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2008 (12) TMI 778 - SUPREME COURT

2008 (12) TMI 778 - SUPREME COURT - 2009 AIR 1749, 2008 (17) SCR 1454, 2009 (3) SCC 141, 2009 (2) JT 71, 2009 (1) SCALE 239 - Civil Appeal No. 4451 of 2008 - Dated:- 19-12-2008 - S.B. SINHA AND CYRIAC JOSEPH JJ. JUDGMENT S.B. SINHA, J. 1. Plaintiffs in a suit for grant of decree for specific performance of contract are before us aggrieved by and dissatisfied with the judgment and decree dated 13.11.2007 passed by a Division Bench of the Andhra Pradesh High Court reversing a judgment and decree d .....

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an agreement for sale with Mohammed Kasim Ali and G. Srinivas Reddy, whose heirs and legal representatives are the appellants, for sale of the said property for a sum of ₹ 18,00,000/-, out of which a sum of ₹ 1,00,000/- was paid as earnest money. Some of the important clauses contained in the said agreement for sale read as under: "1. The total consideration being ₹ 18 lakhs, the Vendees have paid a sum of ₹ 1,00,000/- (Rupees One lakh only) to the Vendor as the ear .....

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s and leaving roads shall also be borne by the Vendees. The Vendees are entitled at their own expenses to obtain the layout permission from Competent Authority. The Vendees are also hereby permitted to use the Telephone however they shall be liable to pay Telephone bills. xxx xxx xxx 5. The above stipulated time for sale to take effect may be extended by the Vendor. But unless the stipulated time is extended in writing by the Vendors, the Vendees shall be liable to pay Bank interest (the interes .....

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onsideration of each plot proportionately on the same day to the Vendors when the Vendors effect sale of that particular plot." 3. Indisputably, besides the above agreement of sale, the said two vendees had also entered into an Agreement of sale with one S. Yadagiri, his sons and some others for sale of land measuring 90 Acres in Survey No. 643 to 658, which is adjacent to the land of the respondents. 4. Pursuant to or in furtherance of the said agreements of sale, the said vendees had appl .....

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36 of SATMRAI Village and for SURVEY NUMBERS 645, 647, 653, 654, 655/1, 657, 658, 666/2 and PART SURVEY NUMBERS 644, 646, 651, 655 is 15 MONTHS after the release of TENTATIVE LAYOUT from HUDA. After the above period for the unpaid balance of sale consideration the Bank interest will be charged." 5. The period of agreement in terms of the said receipt was eight months from the date of release of the tentative layout by Hyderabad Urban Development Authority (for short, "HUDA") 6. I .....

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ii) No plot shall be utilized, sold, leased or otherwise disposed of for the residential purpose unless the layout is finally approved by Hyderabad Urban Development Authority. iii) As regards to amenities like water, drainage, electricity, etc; your own arrangement shall be made as the public system is not available in this area." It was furthermore directed: "You are therefore requested to form the roads as stated above within a period of three months from the date of receipt of the .....

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UDA by 31.7.1985 failing which the said agreement of sale would be deemed to have been terminated and the earnest money of ₹ 1,00,000/- paid by the said vendees would stand forfeited. It was contended therein that after the aforementioned draft layout plan was received, the vendees developed "inter se misunderstandings and untrustworthiness resulting in serious inimical attitude amongst themselves". It was furthermore contended: "9. My clients state that unless you continue .....

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t they are in no way concerned with your inter se mis-understandings and disputes. My clients are only interested in completing the sale transaction of the land covered by Contract of sale within the time fixed in the contract of sale." 8. The vendees responded to the said notice stating that the joint layout had resulted in much inconvenience to develop the portion of the land belonging to the owners as it was one of the conditions of the tentative layout that unless entire land was develo .....

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id agreement of purchase. Alleging breach of the terms of the said agreement on the part of the defendant nos. 1 to 3, he filed a suit bearing O.S. No. 19 of 1986 in the Court of V Addl Judge, City Civil Court at Hyderabad praying, inter alia, for the following reliefs: "(a) A decree for ₹ 90,000/- by way of refund may be passed in favour of the plaintiff and against the persons and the properties of defendants 1 to 3. (b) A decree may be granted awarding future bank interest on ͅ .....

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gh Court. The said Mohammed Kasim Ali died on 19.4.1987 and after his death his wife, the legal representative, entered into a compromise with the owners of the land out of the court. 11. Indisputably, G. Srinivas Reddy filed a suit bearing O.S. No. 171 of 1986 on the file of the Munsif Magistrate, West and South, Ranga Reddy, for grant of mandatory injunction. 12. The owners also filed a suit for damages being O.S. No. 679 of 1986. G. Srinivas Reddy filed a written statement therein, stating: & .....

