Man Kaur (Dead) by LRS.
Vs. Hartar Singh Sangha [2010] INSC 820 (5 October 2010)
Judgment
IN THE SUPREME COURT
OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NOS. 147-148 OF 2001 MAN
KAUR (DEAD) BY LRS. ....APPELLANTS VS.
R. V. RAVEENDRAN J.,
1.
The
appellant (Man Kaur, who died during the pendency of this appeal and is
represented by her Legal Representatives) was the defendant in a suit for
specific performance of an agreement of sale, filed by the respondent. For
convenience the appellant and respondent will also be referred by their ranks
in the suit as `defendant' and `plaintiff' respectively.
2.
The
appellant Man Kaur was the owner of the suit property, a plot admeasuring 1000
sq.yards with the building thereon, identified as `Annexe No 508' situated in
Sector-18B, Chandigarh. The respondent-plaintiff was, at all the relevant
points of time, a Non-Resident Indian living in United Kingdom. An agreement of
sale dated 20.10.1978 was entered between defendant represented by her husband
and attorney holder Kartar Singh, as vendor, and plaintiff represented by his
attorney holder Paramjit Singh, as purchaser. The material terms of the said
agreement were :
i.
The
defendant shall sell the suit property to plaintiff for a consideration of
Rs.1,50,000/-.
ii.
As
the premises was tenanted the defendant was liable to deliver vacant possession
of only a small portion which was in her occupation. If the vendor was able to
get the tenant vacated and deliver vacant possession of the entire premises,
then the sale price shall be Rs.1,60,000/-.
iii.
A
sum of Rs.10,000/- was paid in cash as earnest money by the attorney holder of
the purchaser to the attorney holder of the vendor.
iv.
The
sale had to be completed by 20.12.1978 and the balance sale price shall be paid
at the time of registration of the sale deed.
v.
The
vendor had to deliver at the time of registration of the sale deed, her title
deed, as also the NOC from the Estate Office, Chandigarh, permission for the
sale under Urban Land (Ceiling and Regulation) Act 1976, and Clearance
Certificate under section 230A of the Income Tax Act, 1961 and other relevant
documents if any.
vi.
If
the vendor committed default, he had to pay double the amount of earnest money
to the purchaser and if the purchaser committed any default, the sum of
Rs.10,000/- paid as earnest money would stand forfeited; and 3 (vii) The
bargain was entered through the property dealer -- M/s R. P. Sethi & Co. to
whom both the parties should pay 2% commission on the total price; and in the
event of default, the defaulting party shall pay 4% commission.
The agreement of sale
was signed by the attorney holder of the vendor and attorney holder of the
purchaser and witnessed by Hari Singh (Property Dealer) and Balraj Singh
(property dealer carrying on business under the name and style of M/s R. P.
Sethi & Co.). The agreement also contained an endorsement by Kartar Singh
acknowledging the receipt of Rs.10000/- as earnest money in addition to another
sum of Rs.1500/-.
3.
On
25.4.1980 the respondent (represented by his attorney holder Jagtar Singh
Sangha under power of attorney dated 1.3.1980), filed a suit for specific
performance of the said agreement of sale, against the appellant.
The plaint after
referring to the terms of the agreement of sale, averred that the bargain was
struck through property dealer Balraj Singh of M/s. R.P. Sethi & Co; that
the time for performance was extended from time to time till 7.6.1979; that the
defendant's attorney holder and plaintiff reached Chandigarh on 7.6.1979; that
though defendant's attorney holder stated that he had come to Chandigarh to
execute the sale deed, he did not go over to the Sub-Registrar's office nor
executed the sale deed; that plaintiff remained 4 present in the
Sub-Registrar's office at Chandigarh, and recorded his presence on 7.6.1979 by
presenting an application and getting an acknowledgement from the
Sub-Registrar; that after 7.6.1979, neither the defendant nor her attorney
holder Kartar Singh came to Chandigarh; that they did not also contact the
plaintiff or the property dealer Balraj Singh; and that the repeated attempts
of the property dealer Balraj Singh to contact defendant were futile. The
plaint also averred that the plaintiff was always ready and willing to perform
his part of the contract and get the sale deed registered by paying the balance
consideration; and that in spite of a notice dated 5.3.1980 calling upon the
defendant to complete the sale, the defendant had failed to execute the sale deed.
The plaintiff therefore prayed for specific performance of the agreement of
sale dated 20.10.1978 or in the alternative, if he was found not entitled to
specific performance, then for a decree of recovery of Rs.21,500/- (that is
Rs.11500/- paid to defendant's attorney holder and Rs.10000/- as liquidated
damages) with costs.
4.
