract were obtained from the concerned departments, and hence the said point was answered in favour of the purchaser. 19. On point (6), the High Court held that when a provision is replaced by way of substitution, the substituted legislation operates retrospectively and not prospectively. It further held that specific relief in essence is a part of the law of procedure, and hence it is a retrospective law. The High Court then went on to state that an appeal is a continuation of the suit, and hence any change in law between the date of passing of the decree and the decision of the appeal must be taken into consideration. Based on the above analysis, the High Court held that Section 3 of the Amended Act is retrospective in nature and applies to pending proceedings. 20. On point (7), the High Court held that since the purchaser succeeded on all points, it partly allowed the appeal and directed the vendors to register the suit property in favour of the purchaser, to the extent of the amount paid by the purchaser, i.e., 90% of the total sale consideration, within a period of 3 months. Further, it was ordered that the sum of Rs. 5,39,150/ deposited by the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the light of the amendment to Section 10 of the Specific Relief Act, the jurisdiction to grant specific performance of a contract is no longer discretionary and it is mandatory for Courts to grant such relief, unless the case at hand falls within the statutorily carved out exceptions. 23. Mr. Mukul Rohatgi and Mr. Harish Salve, learned Senior Counsel appearing on behalf of the vendors, submitted as follows: i. The purchaser did not approach the Court with clean hands. The balance amount was not paid within the stipulated time period and the trial Court found the purchaser's statement regarding possession to be false inter alia, for the following reasons: (a)In the suit, there was an alternate prayer seeking possession. If the purchaser was already in possession, such a prayer would not have been made. (b)The purchaser has not mentioned any specific date as to when they were put in possession of the property. (c)As per the draft sale deed prepared by the purchaser, there is no mention of the fact that they had already been granted possession of the property. In fact, the draft sale deed indicates that the purchaser would be put in possession on execution of the sale deed. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rform a contract' does not arise. viii. Reliance on Defendant No. 5's pleadings in support of the plaintiff is misplaced. She has nothing to do with the agreements in question and had filed a collusive written statement. Moreover, knowing such a statement is collusive, she never entered the witness box. 24. We have heard the learned Senior counsel appearing on either side and perused the entire material available on record. In the light of the arguments advanced, the following issues fall for consideration. A. Whether the suit for specific performance is barred by limitation? B. Whether the amended Section 10 of the Specific Relief Act is prospective or retrospective in operation? C. Whether the purchaser is entitled to the relief of specific performance? D. In any case, whether the purchaser is entitled to take benefit of Section 12 of the Specific Relief Act in view of the part payment made in respect of the contract? Issue A 25. Before dealing with issue "A", we would like to highlight certain facts which may be relevant. On 26.03.1997 and 27.03.1997 two agreements to sell were executed between the vendors and purchaser for two separate parcels of land in surv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had got issued reply legal notice on 22.7.2002 to the notice dated 6.7.2002 by stating that the agreements are barred by limitation and the plaintiff never in possession of the suit property and moreover he has not performed his part performance in paying the balance sale consideration within the stipulated period and the notice dated 8.02.2000 was posted on 31.02.2000 with malafide intention." 30. In the above light, the first question that this Court needs to consider pertains to the aspect of limitation. The First Schedule to the Limitation Act, 1963 provides for the period of limitation in the following manner: DESCRIPTION OF SUIT PERIOD OF LIMITATION TIME FROM WHICH PERIOD BEGINS TO RUN 54. For specific performance of a contract Three years The Date fixed for the performance, or, if no such date is fixed, when the plaintiff has notice that performance is refused. The High Court, while dealing with the aspect of limitation, has given a reasoning that Clause 3 of the agreements to sell did not have a specific calendar date for performance of the contract, but rather, provided only for payment of the entire sale consideration within 3 months from the date of the agreeme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the parties, so as to provide a last opportunity for them to successfully enter into a salepurchase agreement. The aforesaid intention of the parties is also made clear through Clause 23 of the agreement to sell, which reads as under: "23. The parties of the second part herein undertake on any pretext they will not make any claim for enhancing the agreed sale consideration." 