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Silvey And Otehrs v. Arun Varghese And Another
Factual and Procedural Background
The respondents (plaintiffs) entered into an agreement dated 23-2-1986 (Exhibit A-1) with four defendants to purchase 10 acres of land at the rate of Rs 19,750 per acre. An advance of Rs 50,000 was paid and the sale deed was to be executed by 17-4-1986. Under the agreement, the defendants had to supply up-to-date tax receipts, obtain registration as a rubber estate, secure licences for planting rubber, and have the land measured at their own expense.
Alleging that the defendants never produced the required documents and were unwilling to execute the sale deed despite repeated oral requests, the plaintiffs issued a lawyer’s notice on 16-3-1988 and filed a suit for specific performance on 5-7-1988, asserting continuous readiness and willingness to perform.
The trial court found that time was not of the essence and that the plaintiffs had the financial capacity, yet dismissed the suit on the ground that the plaintiffs had not taken prompt steps and the defendants had improved the property in the interim. It granted only recovery of the Rs 50,000 advance with 6% interest.
On appeal, the Kerala High Court reversed the trial court, decreeing specific performance in favour of the plaintiffs. The present appeal by the defendants challenges that decision.
Legal Issues Presented
- Whether time was of the essence of the agreement for sale and, if so, whether the plaintiffs failed to perform within that time.
- Whether the plaintiffs had been “ready and willing” to perform their contractual obligations as mandated by Section 16(c) of the Specific Relief Act, 1963.
- Whether, in the exercise of equitable discretion, the court should grant or refuse the remedy of specific performance in light of the parties’ conduct and alleged improvements made to the property.
Arguments of the Parties
Appellants’ (Defendants’) Arguments
- Although the contract did not expressly state that time was of the essence, surrounding circumstances—including extensions limited to the onset of the monsoon—made timely completion critical.
- No demand for execution was made after 17-4-1986; the plaintiffs allegedly waited to see if they could also acquire neighbouring land, indicating lack of genuine interest.
- There was insufficient evidence of the plaintiffs’ continuous readiness and willingness; mere financial capacity does not satisfy Section 16(c).
Respondents’ (Plaintiffs’) Arguments
- Extensions granted by the defendants themselves negate any claim that time was strictly of the essence.
- The defendants falsely claimed that the plaintiffs had abandoned the agreement; such conduct should disentitle them to resist specific performance.
- The plaintiffs pleaded and proved readiness and willingness; delays were caused solely by the defendants’ failure to obtain licences, registration books, and possession certificates as required by the contract.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Ardeshir H. Mama v. Flora Sassoon (1927-28) 55 IA 360, AIR 1928 PC 208 | A purchaser must demonstrate continuous readiness and willingness to perform. | Relied upon by the High Court, and endorsed by the Supreme Court, to conclude that the plaintiffs satisfied Section 16(c) from inception to decree. |
| Raineri v. Miles (1981 AC 1050; (1980) 2 WLR 847; (1980) 2 All ER 145) | Where time is not expressly of the essence, a contractual date cannot be treated as a mere “target”; defaulting party remains liable for delay. | Cited to reject the defendants’ contention that absence of an “essence” clause absolved them from timely performance. |
| Lourdu Mari David v. Louis Chinnaya Arogiaswamy (1996) 5 SCC 589 | The defendant’s conduct is relevant when exercising discretion to grant or deny specific performance. | Used to emphasize the negative inference arising from the defendants’ false plea and non-responsive behaviour. |
Court's Reasoning and Analysis
The Supreme Court affirmed the High Court’s decree for specific performance, reasoning as follows:
- Pleading and Proof under Section 16(c): The plaintiffs expressly pleaded continuous readiness and willingness and adduced evidence through PW-1. This satisfied the statutory requirement.
- Defendants’ Non-Performance: The defendants failed to obtain registration as a rubber estate, licences for planting, and possession certificates, thereby breaching essential contractual obligations.
- False Plea and Conduct: Defendant 3’s admission that he never met the plaintiffs disproved the written statement allegation that the plaintiffs had abandoned the contract. This dishonest defence weighed heavily against the defendants’ equitable claim to resist specific performance.
- Essence of Time: Successive extensions and the parties’ conduct showed that time was not of the essence. Even if it had been, the defendants’ own default precluded reliance on lapses by the plaintiffs.
- Equitable Discretion: The trial court’s refusal based on alleged improvements was outweighed by the defendants’ breaches and conduct. Hence discretion favoured decree of specific performance.
