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M. Sakuntala Devi v. V. Sakuntala And Others
Judgment Summary — Reddy, J.
Factual and Procedural Background
The plaintiff-appellant instituted O.S. No. 565 of 1972 in the Court of the Second Additional Chief Judge, City Civil Court, Hyderabad, seeking specific performance of an agreement of reconveyance dated 5-7-1967. The relief sought was a decree directing defendants 1 to 3 to execute a registered sale-deed conveying a specified house to the plaintiff after receipt of Rs. 13,000/-.
On 28-3-1973 the parties filed a memorandum of compromise, and a decree was drawn up in terms of that compromise. The compromise required the plaintiff to pay Rs. 13,000/- on or before 15-4-1973, upon which defendants 1 and 2 would execute the sale-deed; the plaintiff was to bear the costs of conveyance.
The following day the plaintiff filed I.A. No. 242 of 1973 to set aside the compromise decree alleging her signature was obtained by fraud, and I.A. No. 243 of 1973 asking the Court to proceed with the trial; both petitions were opposed. The plaintiff did not pay by 15-4-1973 and did not seek an extension. Later procedural steps included I.A. No. 58 of 1974 to proceed with the trial and I.A. No. 123 of 1974 seeking permission to withdraw I.A. No. 242 of 1973 unconditionally.
On 6-2-1974 I.A. Nos. 242, 243 and 58 of 1974 were dismissed and I.A. No. 123 of 1974 was allowed. On 7-2-1974 the plaintiff deposited the entire Rs. 13,000 required under the compromise decree, and on 5-4-1974 filed E.P. No. 26 of 1974 to execute the compromise decree. The execution petition contained no explanation for the failure to deposit by 15-4-1973 and contained no application seeking an extension of time.
The defendants opposed execution on the grounds that payment was made after the stipulated time and that the executing court had no jurisdiction to go behind the terms of the decree. The Second Additional Chief Judge dismissed the execution petition. A learned single Judge of this court confirmed that order in C.M.A. No. 456 of 1975. The plaintiff appealed to the court before Reddy, J.
Legal Issues Presented
- Whether, in a decree for reconveyance of immovable property (a decree for specific performance based on reconveyance), time fixed by the decree for payment of purchase money can be extended after the stipulated period has expired.
- Whether Section 28 of the Specific Relief Act, 1963, confers power on the court to extend the time fixed by a decree for payment of purchase money, or otherwise affects the ability of a defaulting purchaser to obtain an extension.
- Whether a compromise (consent) decree based on an agreement can be varied by the court (including by permitting late payment) without the consent of the parties.
- Whether an application for extension of time (if permissible) must be made to the court that passed the decree rather than to the executing court.
Arguments of the Parties
Appellant / Advocate General's Arguments
- The decree was in the nature of a preliminary decree and the court retained jurisdiction to grant further time to perform the contract even after the date fixed by the decree, until the vendor obtained an order rescinding the contract.
- Section 28 of the Specific Relief Act, 1963, was invoked to support the position that the court has power to deal with defaults under a decree for specific performance; the Advocate General relied on decisions including Abdul Shaker Saheb v. Abdul Rahiman Saheb and Manicka Gounder v. Samikannu Gounder.
Respondents / Defendants' Arguments
- The plaintiff paid the purchase money only after the time fixed by the compromise decree had expired, and no extension was sought; therefore execution should not be allowed.