33. The aforesaid clause clearly freezes any enhancement of the agreed sale consideration, which cannot be independent of a fixed time period. A contrary interpretation would render the contract commercially unreasonable and unworkable. The moratorium on the enhancement of rates prescribed under Clause 23 should be interpreted to be predicated on a fixed time and be executable within a reasonable period. The same should not be utilized to render the commercial wisdom between the parties otiose, which is inherent in drafting such clauses. 34. From the above analysis, it is clear that the contract was strictly conditioned on a time frame. At this stage, it may be relevant to quote Section 55 of the Contract Act, which reads as under: "55. Effect of failure to perform at fixed time, in contract in whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en on merits, the purchaser's case cannot be countenanced in law and we accordingly adumbrate on the following aspects. Issue B 40. At the outset, we may notice that this question assumes great significance as application of the 2018 Amendment Act to the present set of circumstances would determine whether specific performance ought to be applied mandatorily or the aforesaid decision is a discretion of the Court to examine whether equity demands such application instead of granting damages if any. 41. We may note that the Specific Relief Act, 1963 is the second legislation, replacing the earlier 1877 enactment of the Specific Relief Act. The 1963 Act was enacted after consideration of the Law Commission in its Ninth Report. The 1963 Act more or less followed the English position on equitable remedy of specific performance. In Common Law, the remedy of specific performance was unknown in the initial days and courts only granted damages for the value of goods if there was any breach of contract. Accordingly English Courts, in the early years, granted monetary relief. In order to rectify the harsh stance of law, Courts of Equity in England started granting relief of specific perfo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as provided under the Specific Relief Act. For determination of whether a substituted law is procedural or substantive, reference to the nature of the parent enactment may not be material. Instead, it is the nature of the amendments which determine whether they are in the realm of procedural or substantive law. 46. The High Court's reliance on Adhunik Steels Limited v. Orissa Manganese and Minerals (P) Ltd. [(2007) 7 SCC 125], was also misplaced. In that case, the Court was concerned with the interpretation of Section 9 of the Arbitration Act, that deals with granting of injunctions. The specific question before the Court was whether the provisions of the CPC or the provisions of the Specific Relief Act have a bearing on Section 9 of the Arbitration and Conciliation Act, 1996. 47. While discussing the nature of the Specific Relief Act, in the aforesaid case, this Court had observed as under: "16. Injunction is a form of specific relief. It is an order of a court requiring a party either to do a specific act or acts or to refrain from doing a specific act or acts either for a limited period or without limit of time. In relation to a breach of contract, the proper remedy ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nciliation Act would involve consideration of settled principles under the Code of Civil Procedure or the Specific Relief Act. It was nowhere stated in the aforesaid case that the Specific Relief Act of 1963 stricto sensu provided for only procedural mechanism. We find it difficult to read the aforesaid case in the manner alluded to by the High Court. 48. In any case, the amendment carried out in 2018 was enacted to further bolster adherence to the sanctity of contracts. This approach was radical and created new rights and obligations which did not exist prior to such an amendment. Section 10, after amendment, reads as under: 10. Specific performance in respect of contracts. - The specific performance of a contract shall be enforced by the court subject to the provisions contained in subsection (2) of section 11, section 14 and section 16. 49. This provision, which remained in the realm of the Courts' discretion, was converted into a mandatory provision, prescribing a power the Courts had to exercise when the ingredients were fulfilled. This was a significant step in the growth of commercial law as the sanctity of contracts was reinforced with parties having to comply wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies on the date of adjudication of the suit and the same is required to be taken into consideration by the appellate court. In Shanti Devi v. Hukum Chand [(1996) 5 SCC 768] this Court had occasion to interpret the substituted Section 15 with which we are concerned and held that on a plain reading of Section 15, it is clear that it has been introduced prospectively and there is no question of such section affecting in any manner the judgment and decree passed in the suit for preemption affirmed by the High Court in the second appeal. We are respectfully in agreement with the view expressed in the said decision and hold that the substituted Section 15 in the absence of anything in it to show that it is retrospective, does not affect the right of the parties which accrued to them on the date of the suit or on the date of passing of the decree by the court of first instance. We are also of the view that the present appeals are unaffected by change in law insofar it related to determination of the substantive rights of the parties and the same are required to be decided in the light of the law of pre34 emption as it existed on the date of passing of the decree." 