Chand Rani Vs Kamal Rani

 

Equivalent Citation- 1993 AIR 1742; 1992 (3) Suppl.SCR 798; 1993 (1) SCC 519; 1993(1) JT 74; 1992(3) SCALE 544

Case type- Special leave appeal

Case no.- Civil appeal no. 3377 of 1979

Decided on- 18.12.1992

Petitioner- Chand Rani

Respondent- Kamal Rani

Justice- Hon’ble Chief Justice of India L.M. Sharma, Hon’ble Justice S.R. Pandian, Hon’ble Justice S. Mohan, Hon’ble Justice B.P. Jeevan Reddy & Hon’ble Justice S.P. Bharucha

Statues Referred- Indian Contract Act, 1855- Section 55.

Cases Referred- Jamshed Khodaram Irani v. Burjorji Dhunjibhai; Roberts v. Berry; Gomathinayagam Pillai And Ors vs Pallaniswami Nadar; Nathulal vs Phoolchand; Hind Construction Contractors vs The State Of Maharashtra; Govind Prasad Chaturvedi vs Hari Dutt Shastri And Another; Indira Kaur And Ors. vs Sheo Lal Kapoor.

Facts

• This special leave appeal is filed against the High Court of Delhi at New Delhi’s judgment in R.F.A. (O.S.) No. 15 of 1975, dated October 26, 1979, reversing the learned Single Judge’s decree for specific performance in O.S. No. 463 of 1971.
• An agreement for sale was signed by Kamal Rani and Chand Rani on August 26, 1971. This deal was reached through Chand Rani’s husband, Niranjan Nath. Kamal Rani agreed to sell her house and property to Chand Rani for Rs. 1, 78, 000, which included a free-hold plot bearing No. 30, Block ‘K’, Green Park, New Delhi (Village Kharera) measuring 311 sq. yards with a double-storeyed residential building constructed thereon, as well as fittings and fixtures. An amount of Rs. 30,000 was paid as earnest money on the day of execution.
• A further sum of Rs. 98,000 was due within 10 days of the agreement’s completion, according to the agreement. The remainder of Rs. 50,000 was due at the time of sale deed registration. The parties agreed that the vendor, Kamal Rani, would redeem the property by repaying a debt of Rs. 25,000 from the Rs. 30,000 paid at the time of execution. The Life Insurance Corporation of India had a mortgage on the property. The vendor was also required to secure a certificate of tax clearance. On or before October 31, 1971, the sale deed was to be signed.
• The first floor of the property had been rented out at the time of this agreement. The vendor was required to hand over documentation relevant to the property in the suit, as well as vacant possession of the first floor, by September 30, 1971, and possession of the front half at the time of registration of the sale deed, according to the agreement. It was also agreed that if the vendee fails to pay the sale consideration and get the sale deed recorded within the stated time frame, the value of Rs. 30,000 will be forfeited to the vendor.
• Chand Rani and her husband filed O.S. No. 463 of 1971 for specific performance based on this agreement. The defendant (Kamal Rani) was allegedly summoned to finalize the sale through multiple letters and notices, but received no answer. She didn’t follow through on her end of the bargain. The agreement was nullified and the sum of Rs. 30,000 was forfeited since the plaintiff failed to pay the sum of Rs. 98,000 within 10 days of the agreement’s date, namely, September 6, 1971. On September 15, 1971, the defendant sent a letter to this effect.
• In response to the defendant’s letter, the plaintiff wrote to her, requesting that she complete the sale deed and promising to pay the balance of the price at the time of execution. As a result of the defendant’s failure to comply with this demand, a lawsuit was brought seeking particular performance of the agreement or, in the alternative, damages in the amount of Rs. 1, 50,000, including a refund of Rs.30, 000.
• The execution of the suit agreement was admitted by the defense. Similarly, the contract’s essential was the receipt of the sum of Rs. 30,000 within 10 days of the agreement’s execution date. Because the agreed-upon amount was not paid, the defendant was entitled to declare the contract null and void. The defendant was, without a doubt, required to redeem the suit property and provide the document by September 30, 1971.
• However, this could only be done if a payment of Rs. 98,000 was made within 10 days of the agreement’s execution. Possession of the first floor had to be given at the moment of the selling deed’s registration. In fact, by September 20, 1971, the occupants had vacated the first level. The front half of the house was already in her possession, and she could simply deliver it at the appropriate time. An amount of Rs. 98,000 was never offered by the plaintiff. The first plaintiff’s husband demanded possession of the ground floor in exchange for a payment of Rs. 98,000. This demand was in violation of the contract’s provisions. As a result, the defendant refused to comply with the requirement. The claim is ill-conceived in these circumstances and is likely to be dismissed. The amount of Rs. 30,000 was properly forfeited against her.
• The trial court was asked to evaluate two significant issues:

1. Was time the core of the contract?
2. Were the plaintiffs ready and prepared to fulfill their contractual obligations?