The
defendant resisted the suit. The defendant alleged that as she and her husband
were residents of Rourkela, it was agreed that the property dealer Balraj
Singh, who was acting on behalf of the purchaser-plaintiff would be responsible
for securing the required clearances for the sale; that a sum of Rs.1500/- was
paid by plaintiff's attorney holder to Balraj Singh 5 (shown as advance
payment to vendor in the receipt portion of the agreement of sale) to secure
the said NOC/permission/clearance; that defendant signed and delivered to
Balraj Singh the necessary papers for getting the clearances/certificates; that
time stipulated for sale (20.12.1978) was the essence of the contract; that
Balraj Singh sent a telegram dated 2.6.1979 requiring defendant's husband
Kartar Singh to reach Chandigarh on 7.6.1979 for registration, assuring that
registration of sale deed would definitely take place on that day and no
further extension would be sought;
that in response to
it, the defendant's husband, who was intent to maintain cordial relationship,
in spite of the expiry of the last date fixed for sale, went to Chandigarh and
met the plaintiff and Balraj Singh, in the office of Balraj Singh; that the
plaintiff informed him that he (plaintiff) could not arrange the entire funds
for making full payment and therefore could not proceed with the sale; that
defendant's husband informed the plaintiff and Balraj Singh that he had come
all the way from Rourkela to get the sale deed registered, and it was evident
that the plaintiff did not have the money and not interested in purchasing of
the property and that therefore the agreement stood cancelled, and he would not
execute the sale deed; and that the defendant's husband thereafter left for
Rourkela and also wrote a letter to Balraj Singh confirming the termination of
the agreement in view of the 6 plaintiff's conduct on 7.6.1979. The defendant
contended that as plaintiff was not ready and willing to perform the contract
by paying the balance of the sale price and get the sale completed, he was not
entitled to specific performance; and that in view of the breach committed by
the plaintiff, the earnest money amount paid by him stood forfeited. The defendant
also contended that the suit was not maintainable as it was not filed by a duly
authorized person. Subsequently the defendant amended her written statement to
contend that plaintiff was a Non-Resident Indian and he had not obtained the
permission of the Reserve Bank of India under the Foreign Exchange Regulation
Act, 1973, and therefore he was not entitled to purchase any immovable property
in India.
5.
On
the said pleadings, the trial court framed the following issues:
1) Whether the suit has
been filed by a duly authorized person?
2) Whether the suit is
not maintainable in the present form?
3) Whether the suit for
specific performance is not maintainable?
4) Whether the suit is
hit by laches and delay? If so, its effect?
5) Whether the agreement
dated 20.10.1978 has been rescinded and the suit is thus not maintainable? 7
6) Whether the plaintiff
is estopped by his own act and conduct from filing the present suit?
7) Whether the time was
the essence of the contract?
8) Whether the plaintiff
was and is ready and willing to perform his part of the agreement? If not its
effect?
9) Whether the plaintiff
is entitled to the specific performance and in alternative damages as claimed?
1)
2)
3)
4)
5)
6)
7)
8)
9) Whether the suit is
barred in view of preliminary objection No.7 in the written statement?
10) Relief.
6.
The
parties went to trial on the said issues. On behalf of the plaintiff, his
attorney holder Jagtar Singh Sangha was examined as PW1, and the property
dealer Balraj Singh was examined as PW2. On behalf of the defendant, her
husband and attorney holder Lt. Col. Kartar Singh was examined as DW-1. After
appreciating the evidence, the trial court by judgment dated 15.3.1983, decreed
the suit. It held that as the plaintiff had executed a power of attorney dated
1.3.1980 in favour of his brother Jagtar Singh Sangha and as Jagtar Singh
Sangha has asserted in his evidence that he was the attorney holder of the
plaintiff, and as Balraj Singh had given evidence that plaintiff executed the
power of attorney in favour of Jagtar Singh Sangha in his presence, the suit
was filed by a duly authorized person 8 and was maintainable. The trial court
held that the time was not of essence of the contract; that defendant had
failed to prove that the agreement dated 20.10.1978 was rescinded; that the
plaintiff had proved that he was ready and willing to perform his part of the
contract; that the suit was not barred by time; that the Reserve Bank's
permission was not necessary for obtaining a decree for specific performance,
but was required only for execution of the sale deed in pursuance of a decree
for specific performance; and therefore plaintiff was entitled to specific
performance.
7.
The
appeal filed by the defendant was dismissed by the District Judge, Chandigarh,
by judgment dated 3.6.1997 affirming the findings of fact recorded by the trial
court. The second appeal filed by the appellant was dismissed by the Punjab
& Haryana High Court, by the impugned judgment dated 26.10.1999. The
appellant has challenged the said judgment in this appeal by special leave.
8.
The
contentions of the appellant in brief are :
i.
The
plaintiff did not sign the agreement of sale nor sign the plaint, nor gave
evidence. His attorney holder (Paramjit Singh) who entered into the agreement
of sale on behalf of the plaintiff and who represented the plaintiff initially,
was not examined. The second attorney holder (Jagtar Singh Sangha) examined as
PW1 was not personally aware of the transaction and 9 admitted that he was not
aware of what transpired prior to the execution of the power of attorney in his
favour on 1.3.1980. There was therefore no acceptable or valid evidence about
the readiness and willingness of the plaintiff to perform the contract. The
courts below ought to have dismissed the suit by drawing a presumption that the
plaintiff's case was false and for non-compliance with Section 16(c) of the Specific
Relief Act, 1963 as the plaintiff did not enter the witness box.
ii.