53. From the afor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot propose to undertake that exercise in this case, nor referring the matter to a larger Bench as we have held on facts in this case that time is the essence of the contract, even with reference to the principles in Chand Rani [(1993) 1 SCC 519] and other cases. Be that as it may. 43. Till the issue is considered in an appropriate case, we can only reiterate what 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 timelimits 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d requirement is one of the essential ingredients under Section 16 of the Specific Relief Act, 1963 which reads as under: 16. Personal Bars to relief. Specific Performance of a contract cannot be enforced in favour of a person ... (c) who fails to aver and prove that he has performed or always been ready and willing to perform the essential terms of the contract which are to be performed by him, other than terms the performance of which has been prevented or waived by the defendant. 63. It is clear that in order to prove readiness and willingness, the burden is on the purchaser to prove that they were always ready and it is only the vendor who refused to perform the contract for extraneous considerations. In order to support their averments, the purchaser (Sunil Siddam Setty) entered into the witness box and deposed as PW1. 64. In his cross examination, PW1 deposed as below: "We have paid a sum Rs. 10,850/ towards advance of sale consideration on 27.03.1997, when one of the agreement of sale was executed. It is true one cheque which was issued by us for a sum of Rs. 5,00,000/ was bounced. When the said fact was brought to our notice, we is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facts and circumstances of this case, we cannot accept that such higher standards of good faith was relevant. 67. On the aspect of the vendor's obligation to provide requisite and necessary documents, DW1 (Smt. Katta Sujatha Reddy), has averred that all the documents were available. It is only after the purchaser was satisfied about the sound title that he entered into the agreement to sell. 68. In the light of the above, it is clear that Section 16(c) of the Specific Relief Act would only come into force if the purchaser was ready and willing to perform the contract within the three month period prescribed under Clause 3 of the agreements. The aforesaid conclusion is also bolstered by the fact that specific performance can only be granted when essential terms of contract are not violated in terms of Section 16(b). 69. From the above, we can safely conclude that the purchaser was not ready or willing to perform his part of the contract within the time stipulated and accordingly, specific performance cannot be granted for the entire contract. 70. The last aspect which we need to consider in this matter is whether possession was with the purchaser after entering into agreements ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... performance of a part of a contract. (2) Where a party to a contract is unable to perform the whole of his part of it, but the part which must be left unperformed by only a small proportion to the whole in value and admits of compensation in money, the court may, at the suit of either party, direct the specific performance of so much of the contract as can be performed, and award compensation in money for the deficiency. (3) Where a party to a contract is unable to perform the whole of his part of it, and the part which must be left unperformed either- (a) forms a considerable part of the whole, though admitting of compensation in money; or (b) does not admit of compensation in money, he is not entitled to obtain a decree for specific performance; but the court may, at the suit of other party, direct the party in default to perform specifically so much of his part of the contract as he can perform, if the other party- (i) in a case falling under clause (a), pays or has paid the agreed consideration for the whole of the contract reduced by the consideration for the part which must be left unperformed and a case falling under clause (b), 1[pays or had paid] the consid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Explanation in the section exhaust all the circumstances in which partperformance can be granted. Section 12(2) deals with the situation where a party is unable to perform and such part is only a small proportion in value and capable of compensation in form of money. It was not a case covered in Section 12(2) at all. Under Section 12(3) party in default is entitled to specific performance on payment of whole consideration or for the part left unperformed but here in the instant case the plaintiff being in default could not be said to be entitled to invoke Section 12(3) also." 77. From the above, it is clear that there was no inability on part of the parties to perform the rest of the contract or the remaining part was waived. In this case, the purchaser breached the essential condition of the contract, which altogether disentitles him to claim specific performance. There is no doubt that the claim of purchaser is hit by delay and laches on their part as they did not take appropriate measures within the stipulated time and filing of the suit was delayed by almost five years. In this context, in Rachakonda Narayana v. Ponthala Parvathamma [(2001) 8 SCC 173], this Court held ..... X X X X Extracts X X X X X X X X Extracts X X X X
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