• On trial, the learned Single Judge held that payment of Rs. 98,000 by September 6, 1971 was not the substance of the contract based on a reading of the suit agreement. He went on to say that the plaintiff was always ready and eager to carry out their share of the deal, and that it was the defendant who was trying to get out of it. As a result, he decided to dismiss the case.
• The matter was taken up in appeal under R.F.A. (O.S.) No. 15 of 1975 by those who were aggrieved by the same. The plaintiffs’ failure to pay Rs. 98,000 on or before September 6, 1971 would empower the defendant to treat it as a breach of contract, according to the Division Bench of the High Court after an extensive review of the oral and documentary evidence. The plaintiffs’ insistence on obtaining an income tax clearance certificate and property redemption before paying Rs. 98,000 was unreasonable. Such demand could only be interpreted as an attempt to circumvent the agreement’s provisions.
• The transaction ultimately failed due to the non-payment of Rs. 98,000 by September 6, 1971. If it was treated as a breach on this basis, it was understandable and could not be considered unjustified. As a result, the decree requiring specific performance was canceled. The plaintiffs were found to be entitled to a reimbursement of Rs. 30,000. A decree was issued in their favor to this end. Special leave to appeal was preferred when challenging the same.
• Both the appellant, Chand Rani (plaintiff), and the respondent, Kamal Rani (defendant), died while their civil cases were pending. Their legal counsel has been called to the stand. Throughout the ruling, the parties will be referred to as plaintiff and defendant.

Fact in issue

• Is time of the essence of the contract?
• Was the first plaintiff willing and able to carry out the contract?

Respondent’s contention

That, as a general tenet of law, time is not the essential of the contract in the sale of immovable property.

Ratio decendi

• The High Court’s Division Bench erred in construing clause (1) of the suit agreement. When it comes to a contract for the sale of real estate, time is seldom considered the most important factor. It would only be an essential part of the contract if it was expressly stated or if it was evident by implication. That is not the case in this instance. Only the amount and not the period for payment would be qualified by the word “only” appearing in clause (1) of the suit agreement.
• In terms of readiness and willingness, it is obvious from the numerous papers that the plaintiff was ready and prepared to perform his share of the contract at all relevant periods. The defendant was served with repeated notices, accompanied by telegrams, requesting that the sale be completed. Even more recently, notification was sent through an advocate that the plaintiff had never refused to pay and was willing to pay. By September 24, 1977, this position had been resolved by advocate’s notice once more. The requirement for delivery of possession was imposed because it was stipulated in the agreement that such possession be handed over by September 30, 1971.
• However, based on the contract’s conditions, it is evident that there was an obligation to pay an amount of Rs. 98, 000 within 10 days of the contract’s execution. The contract would be void if this was not done. The above-mentioned authorities will be irrelevant in this context.
• There was no dispute that the defendant had duties to pay off the mortgage and acquire the income tax clearance certificate. Only after the payment of Rs. 98,000 would such duties arise. In the absence of such payment, the plaintiff had no legal standing to demand that these obligations be met. In other words, the parties intended to make time the substance of the contract in this situation. Despite the fact that the learned Single Judge did not concur with this reasoning, the Division Bench correctly assessed the situation and reached the correct judgment.
• It is obvious from the materials in this instance that the plaintiff was never ready and willing. On September 10, 1971, the defendant was undoubtedly served with notice that the first plaintiff had ready money for the acquisition of real estate. A telegram was sent in response. However, the plaintiff was served with a summons demanding payment of Rs. 98,000, which was due on or before August 26, 1971. This position was reaffirmed in a September 16, 1973 reply notice. Surprisingly, the plaintiff would insist on the first level being unoccupied by September 30, 1971.
• The plaintiff was only willing to part with Rs. 98,000 in exchange for such handover of possession and payment of taxes. As a result, it is obvious from the plaintiff’s notification dated September 24, 1971 that, aside from the bare claim of readiness and willingness, it was not followed by conduct. The plaintiffs’ goal appears to be to take custody of the property. The Division Bench correctly held that where a counter provision was stipulated that was not supported by the suit contract, the suit contract would be void. As a result, it is argued that there is no basis for interfering.
• Time is never considered the substance of the contract in the sale of immovable property, according to a well-accepted principle. In reality, there is a presumption that time is not the most important aspect of the contract. This principle is identical to that which is available in England. The law of equity, which controls the parties’ rights in the case of specific execution of a contract to sell real estate, looks at the substance of the agreement rather than the wording.
• It must be determined if, under the terms of the contract, the parties named a specific time frame for completion, or whether it was truly and in essence intended that it be done within a reasonable time frame. The goal to make time the most important aspect of the contract must be stated clearly.
• It is obvious that there is no assumption that time is the substance of the contract in the sale of immovable property. If the conditions are

1. From the express terms of the contract;
2. From the nature of the property; and
3. From the surrounding circumstances.

For example, the object of making the contract, the court may infer that it is to be performed in a reasonable time even if it is not of the essence of the contract.

• The court examined the terms of the suit contract dated August 26, 1971, in light of the preceding legal context. “Now, therefore, this agreement to sell witness and the parties hereto has agreed as follows,” the document states.