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vendors herein for securing separate layout from HUDA with regard to the land covered by agreement of sale dated 23.4.1984. And also filed O.S. No. 191 of 1987 on the file of Addl. Subordinate Court, Ranga Reddy District for specific performance of the agreement. The plaintiffs herein also have made their appearance in the said suit. 10. Under these circumstances, it is submitted that this defendant is ready and willing to perform his obligations under the agreement of sale at all times, and fo .....

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strict at Saroornagar and was renumbered as O.S. No. 21 of 1993. 14. G. Srinivas Reddy, thereafter filed another suit for specific performance of the agreement of sale bearing O.S. No. 191 of 1987 in the Court of Additional Subordinate Judge Ranga Reddy district at Saroornagar through his constituted attorney. Issues were framed in both the suits separately. Issue No. 2 framed in O.S. No. 21 of 1993 reads as under: "Whether the Defendants 1 to 3 are liable under the suit agreement of sale t .....

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eir responsibility to obtain layout for the suit land from the Urban Development Authority. It was furthermore held: "No doubt it is for the plaintiff and D4 to pay the necessary expenses and also make efforts to obtain the sanction from HUDA being the vendees. The responsibility of D1 to D3 or their G.P.A. is to sign the necessary documents required for obtaining layout sanction and also to deposit the amounts paid by the Plaintiff and D4 required for the fee and charges as they did in the .....

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Therefore, the piece of land which is quite adjacent to the road will have more value than the land beyond the land adjacent to the road. Therefore, the Plaintiff can opt for the specific performance of the entire suit agreement and the suit filed by the 4th Defendant vide O.S. No. 19 of 1986 on the file of the 5th Additional Judge, City Civil Court will not have any adverse effect on the rights of the Plaintiff. At the most the plaintiff can be compelled to pay the balance of sale consideratio .....

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lay in filing the suit for enforcement of the agreement on the part of the plaintiff and he had all along been ready and willing to perform his part of the contract. The learned judge, furthermore, opined that a suit for specific performance of contract at the instance of the plaintiff alone was maintainable although Mohammed Kasim Ali was not to be a party to the deed of sale. The High Court, on the other hand, reversed the said findings of the learned trial judge holding that: (1) in terms of .....

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days before expiry of three years from the date of expiry of contract was a clear pointer to show that the plaintiff was not ready and willing to perform his part of contract. 17. Mr. R.F. Nariman, learned Senior Counsel appearing on behalf of the appellants raised the following contentions: i. A suit for specific performance can be instituted even at the instance of any of the joint promisees as a common layout work was not contemplated under the agreement and, thus, the High Court committed a .....

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e of refusal on the part of the owners - defendants 1 to 3, to abide by the terms of the contract. iii. Order II Rule 2 of the Code of Civil Procedure being not applicable in a case of this nature, the High Court committed a serious error in applying the principles thereof. 18. Mr. P.P. Rao, learned Senior Counsel appearing on behalf of the respondents, on the other hand, urged: i. The agreement in question being a development agreement should be construed having regard to the purport and object .....

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136 of the Constitution of India as the High Court has refused to pass a decree of specific performance of contract. 19. Indisputably, Appellants' predecessor-in-interest Shri G. Srinivas Reddy and late Mohammed Kasim Ali entered into an agreement jointly. The parties proceeded on the basis that not only plot in Survey No. 36 which was the subject matter of the agreement but also other plots, notice whereof had been taken heretobefore, were required to be developed together and permission f .....

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e said layout plan. In fact, the combined proposal was placed before the said authority which was granted as would appear from its letter dated 26.4.1985 addressed to Shri S. Yadagiri. The said sanction was granted subject to certain conditions, one of them being that a road was to be formed as per the specifications. 20. Indisputably, at least for a period of three months no decision was taken. There is also nothing on record to show that any decision was taken prior to or immediately after the .....

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5. The said notice was responded to by the Advocate appointed by G. Srinivas Reddy alone. No such demand was, thus, raised by Mohammed Kasim Ali. 23. In the matter of performance of the said agreement, the appellants did not raise the same contentions, as has been raised before us as regards the performance of contract on the part of the vendors. At that point of time they did not say that the vendors committed any breach of the condition of the agreement for sale. Even in the said reply dated 2 .....

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ter se began or when the disputes and differences between the developers of two plots started. It may be true that in terms of the agreement, draft layout was to be obtained in respect of Plot No. 36 but the very fact that the parties proceeded on the basis that all the lands would be developed together and steps having been taken in this behalf; it was too late for G. Srinivas Reddy to raise a fresh demand. 25. The learned trial judge applied the principle of novation of contract having regard .....

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ve rescinded the contract prior to the filing of the suit for damages against the defendants 1 to 3 but then when he filed the suit claiming refund of the amount of advance which he had paid by way of his share as also the damages, the contract stood rescinded so far as he was concerned. His claim might have been based on the purported breach of the terms of the contract on part of defendants No. 1 to 3, but they had arrived at a compromise. True it is that G. Srinivas Reddy filed a written stat .....