The
agreement of sale only provided for damages in the event of breach by either
party. The agreement (Clause 11) provided that if the vendor failed to perform
his part of the contract by executing the sale deed and getting it registered
on receiving the balance consideration, he shall be liable to pay double the
amount of earnest money received by her from the purchaser. The agreement did
not provide for specific performance in the event of breach by the vendor. The
clear intention of the parties was that in the event of breach by the vendor,
the purchaser will be entitled to double the earnest money (that is refund of
earnest money plus liquidated damages of Rs.10,000/-) and nothing more.
Therefore, even if breach by the appellant - vendor was made out, the remedy of
respondent - purchaser was only to get Rs.20,000/- and not for specific
performance.
iii.
The
evidence clearly established that plaintiff was not ready and willing to
perform the contract and committed breach and as a consequence, the defendant
rescinded the contract. The courts below ignored the relevant evidence in this
behalf and drew invalid inferences from the evidence. The courts below
therefore ought to have dismissed the suit.
10 Re : Contention
(i)
9.
Section
16(c) of the Specific Relief Act 1963 (`Act' for short) bars the specific
performance of a contract in favour of a plaintiff who fails to aver and prove
that he has performed or has always been ready and willing to perform the
essential terms of the contract which are to be performed by him (other than
terms of the performance of which has been prevented or waived by the defendant).
Explanation (ii) to section 16 provides that for purposes of clause (c) of
section 16, the plaintiff must aver performance of, or readiness and
willingness to perform, the contract according to its true construction. Thus
in a suit for specific performance, the plaintiff should not only plead and
prove the terms of the agreement, but should also plead and prove his readiness
and willingness to perform his obligations under the contract in terms of the
contract. (See : N.P. Thirugnanam to R. Jagan Mohan Rao - AIR 1996 SC 116;
Pushparani S.Sundaram v. Pauline Manomani James - 2002 (9) SCC 582; and
Manjunath Anandappa v.
Tammanasa - 2003 (10)
SCC 390). In the first case, this Court held :
"The continuous
readiness and willingness on the part of the plaintiff is a condition precedent
to grant the relief of specific performance. This circumstance is material and
relevant and is required to be considered by the court while granting or
refusing to grant the relief. If the plaintiff fails to either aver or prove
the same, he must fail. To adjudge whether the plaintiff is ready and willing
to perform his part of the contract, the court must take into consideration the
conduct of the plaintiff prior and subsequent to the filing of the suit along
with other attending 11 circumstances. The amount of consideration which he
has to ay to the defendant must of necessity be proved to be available. Right
from the date of the execution till date of the decree he must prove that he is
ready and has always been willing to perform his part of the contract. As
stated, the factum of his readiness and willingness to perform his part of the
contract is to be adjudged with reference to the conduct of the party and the
attending circumstances. The court may infer from the facts and circumstances
whether the plaintiff was ready and was always ready and willing to perform his
part of contract."
In Vidhyadhar v.
Manikrao - 1999 (3) SCC 573, this Court reiterated the following well
recognized legal position:
"Where a party
to the suit does not appear in the witness-box and state his own case on oath
and does not offer himself to be cross-examined by the other side, a
presumption would arise that the case set up by him is not correct."
10.
We
may next refer to two decisions of this Court which considered the evidentiary
value of the depositions of attorney holders. This Court in Janki Vashdeo
Bhojwani vs. Indusind Bank Ltd. - 2005 (2) SCC 217, held as follows:
"Order III,
Rules 1 and 2 CPC, empowers the holder of power of attorney to "act"
on behalf of the principal. In our view the word "acts" employed in
Order III, Rules 1 and 2 CPC, confines only in respect of "acts" done
by the power of attorney holder in exercise of power granted by the instrument.
The term "acts" would not include deposing in place and instead of
the principal. In other words, if the power of attorney holder has rendered
some "acts" in pursuance of power of attorney, he may depose for the
principal in respect of such acts, but he cannot depose for the principal for
the acts done by the principal and not by him. Similarly, he cannot depose for
the principal in respect of the matter which only the principal can have a
personal knowledge and in respect of which the principal is entitled to be
cross-examined.
....In the case of
Shambhu Dutt Shastri v. State of Rajasthan, 1986 2 WLN 713 (Raj) it was held
that a general power of attorney holder can appear, 12 plead and act on behalf
of the party but he cannot become a witness on behalf of the party. He can only
appear in his own capacity. No one can delegate the power to appear in witness
box on behalf of himself. To appear in a witness box is altogether a different
act. A general power of attorney holder cannot be allowed to appear as a
witness on behalf of the plaintiff in the capacity of the plaintiff.
The aforesaid
judgment was quoted with the approval in the case of Ram Prasad v. Hari Narain
- AIR 1998 Raj 185. It was held that the word "acts" used in Rule 2
of Order III of the CPC does not include the act of power of attorney holder to
appear as a witness on behalf of a party.
Power of attorney
holder of a party can appear only as a witness in his personal capacity and
whatever knowledge he has about the case he can state on oath but be cannot
appear as a witness on behalf of the party in the capacity of that party. If
the plaintiff is unable to appear in the court, a commission for recording his
evidence may be issued under the relevant provisions of the CPC. ....