- The executing court did not have jurisdiction to go behind the terms of the decree and cannot permit late compliance with an agreed time-limit.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Samarapuri Chettiar v. Sudarshanna Chariar (ILR 42 Mad 802; AIR 1919 Mad 544) | Authority for the proposition that in agreements for reconveyance of property time is to be considered of the essence. | Cited as part of a group of cases establishing that time is of the essence in reconveyance agreements; used to support conclusion that the time fixed in the decree could not be extended. |
| Balasundara Mudaliar v. Muthu Venkatachala (AIR 1954 Mad 799) | Illustrative authority on the importance of time in reconveyance agreements. | Included among authorities supporting the principle that time is of the essence for reconveyance decrees. |
| Shanmugham Pillai v. Annalakshmi Ammal (AIR 1950 FC 38) | Illustrative authority on reconveyance/time-of-essence principle. | Cited with other cases to show reconveyance agreements treat time as of the essence. |
| Simrathmul (Simrathmal) v. Nanjalingaiah (AIR 1963 SC 1182) | Illustrative authority on reconveyance/time-of-essence principle. | Used alongside other authorities to establish that time is of the essence in reconveyance agreements. |
| Caltex India Ltd. v. Bhagavan Devi (AIR 1969 SC 405) | Principal authority that in certain contracts (e.g., options/renewals) stipulations as to time may be of the essence even if not expressly so; supports that a default clause is not always necessary. | Relied upon to demonstrate that absence of an express default clause does not preclude treating time as of the essence; used to counter an argument that a default clause is necessary to make time of the essence. |
| Mangalam Pillai v. C.S.A. Udayar (AIR 1976 Mad 360) | Illustrative authority on reconveyance/time-of-essence principle. | Included among cases cited for the proposition that time is of the essence in reconveyance agreements. |
| Mooriantakath Ammoo v. Matathankandy Vadakkayil Pokkan (AIR 1940 Mad 817; 1940 2 Mad LJ 311) | Cited for the proposition that a decree based on an agreement cannot be changed except by the agreement of the parties. | Relied on to support the contention that a compromise decree cannot be varied by the court without consent of the parties. |
| Bethanna Nadar v. Srinivasan (1962 1 Mad LJ 418) | Cited in support of the proposition that a decree based on an agreement cannot be changed except by agreement. | Used as one of the authorities supporting the principle that the court is incompetent to permit modification of a consent decree without agreement. |
| Subramanya Mudaliar v. Shanmugham Chettiar (AIR 1968 Madras 48) | Cited in relation to the principle that a decree founded on agreement cannot be altered except by consent. | Included among authorities supporting that a consent decree cannot be varied except by agreement. |
| Hukamchand v. Bansilal (AIR 1968 SC 86) | Cited to support the same proposition about the limits on varying decrees based on agreement. | Relied upon as part of the authorities indicating that decrees founded on agreement are not to be changed without consent. |
| Abdul Shaker Saheb v. Abdul Rahiman Saheb (ILR 46 Mad 148; AIR 1923 Mad 284) | Held that a court had power to extend the time stipulated for payment of purchase money by a decree for specific performance; proceeded on the assumption that time was not of the essence. | The court examined and distinguished this case: it observed the decision assumed time was not of the essence, which the present court considered incorrect for reconveyance agreements; therefore Abdul Shaker Saheb was not treated as authority allowing extensions in reconveyance matters. |
| Manicka Gounder v. Samikannu Gounder (AIR 1967 Mad 397) | Purported to follow Abdul Shaker Saheb; noted in that case that there was "no default clause." | The court noted that the decision purported to follow Abdul Shaker Saheb but did not change the present court's view that Abdul Shaker Saheb is not authoritative for reconveyance matters; the observation about lack of a default clause was recorded but the court rejected the necessity of a default clause as determinative. |
Court's Reasoning and Analysis
The court analyzed the issue by reference to statutory provisions and established equitable principles. It reproduced and considered Section 28 of the Specific Relief Act, 1963, which provides for rescission of a contract for sale or lease of immovable property where a purchaser or lessee fails to pay within the period allowed by the decree or such further period as the court may allow, and prescribes consequences upon rescission.
The court observed that Section 28 deals with rescission and the consequences of rescission; while it may be said to recognise the court's power to extend time, it does not expressly confer power to extend time nor prescribe conditions for extension. Thus Section 28 does not directly address the circumstances in which the court may allow further time.
The court then turned to general principles of law and equity and relevant provisions of the Specific Relief Act (Section 9 and Section 20(1)), noting that (a) where specific performance is claimed the defendant may plead any contractual defence and (b) the jurisdiction to decree specific performance is discretionary but not arbitrary.
The court explained the settled equitable rule that, generally, time is presumed not to be of the essence in contracts for purchase of immovable property and that courts may relieve a defaulting purchaser by extending time. However, it emphasized the correlative and distinct rule that in agreements for reconveyance (i.e., an option to repurchase/reconvey), time is to be considered of the essence because the option is a concession or privilege requiring strict observance of conditions.
