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TMI Blog2024 (11) TMI 710X X X X Extracts X X X X X X X X Extracts X X X X ..... ............................................................................................ 32 H. Relief ......................................................................................................... 36 1. The petitioner has instituted proceedings under Article 137 of the Constitution read with Order XLVII Rule 1 of the Supreme Court Rules 2013 seeking a review of the judgment of a three-Judge Bench of this Court dated 25 August 2022. By the judgment, this Court allowed the appeal against the judgment of the High Court of Telangana dated 23 April 2021 by which the 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. The issue for the consideration of this Court is whether the judgment of this Court dated 25 August 2022 suffers from an error apparent on the face of the record which warrants the exercise of the review jurisdiction. A. Background 2. On 19 March 1994, Shri Debbad Narayana, Shri Vishweswara Rao (represented by the tenth to twelfth respondents who are his legal representatives), the third respondent, fourth respondent and f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its nominee or nominees, after receiving the balance sale consideration. [...] 20. The parties of the first part and the second part herein undertake to execute the documents either registered or un-registered as desired by the purchaser after receiving the balance sale consideration to the extent to the schedule property. [...] 21. The parties of the first part are not at all concerned to the sale consideration agreed by the parties of the second part herein with the purchaser as already they received the agreed sale consideration from the parties of the second part herein as per the agreement dated 19th March 1994. [...] 23. The parties of the second part herein undertake on any pretext they will not make any claim for enhancing the agreed sale consideration." (emphasis supplied) 4. The first agreement to sell refers to the "original owners" as the "parties of the first part". The agreement refers to the "vendors" as the "parties to the second part". The petitioner is referred to as the "purchaser". It must also be noted that the recital to the first sale agreement states that the "parties of the first part and parties 1,3,5 and 6 of the parties of the secon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respondents to furnish the petitioner with necessary permissions and certificates, which they failed to do. 8. The petitioner prayed for a decree for specific performance upon the receipt of the balance sale consideration of Rs 5,39,150. The petitioner sought alternative reliefs of (a) delivery of possession of the suit land; or (b) a direction to refund the consideration of Rs. 34,80,850 paid with interest of 36% per annum. B. Judgments of the Trial Court, High Court and this Court 9. By a judgment dated 12 December 2010, the Additional District Judge dismissed the suit instituted by the petitioner. The Trial Court held that the petitioner is not entitled to a decree or specific performance for the following reasons: a. The respondents did not dispute the execution of the two agreements to sell. There is also no dispute over the identity of the property. The petitioner is only required to prove that he was always willing to perform his part of the agreement; b. It can be inferred from the evidence on record that the petitioner does not have possession of the suit property and that a false plea that possession has been delivered has been made because: i. The alternative p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n three months. The respondents had not obtained the permissions and certifications required under Clause 3 and they did not inform the petitioner about any steps taken to obtain them. The cross-examination of DW-1 (first respondent) indicates this. Thus, time is not of essence in the agreement; e. The petitioner claims that he issued the first legal notice on 8 February 2000. However, the postal cover and postal certificate indicate that it was registered on 31 March 2000. Thus, the petitioner ante-dated the legal notice to overcome limitation ; f. The petitioner is not entitled to the discretionary relief of specific performance if a false plea is made. In this case, the petitioner made three false pleas; g. The petitioner has been unable to prove that he was willing to perform his part of the contract within three years from the sale agreements and specifically, within three months according to the agreement. If the petitioner was able to perform his part, a notice would have been issued earlier or the balance would have been deposited in the bank; h. The first part of Article 54 of the Schedule to the Limitation Act 1963 applies to the facts of the case. The petitioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y Act 1882. (Relied on Babulal v. Hajarilal Kishorilal 1982 (1) SCC 525); c. The respondents received a substantial amount of the sale consideration of Rs. 38,80,850 out of the total sale consideration of Rs. 40,20,000. The respondents failed to provide the certificates. The first respondent admitted that she received the amount in her cross-examination though she had denied the same earlier in her written statement and chief examination. The sale deed could not be executed because of the fault of the respondents. It cannot be concluded that the petitioner did not approach the respondents for the payment of the balance consideration merely because he could not depose the particulars of when he approached them. Further, though the first and the second respondents pleaded that they had obtained the necessary documentation as required by Clause 3 of the sale agreement in both the written statement and evidence, this version was denied during the crossexamination of DW-1 and DW-2 (husband of DW-1). The Trial Court concluded that the respondents were not ready with the certifications. This finding was not assailed by the counsel for the respondents; d. The petitioner would not benef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court referred to the judgment in Chand Rani v. Kamal Rani (1993) 1 SCC 519, in which it was held that there is no presumption that time is of essence in a contract for a sale of immovable property and the Court may infer if it was of essence based on (a) the express terms of the contract; (b) the nature of the property; and (c) surrounding circumstances such as the object of the contract. Relying on the judgment, this Court held that in the facts of the present case, time is of essence for the following reasons: a. Both the vendors' and the purchaser's obligations in Clause 3 of the sale agreements were required to be completed within the stipulated time period of three months. The consequences of (in)actions are different. There are no consequences if the vendors do not produce the certificates and permissions. However, the clause spells out a consequence of forfeiture of the advance amount if the purchaser does not pay the balance consideration; and b. According to Clause 21 of the sale agreements, the parties had entered into an earlier agreement to sell dated 19 March 1994. This agreement did not materialize and the agreed price was no longer applicable. Fresh agreements ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eceived with an interest of 7.5 percent from the date on which the payment was made till the time the entire amount is paid back. The payment was directed to be made within six months. 