We hold that the view
taken by the Rajasthan High Court in the case of Shambhu Dutt Shastri followed
and reiterated in the case of Ramprasad is the correct view."
In Shankar Finance
& Investments vs. State of AP - (2008) 8 SCC 536, this Court explained in
what circumstances, the evidence of an attorney holder would be relevant, while
dealing with a complaint under section 138 of the Negotiable Instruments Act,
1881 signed by the attorney holder of the payee.
This Court held :
"A power of
attorney holder of the complainant, who does not have personal knowledge,
cannot be examined. But where the attorney holder of the complainant is in
charge of the business of the complainant and the attorney holder alone is
personally aware of the transactions, and the complaint is signed by the
attorney holder on behalf of the complainant payee, there is no reason why the
attorney holder cannot be examined as the complainant.....In regard to business
transactions of companies, partnerships or proprietary concerns, many a time
the authorized agent or attorney holder may be the only person having personal
knowledge of the particular transaction; and if the authorized agent or
attorney-holder has signed the complaint, it will be absurd to say that he should
not be 13 examined under section 200 of the Code, and only the Secretary of
the company or the partner of the firm or the proprietor of a concern, who did
not have personal knowledge of the transaction, should be examined."
11.
To
succeed in a suit for specific performance, the plaintiff has to prove: (a)
that a valid agreement of sale was entered by the defendant in his favour and
the terms thereof; (b) that the defendant committed breach of the contract; and
(c) that he was always ready and willing to perform his part of the obligations
in terms of the contract. If a plaintiff has to prove that he was always ready
and willing to perform his part of the contract, that is, to perform his
obligations in terms of the contract, necessarily he should step into the
witness box and give evidence that he has all along been ready and willing to
perform his part of the contract and subject himself to cross examination on
that issue. A plaintiff cannot obviously examine in his place, his attorney
holder who did not have personal knowledge either of the transaction or of his
readiness and willingness. Readiness and willingness refer to the state of mind
and conduct of the purchaser, as also his capacity and preparedness on the
other. One without the other is not sufficient.
Therefore a third
party who has no personal knowledge cannot give evidence about such readiness
and willingness, even if he is an attorney holder of the person concerned.
12.
We
may now summarise for convenience, the position as to who should give evidence
in regard to matters involving personal knowledge:
a. An attorney holder
who has signed the plaint and instituted the suit, but has no personal
knowledge of the transaction can only give formal evidence about the validity
of the power of attorney and the filing of the suit.
b. If the attorney
holder has done any act or handled any transactions, in pursuance of the power
of attorney granted by the principal, he may be examined as a witness to prove
those acts or transactions. If the attorney holder alone has personal knowledge
of such acts and transactions and not the principal, the attorney holder shall
be examined, if those acts and transactions have to be proved.
c. The attorney holder
cannot depose or give evidence in place of his principal for the acts done by
the principal or transactions or dealings of the principal, of which principal
alone has personal knowledge.
d. Where the principal
at no point of time had personally handled or dealt with or participated in the
transaction and has no personal knowledge of the transaction, and where the
entire transaction has been handled by an attorney holder, necessarily the
attorney holder alone can give evidence in regard to the transaction. This
frequently happens in case of principals carrying on business through
authorized managers/attorney holders or persons residing abroad managing their
affairs through their attorney holders.
e. Where the entire
transaction has been conducted through a particular attorney holder, the
principal has to examine that attorney holder to prove the transaction, and not
a different or subsequent attorney holder.
f. Where different
attorney holders had dealt with the matter at different stages of the
transaction, if evidence has to be led as to what transpired at those different
stages, all the attorney holders will have to be examined.
g. Where the law
requires or contemplated the plaintiff or other party to a proceeding, to
establish or prove something with reference to his `state of mind' or `conduct',
normally the person concerned alone has to give evidence and not an attorney
holder. A landlord who seeks eviction of his tenant, on the ground of his `bona
fide' need and a purchaser seeking specific performance who has to show his
`readiness and willingness' fall under this category. There is however a
recognized exception to this requirement. Where all the affairs of a party are
completely managed, transacted and looked after by an attorney (who may happen
to be a close family member), it may be possible to accept the evidence of such
attorney even with reference to bona fides or `readiness and willingness'.
Examples of such attorney holders are a husband/wife exclusively managing the
affairs of his/her spouse, a son/daughter exclusively managing the affairs of
an old and infirm parent, a father/mother exclusively managing the affairs of a
son/daughter living abroad.
13.
In
this case, the matter has been handled by different persons at different points
of time on behalf of the plaintiff - (a) the negotiations and execution of
agreement on 20.10.1978 were handled by plaintiff's attorney 16 holder
Paramjit Singh; (b) on 7.6.1979, the plaintiff was personally present and dealt
with the matter himself; and (c) from 1.3.1980, the matter was dealt with by
plaintiff's new attorney holder Jagtar Singh Sangha. The plaintiff neither
signed the agreement of sale nor signed the plaint nor gave evidence, in
particular, about his readiness and willingness. The agreement of sale was
executed by plaintiff's attorney holder Paramjit Singh who was not examined.