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endee. 26. Mr. Nariman may be right that a suit for enforcement of a contract on the part of the joint promisee is maintainable. Reliance has been placed by Mr. Nariman on a decision of Jagdeo Singh & ors. v. Bisambhar & ors. [AIR 1937 Nagpur 186], wherein the learned judge laid down the law thus: "That would certainly appear to cover a case where one or more co-contractors want to enforce the contract against the will of the others. The wording is not either side thereto' or ev .....

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to buy the property and want the Court to compel their co-contractors Anantram to buy it along with them just as he had promised to do, and ask the Court to compel the defendants to sell it to all four in exact accordance with the agreement. So long as the plaintiffs are willing to pay the vendors the full price bargained for and ask them to sell to the very persons with whom they had contracted I am unable to see how there is any variation. Any quarrel the purchasers may have among themselves .....

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ormance even though one of their co-contractors now refuses to join them. Of course, it is essential in such a case that all the parties to the contract should be before the Court. If any are omitted then I can understand difficulties arising. But when as here they have all been joined on one side or the other I am of opinion the suit can proceed." It may, however, immediately be noticed that the court therein proceeded on the basis that the original contract was required to be enforced jus .....

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n the time prescribed. This Court, having regard to the provisions contained in Section 45 of the Indian Contract Act, held as under: "The section thus deals with devolution of joint rights in the case of joint promises, but it does not deal with a case where, a joint promise, does not want to joint as a co-plaintiff and is arrayed as a proforma-defendant with the specific plea that no relief is claimed against him. The judgment and the decree in this case have in fact enured to his benefit .....

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im as a proforma- defendant." 29. The dicta laid down in Jahar Roy (Dead through L.Rs.) & Anr. v. Premji Bhimji Mansata & Anr. (supra) was followed by the Madras High Court in Ponnuswami Gounder v. Boyan & ors. [AIR 1979 MADRAS 130]. The Madras High Court held that the decision of the Calcutta High Court in Safiur Rahman v. Maharumunnissa Bibi [(1897) ILR 24 Calcutta 832] was not good law opining that as both the vendees had different rights, one can purchase the right of the ot .....

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agreement to convey or reconvey, as the case may be and on such deposit of the entire money, he would be entitled to get a conveyance of the entirety of the property though it should normally be in favour of the plaintiff and the defendants in whose favour the agreement was executed. After the conveyance is executed as such, the rights of the plaintiff and the other defendants in whose favour the agreement was executed will have to be worked out. The specific performance as such therefore could .....

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onveyance is executed in favour of the plaintiffs and defendants 2 and 3, defendants 2 and 3 would be entitled to half of the properties conveyed. The rights as between the plaintiffs and the defendants would have to be worked out with reference to the agreements between them and it is not open to the first defendant to plead that the second and third defendant's right should be separated from that of the plaintiffs." (Emphasis supplied) 30. We would proceed on the basis that the ratio .....

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recorded. A part of the contract stood rescinded; it has been worked out. We, however, must place on record that the terms of the compromise are not placed before us. Presumably, that proportionate amount of advance taken must have been refunded; some damages also must have been paid. G. Srinivas Reddy not being a party thereto may not be bound thereby but at least being a party to the suit he, keeping in view the interest he had in the matter, should have opposed recording of the said compromis .....

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e matter of enforcement of an agreement to sell, exercise a discretionary jurisdiction. Discretionary jurisdiction albeit must be exercised judiciously and not arbitrarily or capriciously. A plaintiff is expected to approach the court with clean hands. His conduct plays an important role in the matter of exercise of discretionary jurisdiction by a court of law. In Mohammadia Cooperative Building Society Limited v. Lakshmi Srinivasa Cooperative Building Society Limited & ors. [(2008) 7 SCC 31 .....

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SCC 242] in regard to exercise of the discretionary jurisdiction, this Court held that the same depends upon the facts and circumstances of each case wherefor no hard and fast rule can be laid down. 32. We may notice that B.P. Jeevan Reddy, J. in K.S. Vidyanadam & ors. v. Vairavan [(1997) 3 SCC 1] held that a new look is required to be given and the rigour of the rule is required to be relaxed by courts as regards the principle that time is not of the essence of the contract in case of immo .....

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said time-limit may not amount to making time the essence of the contract but it must yet have some meaning. Not for nothing could such time-limit would have been prescribed. Can it be stated as a rule of law or rule of prudence that where time is not made the essence of the contract, all stipulations of time provided in the contract have no significance or meaning or that they are as good as nonexistent? All this only means that while exercising its discretion, the court should also bear in min .....

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law and the English law on the subject to hold that some delay may not be a bar in granting a relief of specific performance as the limitation for filing such suit is prescribed under the Limitation Act, 1963, stating: "13. In the case before us, it is not mere delay. It is a case of total inaction on the part of the plaintiff for 2 1/2 years in clear violation of the terms of agreement which required him to pay the balance, purchase the stamp papers and then ask for execution of sale deed .....

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