15. The petitioner filed a review petition against the judgment of this Court. C. Submissions 16. Mr Neeraj Kishan Kaul, senior counsel submitted that the judgment of this Court suffers from the following apparent errors that warrants the exercise of the review jurisdiction: a. Clause 21 of the agreements to sell refers to the sale agreement executed by the original owners in favour of the vendors in 1994. Though petitioner was not a party to that agreement, this court has proceeded on the incorrect premise that the 1994 agreement was between the parties; b. The Trial Court, after analysing the evidence on record, concluded that the vendors did not produce certificates and permissions as required by Clause 3 of the sale agreements. This finding was not challenged before the High Court. This Court wrongly records that the vendors produced the certificates without referring to the direct evidence on record to the contrary; and c. Clause 3 does not state that the agreement will be cancelled if ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, whether the suit instituted by the petitioner was barred by limitation; and second, whether the suit for specific performance must be decreed. The finding that time was of essence to the contract was central to the Court's reasoning on both the issues. E. Limitation 21. The Schedule to the Limitation Act 1963 prescribes the period of limitation. Article 54 of the Schedule prescribes the period of limitation for a suit for specific performance of a contract : 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. 22. The provision has two parts. The first part deals with situations where the contract fixes a date for performance. The period of limitation of three years runs from the date fixed for completion of performance. The second part deals with situations where the contract does not fix a date for the performance of the contract. In such situations, the period of limitation runs from the date when the plaintiff has notice that the defendant has refused ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disregards the phrase "and this agreement of sale will be cancelled" in Clause 3. In paragraph 32 of the judgement, this Court further notes that non-payment of the balance consideration would lead to a severe consequence of "forfeiture": "33. Coming to the aforesaid indicators, the language of the agreements makes it clear that severe consequences of forfeiture would ensue if the payment is not made within three months of the date of the agreements." 25. Clause 3 has two parts. The first part casts an obligation on the purchaser/petitioner and prescribes consequences for it, that is, the forfeiture of the advance paid. The word "and" disjuncts this part from the second part which casts an obligation on the vendors. The second part prescribes the consequence if the vendors do not furnish the documents. 26. This Court further noted that the "language of the agreements" ensures severe consequences of forfeiture if the balance consideration is not paid within three months. This Court further referred to Clauses 21 and 23 to substantiate this interpretation: "32. [...] It may be noted that as per Clause 21, the parties had entered into an earlier agreement to sell dated 10.03.19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relevant clauses of the recital to the agreement dated 26 March 1997 are extracted below: "4. Whereas parties of the Second part herein have entered into an agreement of sale with the parties of the first part herein dated 19 March 1994. 5. Whereas the parties of the second part herein have purchased from the parties of the first part to an extent of Articles 127-129 guntas only in lad bearing Sy.No. 301 part 302, 303, 304, 305, 306, 307, 308 and 309 for a valuable consideration and on the date of the agreement possession was delivered to an extent of Articles 65-23 guntas and it was specifically agreed that an irrevocable general power of attorney will be executed through a registered document in the names nominated by the parties of the second part herein, as such parties of the first part herein have executed and irrevocable power of attorney on 28 March 1994 which was registered on 30th day of April 1994. 6. Whereas parties of the second part herein have paid the full sale consideration to the parties of the first part and the parties of the first part herein have also delivered the possession of the remaining extent of Ac. 50-00 gts and to that effect admitting and ack ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of Clauses 3 and 21 of the Sale Agreements was erroneous, there is nothing in Clause 23 alone that could be interpreted to prescribe a time for the performance of the contract. Further, the judgment also does not take note of Clause 6 of the agreements to sell which provides that a sale deed will be executed after receiving the balance sale consideration. This clause does not prescribe any time period within which the sale deed must be executed. Another question is whether Clause 3 can be independently interpreted to prescribe a date for the performance of contract. The consequence of the non-payment of the balance consideration in terms of Clause 3 is the forfeiture of the advance amount paid by the purchaser and not all the consideration paid by the end of three months. The consequence is not that the sale deed shall not be executed. 