The plaint was signed by plaintiff's attorney holder Jagtar Singh Sangha (PW1)
in whose favour plaintiff had executed the power of attorney on 1.3.1980 and
who had no personal knowledge of the transaction.
The said attorney
holder (PW1) was not aware of the execution of the agreement, nor what happened
till the last date fixed for performance had elapsed, nor what transpired on
7.6.1979. The said attorney holder (PW1) clearly stated in his evidence that he
was not aware of anything that transpired prior to 1.3.1980 when the power of
attorney was executed in his favour. Nothing of relevance transpired after
1.3.1980 except the issue of the suit notice dated 5.3.1980. He did not know
whether defendant committed breach nor did he know about the readiness and
willingness of the plaintiff.
He admitted in his
evidence :
"I do not know
the detailed terms and conditions of the transaction.... I do not know the
facts of this transaction before my appointment in the year 1980..... I do not
know whether plaintiff wrote any letter that he is ready to purchase this
plot.... I do not know if anybody else also did any bargain 17 in the
transaction or not. I do not know who has been in correspondence on behalf of
the plaintiff till June 1979".
The evidence of PW 1
is therefore of no assistance in a suit for specific performance except to
prove that he was authorized by the plaintiff to file a suit for specific
performance.
14.
The
plaintiff who ought to have given evidence never appeared and gave evidence. As
his attorney holder PW1 had no knowledge of the transaction, the plaintiff
solely relied on the evidence of the property dealer Balraj Singh (PW2) to
prove the execution of the agreement, the terms of the agreement, his readiness
and willingness to perform the agreement and the alleged breach by the
defendant. But Balraj Singh cannot become a substitute for the plaintiff to
give evidence about the finances or intentions or the readiness and willingness
of plaintiff which were within the personal knowledge of the plaintiff. Balraj
Singh was a property dealer engaged by plaintiff and supporting the plaintiff.
He was not an attorney holder acting on behalf of plaintiff. Therefore, neither
the evidence of Jagtar Singh (PW 1) nor the evidence of Balraj Singh (PW2) can
be relied upon to prove that plaintiff was always ready and willing to perform
his obligations under the contract, in terms of the contract. Therefore, it has
to be held that though 18 there were necessary averments in the plaint about
the readiness and willingness of the plaintiff, and though PW1 and PW2 gave
evidence about his readiness and willingness, the suit has to fail for failure
to comply with section 16(c) of the Specific Relief Act, as there was no
acceptable or valid evidence of such readiness and willingness of plaintiff to
perform his part of the obligations in terms of the contract.
15.
The
respondent relied upon the following observation of this Court in P.D'Souza v.
Shondrilo Naidu - 2004 (6) SCC 649 :
"It is
indisputable that in a suit for specific performance of contract the plaintiff
must establish his readiness and willingness to perform his part of the
contract. The readiness and willingness on the part of the plaintiff to perform
his part of contract would also depend upon the question as to whether the
defendant did everything which was required of him to be done in terms of the
agreement for sale. The question as to whether the onus was discharged by the
plaintiff or not will depend upon the facts and circumstances of each case. No
straitjacket formula can be laid down in this behalf."
The respondent next
relied upon the following observations of this Court in Aniglase Yohannan v.
Ramlatha [2005 (7) SCC 534] :
"12. The basic
principle behind Section 16(c) read with Explanation (ii) is that any person
seeking benefit of the *grant relief on the basis of the conduct of the person
seeking relief. If the pleadings manifest that the conduct of the plaintiff
entitles him to get the relief on perusal of the plaint he should not be denied
the relief."
19 This Court
further held that the averments relating to readiness and willingness are not a
mathematical formula which should be expressed in specific words and if the
averments in the plaint as a whole, do clearly indicate the readiness and
willingness of the plaintiff to fulfil his part of the obligations under the
contract, the fact that the wording was different, will not militate against
the readiness and willingness of the plaintiff. The above observations cannot
be construed as requiring only a pleading in regard to readiness and
willingness and not `proof' relating to readiness and willingness. In fact, in
the very next para, this Court clarified that Section 16(c) of the Act mandates
the plaintiff to aver in the plaint and establish the fact by evidence aliunde
that he has always been ready and willing to perform his part of the contract.
Therefore, the decision merely reiterates the need for both pleadings and proof
in regard to readiness and willingness of the plaintiff.
16.
The
said decisions do no assist the respondent. The respondent also relied upon
some decisions which observe that increase in value of the property is not a
relevant consideration to deny specific performance. On the facts and
circumstances that issue does not arise for consideration in this case.
20 Re : Contention
(ii)
17.