Holding and Implications
Appeal DISMISSED. The decree of the Kerala High Court granting specific performance to the plaintiffs stands affirmed. No order as to costs.
Implications: The defendants must execute the sale deed in accordance with Exhibit A-1. The judgment reinforces established principles regarding readiness and willingness under Section 16(c), the non-decisive nature of time stipulations absent explicit intention, and the relevance of a defendant’s conduct in equitable relief. No new legal precedent is created, but the decision reaffirms and applies existing doctrine to the facts.
Dr. Arijit Pasayat, J.— Challenge in this appeal is to the judgment of a Division Bench of the Kerala High Court allowing the appeal filed by the respondents who were the plaintiffs in a suit for specific performance of an agreement to sell immovable properties.
2. The plaintiffs in a suit for specific performance of an agreement to sell immovable properties are the respondents. The defendants, four in number entered into an agreement for sale of the respective portions held by them under Exhibit A-1 dated 23-2-1986. Thereunder, they agreed to convey to the plaintiffs an extent of 10 acres of property held by the four of them at a price of Rs 19,750 per acre. They received an advance of Rs 50,000. The agreement provided that the sale deed was to be executed by 17-4-1986. The defendants were to furnish the plaintiffs with all documents in their possession and power and also furnish tax receipts for taxes paid up-to-date, the registration book for registration as a rubber estate with the Rubber Board and the licence for planting rubber plants, get the properties measured by competent persons at the expense of the defendant vendors in the presence of the plaintiff purchasers or their agents.
3. According to the plaintiffs, the defendants were never ready with the requisite documents for executing the sale deed in favour of the plaintiffs and repeated demands by the plaintiffs for execution of the document did not meet with the proper response and, therefore, they had ultimately to send a notice through a lawyer on 16-3-1988 demanding performance and the defendants having failed to respond to that notice, a suit had been filed on 5-7-1988 for specific performance of the agreement for sale. The plaintiffs pleaded that they were and they have always been ready and willing to perform their part of the contract. The defendants filed a written statement contending that the plaintiffs were in default. The plaintiffs never demanded performance of the agreement. The defendants, therefore, were under the impression that the plaintiffs have abandoned the agreement. The defendants have, therefore, effected improvements in the property and the value of the property has increased. It was, therefore, not a fit case where a decree for specific performance should be granted to the plaintiffs. It was pleaded that the plaintiffs were never ready and willing to perform their part of the contract.
4. The trial court held on the materials that time was not of essence of the contract and that the plaintiffs had the requisite capacity to raise funds for the purchase of the property covered by Exhibit A-1. But, the trial court held that plaintiffs had not taken prompt steps for enforcement of the obligations under Exhibit A-1 agreement for sale. But, it did find that the defendants had not yet obtained the certificates of registration from the Rubber Board as envisaged by the agreement for sale and they had not even obtained possession certificates, since obviously there was considerable dispute about the properties covered in the survey number, of which the plaint schedule properties formed a part. The trial court stating that in view of the delay in the plaintiffs approaching the court, the plaintiffs have not shown themselves to be ready and willing to perform their part of the contract and in the matter of exercise of discretion, specific performance should be refused to the plaintiffs since the defendants have, on the basis that the plaintiffs were not any more interested in purchasing the property, expended amounts for improvement of the property. Thus stating that the discretion has to be exercised against the plaintiffs, the trial court dismissed the suit for specific performance. But the trial court granted a decree for recovery of the advance of Rs 50,000 paid by the plaintiffs to the defendants at the time of entering into Ext. A-1 agreement along with interest at the rate of 6% per annum thereon from the date of suit till date of realisation. It is feeling aggrieved by the refusal to grant the plaintiffs a decree for specific performance that the plaintiffs have filed appeal before the High Court.
5. In appeal, the High Court reversed the judgment and decree of the trial court and held that the suit was to be decreed in favour of the plaintiffs for specific performance as prayed for.
6. Learned counsel for the appellants submitted that though time may not be the essence of an agreement but circumstances can show that it was really so. Though extension was granted, that was not for a very long period. Though originally it was stipulated in the agreement that the sale was to be completed before onset of monsoon, the last extension granted was for a short period thereafter. There was no extension after 17-4-1986. For a long time no demand was made by the plaintiffs. The plaintiffs were really not interested in executing the sale deed as they were waiting to see whether the intended purchases of the neighbouring land would be completed. There was no material to show that at all relevant points of time, the plaintiffs were ready and willing to perform their part of the agreement. Reference is made to the evidence of PW 1 to show that the purchase of the agreed land depended upon acquisition of the neighbouring land.
