Supreme Court Allows Appeal by Original Defendant in Suit for Specific Performance of Property Sale Agreement and Sets Aside High Court's Decree. Purchaser's Failure to Pay Rs.4 Lakhs Part Payment Within Agreed or Reasonable Time Renders Him Not Ready and Willing to Perform Essential Terms Under Specific Relief Act, 1963.

Case Note & Summary

Background: The dispute pertained to a suit for specific performance of an agreement for sale of immovable property. The appellant, M/s. P.R. Deb and Associates, was the original defendant-vendor, and the respondent, Sunanda Roy, was the original plaintiff-purchaser. The property in question was No.30, Gariahata Road, South Calcutta. Facts: By an agreement dated 24 October 1977, the appellant agreed to sell the property to the respondent for Rs.9 lakhs. The terms required an earnest payment of Rs.25,000 at execution, a further part payment of Rs.4 lakhs within five months (by 23 March 1978), and the balance at the time of completion, with time being of the essence. Clause 4 required the respondent to send a draft conveyance to enable the appellant to obtain an income-tax clearance certificate under Section 230A of the Income Tax Act and permission under the Urban Land (Ceiling and Regulation) Act, 1976. Clause 6 required the appellant to deliver vacant possession except for four front shop rooms. Clause 11 permitted conveyance to a cooperative housing society to be initiated by the respondent, with a further agreement and consent letter. Clause 13 gave the appellant the right to rescind and forfeit the earnest money if the purchaser failed to complete. Clause 14 stated that the Rs.4 lakhs was not earnest money but part payment and refundable if the transaction fell through. The respondent failed to pay the Rs.4 lakhs within the prescribed period. The appellant sent a solicitor's letter dated 12 April 1978 noting the default, stating that the funds were needed to purchase alternative residential accommodation, and giving seven days to pay. The respondent contended that clause 11 required the appellant to enter into an agreement with a proposed cooperative housing society and give a consent letter, and that his inability to raise the amount was due to the appellant's non-cooperation. The respondent's solicitors sent letters on 5 June 1978 and 25 September 1980, the former enclosing a draft agreement with M/s. Anirban Co-operative Housing Society Ltd. (which was not registered) and a cheque for Rs.25,000, and the latter stating that unless the fresh agreement was executed, it was impossible to collect money from proposed society members. The proposed society was never registered and had no proven members. The respondent filed the suit for specific performance on 10 November 1980. The trial court dismissed the suit on 24 December 1985, holding that the respondent was not ready and willing to perform his part of the contract. On appeal, the High Court set aside the dismissal and granted specific performance by judgment and decree dated 28 August 1991, directing the respondent to make payments within three months and the appellant to execute the conveyance within three months thereafter. The respondent failed to pay within the specified period (which expired on 27 November 1991) and made an application on 3 February 1992 for extension of time. The High Court dismissed that application on 26 May 1993, holding that extension would cause hardship, serious prejudice, and injury to the opposite party by reopening the decree. Consequently, the suit for specific performance stood dismissed. The original defendant filed Civil Appeal No. 4631A of 1993 against the High Court's decree, and the original plaintiff filed Civil Appeal No. 4631 of 1993 against the refusal of extension. Legal Issues: The core questions were whether the respondent-plaintiff was ready and willing to perform his part of the contract; whether payment of Rs.4 lakhs within a reasonable time was an essential term; whether clause 11 made the appellant's agreement with the proposed cooperative society a condition precedent to the respondent's payment obligation; and whether the High Court erred in granting specific performance and later in refusing extension. Arguments: The appellant argued that the payment of Rs.4 lakhs was an essential term and time was of the essence; the clause 11 was independent and did not excuse non-payment; and the respondent was never ready and willing. The respondent argued that the appellant was required to enter into an agreement with the proposed housing society and give consent, and that the appellant's failure to do so prevented the respondent from raising the amount. Court's Analysis: The Supreme Court held that early payment of Rs.4 lakhs was required because the appellant needed the funds to purchase alternative residential accommodation to deliver vacant possession. Payment within a reasonable time was an essential term; late payment could affect the appellant's right to obtain suitable accommodation as property prices may increase. The correspondence, especially the letter dated 25 September 1980, showed that the respondent was not in a position to pay the amount within the agreed period or a reasonable time; he insisted on the appellant first entering into an agreement with a proposed housing society that never came into existence. There was nothing in clause 11 requiring such an agreement as a condition precedent to receiving the part payment; clause 11 was independent of the appellant's right to receive the sum. The proposed cooperative society was never registered, and there was no evidence of members or ability to collect Rs.4 lakhs. The respondent and his solicitor did not state that the respondent had the sum at the material time or could pay within a reasonable time. The trial court had rightly concluded that the respondent was not in a position to carry out the terms of the agreement, and a plaintiff in a suit for specific performance must be ready and willing to carry out his part of the contract. Decision: The Supreme Court allowed the appeal filed by the original defendant, set aside the High Court's decree for specific performance, and restored the trial court's dismissal of the suit. It also dismissed the respondent's appeal against the refusal of extension. The court held that the respondent-plaintiff was not ready and willing to perform his part of the contract due to non-payment of the essential part payment of Rs.4 lakhs.

Headnote

Issue of Consideration

Final Decision

The Supreme Court allowed Civil Appeal No. 4631A of 1993 filed by the original defendant, set aside the High Court's judgment and decree dated 28 August 1991 granting specific performance, and restored the trial court's dismissal of the suit. It also dismissed Civil Appeal No. 4631 of 1993 filed by the respondent against the High Court's refusal to extend time. The Court held that the respondent-plaintiff was not ready and willing to perform his part of the contract because he failed to pay Rs.4 lakhs within the stipulated or reasonable time, and clause 11 did not excuse such non-payment.

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