Section
10 of the Act deals with cases in which specific performance of contract is
enforceable. It provides that except as otherwise provided in that Chapter
(dealing with Specific Performance of Contracts) of the Act, specific
performance of any contract may, in the discretion of the court, be enforced
when the act agreed to be done is such that compensation in money for its
non-performance would not afford adequate relief. Explanation (i) to section 10
provides that unless and until the contrary is proved, the court shall presume
that the breach of a contract to transfer immovable property cannot be
adequately relieved by compensation in money. Sub-sections (2) and (5) of
section 21 of the Act provide that in a suit for specific performance, if the
court decides that specific performance ought not to be granted, but that there
is a contract between the parties which has been broken by the defendant, and
that the plaintiff is entitled to compensation for that breach, it shall award
him such compensation accordingly; and that no compensation shall be awarded
under this section unless the plaintiff has claimed such compensation in his
plaint. Section 23 of the Act provides that a contract otherwise proper to be
specifically enforced, may be so enforced, though a sum be named in it as the
amount to be paid in case of its breach 21 and the party in default is willing
to pay the same, if the court, having regard to the terms of the contract and
other attending circumstances, is satisfied that the sum was named only for the
purpose of securing performance of the contract and not for the purpose of
giving to the party in default an option of paying money in lieu of specific
performance.
18.
It
is thus clear that for a plaintiff to seek specific performance of a contract
of sale relating to immovable property, and for a court to grant such specific
performance, it is not necessary that the contract should contain a specific
provision that in the event of breach, the aggrieved party will be entitled to
specific performance. The Act makes it clear that if the legal requirements for
seeking specific enforcement of a contract are made out, specific performance
could be enforced as provided in the Act even in the absence of a specific term
for specific performance in the contract. It is evident from section 23 of the
Act that even where the agreement of sale contains only a provision for payment
of damages or liquidated damages in case of breach and does not contain any
provision for specific performance, the party in breach cannot contend that in
view of specific provision for payment of damages, and in the absence of a
provision for specific performance, the court cannot grant specific
performance. But where the 22 provision naming an amount to be paid in case of
breach is intended to give to the party in default an option to pay money in
lieu of specific performance, then specific performance may not be permissible.
We may attempt to clarify the position by the following illustrations (not
exhaustive):
(A). The agreement of
sale provides that in the event of breach by the vendor, the purchaser shall be
entitled to an amount equivalent to the earnest money as damages. The agreement
is silent as to specific performance. In such a case, the agreement indicates
that the sum was named only for the purpose of securing performance of the
contract. Even if there is no provision in the contract for specific
performance, the court can direct specific performance by the vendor, if breach
is established. But the court has the option, as per Section 21 of the Act, to
award damages, if it comes to the conclusion that it is not a fit case for
granting specific performance.
(B). The agreement
provides that in the event of the vendor failing to execute a sale deed, the
purchaser will not be entitled for specific performance but will only be
entitled for return of the earnest money and/or payment of a sum named as
liquidated damages. As the intention of the parties to bar specific performance
of the contract and provide only for damages in the event of breach, is clearly
expressed, the court may not grant specific performance, but can award
liquidated damages and refund of earnest money.
(C). The agreement of
sale provides that in the event of breach by either party the purchaser will be
entitled to specific performance, but the party in 23 breach will have the option,
instead of performing the contract, to pay a named amount as liquidated damages
to the aggrieved party and on such payment, the aggrieved party shall not be
entitled to specific performance.
In such a case, the
purchaser will not be entitled to specific performance, as the terms of the
contract give the party in default an option of paying money in lieu of
specific performance.
19.
In
this case, clauses 11 and 12 of the agreement deal with consequences of breach.
They are extracted below :
"11. That in
case the seller fails to perform his part of contract of sale according to the
terms and conditions agreed upon in this agreement to sell in matter of
execution of the sale deed and its registration, on the receipt of the balance
sale price, he shall be liable to pay double the amount of the earnest money
received by her from the purchaser.
12. That in case the
purchaser fails to get the transaction of the sale completed by means of
execution and registration of sale deed according to the terms of this
agreement for sale, he shall forfeit his earnest money of Rs.10,000/- advanced
by the purchaser to the said seller."
The agreement does
not specifically provide for specific performance. Nor does it bar specific
performance. It provides for payment of damages in the event of breach by
either party. The provision for damages in the agreement is not intended to
provide the vendor an option of paying money in lieu of specific performance.
Therefore, we are of the view that plaintiff will be entitled to seek specific
performance (even in the absence of a specific provision therefor) subject to
his proving breach by the defendant and that 24 he was ready and willing to
perform his obligation under the contract, in terms of the contract.
Re : Contention (iii)
20.
The
time fixed for the performance in the agreement was 20.12.1978.
But time was
obviously not considered by the parties, to be of essence of the contract. The
correspondence clearly shows that defendant's attorney holder Lt.Col. Kartar
Singh, was willing to perform the contract on 7.6.1979, nearly six months after
the last date stipulated in the agreement. The evidence shows that the
defendant had entrusted the work of securing the necessary
permission/NOC/clearance for the sale to the property dealer to Balraj Singh
who was also acting on behalf of the plaintiff. Balraj Singh sent a telegram
dated 2.6.1979 to Kartar Singh who was staying at Rourkela to come over to
Chandigarh on 7.6.1979 to execute the sale deed. The wording of the telegram is
"Reach Chandigarh as Mr. Sangha is here. Sale deed registration is final.