30. For the above reasons, Clauses 3, 21 and 23 cannot be interpreted to mean that a time is fixed for the execution of the sale agreements. Thus, the limitation is governed by the second part of Article 54. The limitation of three years prescribed by the second part of Article 54 runs from the date when the plaintiff has notice that performance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... presume (i) that the breach of a contract to transfer immovable property cannot be adequately relieved by compensation in money; and (ii) that the breach of a contract to transfer movable property can be so relieved except in the following cases: (a) where the property is not an ordinary article of commerce, or is of special value of interest to the plaintiff, or consists of goods which are not easily obtainable in the market; (b) where the property is held by the defendant as the agent or trustee of the plaintiff." 33. This Court referred to the judgment in Saradamani Kandappan v. Rajalakshmi (2011) 12 SCC 18, which laid down the factors that the Courts must consider while deciding whether to exercise the discretion of decreeing specific performance of a contract: "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/pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in the case at hand to enforce his right and could not have been lackadaisical in his approach. From the facts, it is clear that the purchaser had entered into an agreement way back on 26/27/.03.1997, which had a clause mandating completion of the contract by payment of the remaining consideration within three months. The aforesaid clause was drafted, as alluded to earlier, for providing one last opportunity for the purchaser to make good their lapse which had happened on the earlier occasion. In this context, the time for performance of the contract including the payment lasted till the month of June 1997." ( emphasis supplied ) 36. It is clear from the above extract that this Court held that the petitioner was not ready and willing to perform the contract in which time was of essence. The conclusion that time was of essence was derived based on an interpretation of Clause 3 read with Clause 21. The reasoning based on which this Court held that the petitioner was not ready and willing to perform the contract falls in view of the conclusion that the interpretation of Clause 21 and Clause 3 by this Court is erroneous because of the factual misconception and omission, respecti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pleaded that they are ready with the certificates. However, that finding is not attacked in this appeal, which goes to show that the defendants are at fault in not obtaining certificates for fulfilling their part of the contract, though, the plaintiff paid 90% of the sale consideration requesting the defendants 6 & 8 to receive balance sale consideration." ( emphasis supplied ) 40. The judgment of this Court in paragraph 67 only refers to the deposition of DW-1 without referring to her cross-examination or the fact that the respondents did not challenge the finding of the Trial Court on this aspect. This is another error apparent on the face of the record. 41. Having held that the basis of the reasoning of this Court on whether the petitioner was willing to perform the contract has an error apparent on the face of the record, we are required to decide the issue of whether the petitioner was ready and willing to perform the contract. We are of the considered opinion 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 mone ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cure defects. On 11 November 2022, the petitioner cured the defects. On 13 December 2022, the review petition was registered. On 27 January 2023, the counsel for the petitioner sought six weeks to bring some documents on record. On 1 March 2023, the matter was listed before a three-Judge Bench of Justice Krishna Murari, Justice Hima Kohli and one of us (Justice DY Chandrachud). The matter was not taken up. By an order dated 31 August 2023, Justice D Y Chandrachud allowed the application for listing the review petition in open court and issued notice, returnable in six weeks. Justice Hima Kohli did not agree and was of the view that the review petition be dismissed. Justice Narasimha who was the third member of the Bench recused from the matter for personal reasons. Subsequently, Justice Manoj Misra was nominated as the third member of the Bench. By an order dated 26 September 2024, notice was issued in the review petition. 45. Section 52 of the Transfer of Property Act 1882 states that during the pendency in any court of any suit in which any right to immovable property is directly and specifically in question, the property cannot be transferred or otherwise dealt with by any par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her party to the dispute. See Amit Kumar Shaw v. Farida Khatoon, (2005) 11 SCC 403 47. In short, 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 principle on which this doctrine rests was explained by Lord Turner in Bellamy v. Sabine (1857) 1 De G&J 566 as follows : "It is, as I think, a doctrine common to the courts both of Law and Equity and rests, as I apprehend, upon this foundation that it would plainly be impossible that any action or suit could be brought to a successful termination, if alienations pendente lite were permitted to prevail. The plaintiff would be liable in every case to be defeated by the defendants alienating before the judgment or decree, and would be driven to commence his proceedings de novo, subject again t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the litigation. See GT Girish v. Y Subba Raju, 2022 8 SCR 991. H. Relief 50. The High Court relied on Section 12 of the Specific Relief Act to decree specific performance only to the extent of the consideration paid by the petitioner. The directions of the High Court are extracted below: "89. [...], this court is of the considered opinion that by exercising power under Section 12, in order to meet the ends of justice, suit can be decreed for specific performance only to the extent of 90% of the amount paid by the plaintiff to the defendants 6 & 8 towards sale consideration. 90. In the result, Appeal Suit is allowed in part directing the defendants 6 & 8 to register the suit schedule property in favour of the plaintiff proportionate to the extent of amount paid by the plaintiff i.e., 90% of the total sale consideration[...]. 91. It is needless to state that the Suit Schedule Land is required to be divided by metes and bounds in the execution proceedings by the Execution Court, as indicating above i.e., 90% and 10% with the assistance of an advocate commissioner and the 90% of the part of the Suit Schedule Land, so determined, shall be registered in favour of the Appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X
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