7. It is submitted that there must be material to show about the readiness and willingness throughout, even though a person may have funds or is capable of raising funds. These aspects have been lost sight of by the High Court.
8. Learned counsel for the respondents on the other hand submitted that though in a given case even in respect of an agreement for sale of immovable property, time may be the essence of agreement yet it would depend upon several factors. If the circumstances show that the time was the essence of the agreement that fact can also be taken note of. In the instant case, it is submitted that the defendants themselves have accepted that the time was extended and the agreement was to be given effect to before monsoon set in. But the period extended itself to a period which was admittedly after monsoon had set in. A false plea was taken by the defendants about the plaintiffs having told them to have abandoned the agreement. This conduct itself disentitled the defendants from opposing the suit for specific performance of contract.
9. The High Court has found that the plaintiffs can be said to have been always ready and willing to perform their part of the contract from the inception of the contract to the date of the decree of the trial court, relying on the principles highlighted in Ardeshir H. Mama v. Flora Sassoon (1927-28) 55 IA 360, AIR 1928 PC 208.
10. In Raineri v. Miles 1981 AC 1050, (1980) 2 WLR 847, (1980) 2 All ER 145 (HL) (All ER at p. 155e-g) it was held as follows:
“In the instant case the date for completion was not expressed to be of the essence, and it has not been suggested (though I think it might possibly have been) that the surrounding circumstances nevertheless so rendered it. In that state of affairs the appellants submit that the law as it has stood ever since 1875 exculpated them from all liability for the foreseeable damage sustained by the respondents as a direct result of their failure to keep their word. My Lords, were this indeed right the respondents would suffer a substantial injustice. The fact that time had not been declared to be of the essence does not mean that the express date for completion could be supplanted by the court's treating it as a mere ‘target’ date and, in effect, enabling the defaulting party to insert into the contractual provision some such words as ‘… or within a reasonable time thereafter’.”
11. As rightly noted by the High Court, the plaintiffs have pleaded in terms of Section 16-C of the Specific Relief Act, 1963 (in short “the Act”) that they have always been and are ready and willing to perform their part of the contract. Plaintiff 2 as PW 1 has also spoken about this fact. The case of the plaintiffs was that the defendants were not ready with the document as contemplated in Clause 2 of Ext. A-1 which resulted in the delay in the performance of the contract and in the plaintiffs seeking the performance of the contract by the defendants.
12. The High Court has noticed that the agreement in respect of the adjacent land was entered into much before the agreement in question. It has also been noticed by the High Court that there was no impediment on the plaintiffs obtaining a sale deed in respect of adjacent land or that they apprehended it at any point of time that they were not going to get an assignment to the extent. The assignment in fact was obtained in respect of the adjacent land. The High Court also highlighted, in our opinion rightly, that the defendants had not performed their part of the contract under Ext. A-1 as they had not obtained requisite licence for planting rubber plant, except in case of Defendant 3. None of the other defendants had obtained the registration book for registration as a rubber estate with the Rubber Board as envisaged by Clause 7 of the agreement for sale.
13. DW 1 accepted that possession certificates could not be obtained by the defendants in view of the nature of the property involved in the context of the Kerala Land Reforms Act and the Kerala Private Forest (Vesting and Assignment) Act. The defendants never responded to the letter, Ext. A-2 issued by the plaintiffs seeking performance of the contract. No response was also sent to the letters, Exts. A-2 to A-10. Ext. A-6 was a letter sent through registered post which was refused. The lawyer's notice, Ext. A-11 was also not responded to.
14. As regards the false plea of the defendants, the effect needs to be noted. It was pleaded that Defendant 3 had gone to the house of Plaintiff 2 in Alleppey prior to receiving any letter from the plaintiffs and had spoken that they had told him that they were not keen on enforcing the application under Ext. A-1. But when examined as DW 1, the said Defendant 3 admitted that he had never met the plaintiff as pleaded in the written statement and that he or any other defendant had never gone to Alleppey to meet Plaintiff 2 at his residence to speak about the performance of the contract. The plea stated in the written statement was abandoned in evidence. In Lourdu Mari David v. Louis Chinnaya Arogiaswamy (1996) 5 SCC 589 it was noted that the conduct of the defendant cannot be ignored while weighing the question of exercise of discretion for decreeing or denying a decree for specific performance. The High Court has, after analysing the factual position, come to the conclusion that the defendants were really not ready to perform their obligation in terms of the contract and had taken a false plea in the written statement.
15. The appeal is without merit, deserves dismissal, which we direct, but in the circumstance without any order as to costs.
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