Date 7th June. No extension." The evidence of DW1 (Kartar Singh) and the
evidence of Balraj Singh (PW2) show that Kartar Singh accordingly visited
Chandigarh on 7.6.1979 and met the plaintiff in the office of Balraj Singh on
7.6.1979. Kartar Singh's evidence shows that he stated that he was ready to
receive the balance of the sale price and execute the sale deed and had in fact
came all the way from Rourkela to 25 execute the sale deed, and that plaintiff
told him that the entire amount was not available. Kartar Singh (DW1) also
stated that after the meeting, plaintiff went away stating that he would try to
arrange for money; that he (Kartar Singh) went back to the office of Balraj
Singh at about 5.30 PM; that at that time, Balraj Singh showed the writing of
Sub-Registrar (about plaintiff's presence and Kartar Singh's absence); that he
(Kartar Singh) got irritated by the conduct of plaintiff and told Balraj Singh
to tell plaintiff that plaintiff was trying to be too clever, and he may treat
the transaction as cancelled.
Kartar Singh
categorically stated :
"He (plaintiff)
did not give any proof of money with him. He did not buy the stamp throughout
the day and he did not show any inclination to buy. I was fully ready to
register the sale deed on 7.6.79."
There is no evidence
to rebut the said evidence of Kartar Singh as plaintiff was not examined.
21.
Balraj
Singh (PW2) who was examined as PW2 attempted to give some evidence about the
readiness and willingness of the plaintiff. But the evidence of Balraj Singh
can not be a substitute for the evidence of plaintiff regarding plaintiff's
readiness and willingness. Further the correspondence between Balraj Singh and
Kartar Singh demonstrates that the version and stand of Kartar Singh (DW1)
appears to be more probable and correct. After 26 Kartar Singh returned from
Chandigarh after the visit on 7.6.1979, by letter dated 29.6.1979 Balraj Singh
informed Kartar Singh that the purchaser was now ready to get the sale deed
executed in July 1979. Immediately, Kartar Singh sent a reply dated 2.7.1979
referring to his visit to Chandigarh on 7.6.1979 and about plaintiff informing
him that full amount of sale price was not available with him for proceeding with
the sale, which showed that plaintiff was not ready and willing to complete the
sale. Balraj Singh sent a reply dated 7.7.1979 which does not deny the version
given by Kartar Singh in his letter dated 2.7.1979, (as to what happened on
7.6.1979) but concentrated on trying to persuade Kartar Singh to come again and
execute the sale deed by receiving the higher price of Rs.1,60,000/- even
without delivering possession. The said letter dated 7.7.1979 of Balraj Singh
also admits that marking the presence of plaintiff in the office of Sub-
Registrar on 7.6.1979 was only to save the position of plaintiff. The said
letter also states: "Now he is ready to pay you the balance amount,
considering Rs.160,000/- as the sale price". The correspondence therefore
clearly established that plaintiff was not ready and willing to get the sale
deed executed within the time prescribed or even as on 7.6.1979 which was the
last day of the extended period. The evidence also demonstrates that plaintiff
was not in a position to perform the contract as Balraj Singh admits in his 27
evidence that the purchaser had to purchase the stamp paper and that on
7.6.1979, the stamp paper was not purchased; and that the plaintiff had in his
bank account Rs.114000 but that amount was not drawn from the bank.
Balraj Singh and PW1
have also referred to the assets owned by plaintiff.
Such evidence is of
no assistance in the absence of evidence as to availability of money for
purchase and about the readiness and willingness of plaintiff to perform the
contract.
22.
There
is also something doubtful about the following version given by Balraj Singh
(PW2) in his evidence as to what happened at the Sub- Registrar's office on
7.6.1979 :
"Then we i.e.
myself, Hartar Singh plaintiff, Paramjit Singh, all went to the office of the
Sub-Registrar. The plaintiff signed the application dated 7.6.1979 in my
presence and likewise Paramjit Singh also signed the same and we then submitted
the same which is Ex.P21 to the Sub-Registrar, Chandigarh. He then called
Kartar Singh, through his Peon. Kartar Singh did not appear before the
Sub.Registrar, Chandigarh, who then made an endorsement Ex.22 on the said
application in my presence (objected to).
In the plaint, the
incident is described thus :
"Ultimately, the
general attorney of the Defendant namely Kartar Singh reached Chandigarh on
7.6.1979 and the plaintiff was also there in Chandigarh on the said date. The
said Kartar Singh who hold the general attorney for the Defendant had disclosed
that he had come on the said date for execution of the sale deed, but neither
Kartar Singh nor the Defendant came to the office of Sub-Registrar, Chandigarh
to execute the sale deed in favour of the plaintiff in respect of the above
said plot, though the plaintiff remained present in the office of
Sub-Registrar, Chandigarh on the said day and got himself marked present by
moving an application."
28 But Exs.21 and
22 (the letter dated
7.6.1979 to the Sub-Registrar containing the Sub-Registrar's endorsement) reads
thus :
"To, The
Sub-Registrar, Chandigarh.