1. That the first party has received an amount of Rs. 30,000 (Rupees Thirty Thousand Only) as earnest money from the second party in accordance with the stated agreement, which receipt the first party hereby recognizes separately. The second party will pay the first party Rs. 98,000 (Rupees Ninety-eight Thousand only) within two days and the balance of Rs. 50,000 (Rupees Fifty Thousand alone) when the sale deed is registered with the Sub-Registrar, New Delhi.
2. The first party has completed the house with all fixtures and fittings, and the parties have agreed that the first party will take the required procedures to redeem the property from the stated mortgage as soon as possible, and will notify the second party in writing when the redemption is complete.
3. That the first party shall apply to the income tax authorities for permission to sell immediately, and that after receiving permission to sell and receiving an income tax clearance certificate in respect of the said property, the first party shall execute a sale deed in favor of the second party or her nominees on or before October 31, 1971.
4. That if the first party fails to complete and register the sale deed within the time frame set forth in paragraph 3 above, the second party has the right to have this agreement enforced by specific performance in a court of law.
5. If the second party fails to pay the balance of the sale consideration and have the sale deed executed and registered within the time frame specified in paragraph 3 above, the earnest money of Rs. 30,000 (Rupees Thirty Thousand only) will be forfeited to the first party, and this agreement will be deemed null and void.
6. That the first party shall pay all taxes, rates municipal taxes, and earlier deeds and other documents relevant to the said land up to the date of registration of the sale deed. The first party shall hand over the vacant possession of the first floor and the front portion of the property to the second party at the time of registration of the sale deed, along with the sanctioned place and completion certificate from the Municipal Corporation of Delhi in respect of the superstructure built on the said plot.

• Then there’s the issue of the Rs. 98,000 payment. What does it mean when the phrases “during a period of 10 days only” are used? Is it applicable to the sum or the 10-day time limit that began on August 26, 1971? The trial court held that the phrase “only” was meant to emphasize and qualify the amount of Rs. 98,000 and could not be interpreted to suggest that payment within 10 days was the contract’s core. On this point, the appeal court disagrees, holding that the sum of Rs. 98,000 should have been paid on or before September 6, 1971. Failure to do so would be considered a breach on the defendant’s part.
• The court believed that the Division Bench arrived to the correct judgment. The word “only” has been used twice in the judgment under appeal,

1. To qualify the amount of Rs. 98,000 and
2. To qualify the time of 10 days, as correctly pointed out in the judgment under appeal.

• As a result, having qualified the amount, there was no need to qualify it again unless the parties intended to make time the essential of the contract.
• The plaintiff was not willing to pay this sum unless vacant delivery of one room on the bottom level was delivered, according to the evidence. In cross-examination, it was claimed that the sum of Rs. 98,000 was not paid because an income tax clearance certificate had not been received. Payment would not be made unless the property was redeemed. If this was the plaintiff’s mindset, it is evident that conveyance of possession was a condition previous to paying this payment. The income tax certificate was only required to complete the deal.
• The court doesn’t understand how these duties on the defendant’s side could be demanded in exchange for a payment of Rs. 98,000.
• The next consideration is whether the plaintiff was prepared and willing to take the case. In order to determine preparedness and willingness, it is necessary to examine the notices that were exchanged between the parties. The plaintiff said in a registered notice dated September 10, 1971 that ready money was available for the purchase of the property, which was followed up by a telegram. The defendant claims that the sum of Rs. 98,000 was not paid within 10 days on August 26, 1971, and hence the value of Rs. 30,000 was forfeited. Following the acquisition of stamp paper, the mortgage would be repaid, and income tax clearance would be acquired.
• When the plaintiff was informed of the defendant’s position about payment of Rs. 98,000, which was restated in the notice dated September 16, 1973, nothing could have been easier for the plaintiff than to pay the sum in question. Instead of taking such course, the plaintiff’s notice dated September 24, 1971 states the following:

“That, according to the agreement, your client is responsible for all taxes, rates, and municipal taxes up to the date of registration, and that the previous and other documents pertaining to the said plot No. 30, Block ‘K’ sanctioned plan and completion certificates from Municipal Corporation of Delhi in respect of the superstructure built on the said plot shall be handed over along with vacant possession of the first floor. You are aware that September 30, 1971 is rapidly approaching, and your client has yet to comply with these requirements, in addition to those set forth in paragraphs 2 and 3 of the agreement. I therefore request that you advise your client to comply with the requirements well before September 30, 1971, or at the very least by September 30, 1971, in order to obtain the additional part consideration of Rs. 98,000 from my client”

• As a result, even as late as September 24, 1971, the plaintiff refused to pay the sum of Rs. 98, 000.

Judgment

• As a result, the court held that, while time is not the essence of the contract in the context of a sale of immovable property as a general rule of law, the parties intended to make time the essence under clause (1) of the suit agreement.
• The court has previously seen the oral evidence in this regard. It demonstrates a lack of readiness and willingness. The Division Bench’s decision is one with which the court concur.
• In light of the above, the civil appeal is dismissed with costs.

BY PRITI PODDAR