Sir, We, Hartar Singh
Sangha, S/o Shri Bikramjit Singh Sangha and Ms. Avtar Kaur D/o S. Charan Singh,
58, Sector-26, Madhya Marg, Chandigarh had entered into agreement with Mrs. Man
Kaur, wife of Shri Jartar Singh through her general attorney and husband Major
Kartar Singh for purchase of her annexe No.509, Sector-18B, Chandigarh. Today
is the last date for the registration of said annexe and we (Purchasers) are
ready with the payment to pay the balance full and final amount relating to the
above mentioned property before the Sub-Registration, but the seller herself or
through her general attorney have not turned up so far. We request you to mark
out presence in your court.
Thanking you, Yours
faithfully, (Hartar Singh Sangha) (Avtar Kaur) through attorney Paramjit Singh
Dated : 7.6.1979 The applicant Hartar Singh Sangha is present. Respondent Col.
Kartar Singh name was called out, but was not found present.
(sd/-)
Sub-Registrar"
This letter describes
plaintiff and Ms. Avtar Kaur, daughter of S. Charan Singh as purchasers and
states that plaintiff and Ms. Avtar Singh entered 29 into agreement with
defendant for purchase of the property (Annexe No.509, Sector-18B, Chandigarh).
The letter is said to have been signed by plaintiff and Avtar Singh through
Paramjit Singh (Attorney Holder). There is absolutely no reference or
explanation either in the pleading or evidence as to who is Ms. Avtar Kaur, and
how she became a purchaser under the agreement of sale. There is also no
explanation as to why Avtar Kaur and Paramjit Singh, if they were present on
7.6.1979, were not examined. The said letter is not marked through either any
of the sender or the receiver of the letter and has no evidentiary value.
23.
The
learned counsel for the respondent contended that in terms of the agreement,
the defendant had to furnish an NOC from Chandigarh Administration, as also ULC
clearance and income tax clearance required for the sale and there was nothing
to show that she had obtained them, and therefore the question of plaintiff
proving his readiness and willingness to perform his obligations did not arise.
This contention has no merit. There are two distinct issues. The first issue is
the breach by the defendant - vendor which gives a cause of action to the
plaintiff to file a suit for specific performance. The second issue relates to
the personal bar to enforcement of a specific performance by persons enumerated
in section 16 of the Act. A 30 person who fails to aver and prove that he has
performed or has always been ready and willing to perform the essential terms
of the contract which are to be performed by him (other than the terms the
performance of which has been prevented or waived by the defendant) is barred
from claiming specific performance. Therefore, even assuming that the defendant
had committed breach, if the plaintiff fails to aver in the plaint or prove
that he was always ready and willing to perform the essential terms of contract
which are required to be performed by him (other than the terms the performance
of which has been prevented or waived by the plaintiff), there is a bar to
specific performance in his favour. Therefore, the assumption of the respondent
that readiness and willingness on the part of plaintiff is something which need
not be proved, if the plaintiff is able to establish that defendant refused to
execute the sale deed and thereby committed breach, is not correct. Let us give
an example. Take a case where there is a contract for sale for a consideration
of Rs.10 lakhs and earnest money of Rs.1 lakh was paid and the vendor wrongly
refuses to execute the sale deed unless the purchaser is ready to pay Rs.15
lakhs. In such a case there is a clear breach by defendant. But in that case,
if plaintiff did not have the balance Rs.9 lakhs (and the money required for
stamp duty and registration) or the capacity to arrange and pay such money,
when the contract had to be 31 performed, the plaintiff will not be entitled
to specific performance, even if he proves breach by defendant, as he was not
`ready and willing' to perform his obligations.
24.
In
this case, the evidence clearly showed that defendant's attorney holder Kartar
Singh had entrusted the work of securing the clearances to the property dealer
Balraj Singh, who was acting on behalf of plaintiff. This was within the
knowledge of Paramjit Singh, who was the attorney holder of plaintiff at the
relevant point of time. Balraj Singh also admitted in his evidence that he was
to get the NOC and ULC clearance. Balraj Singh sent a telegram to Kartar Singh
at the instance of plaintiff, asking him to come to Chandigarh on 7.6.1979 and
execute the sale deed. Therefore, Balraj Singh had either secured the
certificates necessary for the sale or had deliberately called Kartar Singh to
come over to Chandigarh, even though the plaintiff was not ready and the
clearances had not been secured, to create evidence that plaintiff was ready.
In neither case, the defendant could be faulted. Be that as it may.
25.
None
of the courts below have referred to the relevant evidence or the significance
of plaintiff not tendering evidence. They have merely gone by 32 the evidence
of Balraj Singh to hold that the plaintiff was ready and willing and defendant
committed a breach. The material on record shows that the respondent-plaintiff
committed breach. Therefore, the earnest money stood forfeited and respondent
is not entitled for refund of the earnest money.
Conclusion
26.
Having
regard to our findings on contentions (i) and (iii), the appellant is bound to
succeed in these appeals. We therefore allow these appeals, set aside the
judgments of the courts below and dismiss the suit for specific performance.
..................................J
(R. V. RAVEENDRAN)
..................................J
(AFTAB ALAM)
NEW
DELHI;
OCTOBER
5, 2010.
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