Applying these principles to the facts — a decree for reconveyance embodied in a compromise containing a fixed date for payment — the court concluded that the time fixed by the decree for payment of the purchase money could not be extended. The court rejected the Advocate General's argument that Section 28 permitted extension until the vendor applied for rescission, explaining that Section 28 is intended to provide the non-defaulting party a remedy to seek rescission and restoration of possession, not to empower a defaulting party to seek indefinite extension pending action by the vendor.
The court reviewed authority relied upon by the Advocate General (notably Abdul Shaker Saheb) and found those decisions inapplicable to the present case because they proceeded on the assumption that time was not of the essence; the present court held that distinction between contracts to sell and contracts to reconvey was decisive. It also considered and declined to follow the reasoning that the absence of an express "default clause" would permit extension, relying on authority (Caltex) for the proposition that an express default clause is not always necessary to make time of the essence.
Finally, the court identified an additional hurdle: the decree was a compromise (consent) decree based on an agreement and could not be varied except by agreement of the parties. The court found nothing in Section 28 to aid the appellant on this point and therefore declined to permit variation of the compromise decree.
Holding and Implications
Holding: The appeal is dismissed. The court concluded that, in the case of an agreement to reconvey immovable property embodied in a compromise decree, the time fixed by the decree for payment of the purchase money cannot be extended; further, a compromise decree cannot be varied except by consent of the parties. The court found Section 28 of the Specific Relief Act, 1963, did not assist the appellant. The court ordered no costs.
Implications:
- Direct effect on the parties: The appellant's execution petition was properly dismissed for failure to comply with the time stipulated in the compromise decree and for failing to seek an extension before the expiry of that time; the appeal against that decision was dismissed and no costs were awarded.
- Scope of authority: The court reaffirmed that, for reconveyance agreements, time is of the essence and cannot be extended under the circumstances presented. The court distinguished prior authorities (e.g., Abdul Shaker Saheb) that assumed time was not of the essence and clarified that those authorities are not controlling for reconveyance decrees.
- No new broader legal principle was announced beyond the application and reaffirmation of existing principles as described in the judgment; the court confined its decision to the facts and legal position before it.
Disposition recorded in the text: "Appeal dismissed. No costs."
Reddy, J.:— The plaintiff-appellant filed O.S No. 565 of 1972 in the Court of the Second Additional Chief Judge, City Civil Court, Hyderabad for specific performance of an agreement of re-conveyance dated 5-7-1967. The plaintiff sought a decree directing defendants 1 to 3 to execute a registered sale-deed after receiving a sum of Rs. 13,000/- from the plaintiff. On 28-3-1973 a memorandum of compromise signed by the parties and their counsel was filed and a decree was passed in terms of the compromise. The relevant clause of the compromise decree with which we are concerned was as follows:—
“That in cases the plaintiff pays to the defendants 1 and 2 a sum of Rs. 13,000/- on or before 15-4-1973, the defendants 1 and 2 shall execute the sale-deed conveying house No. 8-3-943/1 to 4 situated at Ameerpet Cross Roads, Hyderabad in favour of the plaintiff or his nominee Maineni Mudukrishna. The costs of conveyance by way of execution of the sale-deed shall be borne by the plaintiff alone.”
2. The very next day, the plaintiff filed I.A No. 242 of 1973 to set aside the compromise decree on the ground that her signature to the memorandum of compromise was obtained by fraud. The plaintiff also filed I.A No. 243 of 1973 requesting the Court to proceed with the trial of the suit. Both the petitions were opposed by the defendants. While the petitions were pending, the date fixed for payment of Rs. 13,000/- by the plaintiff under the compromise expired. The plaintiff did not seek any extension of time. On 24-1-1974 the plaintiff filed another petition I.A No. 58 of 1974 requesting the Court to proceed with the trial of the suit. Later, the plaintiff filed I.A No. 123 of 1974 seeking permission of the Court to withdraw I.A No. 242 of 1973 unconditionally. On 6-2-1974 I.A Nos. 242 of 1973, 243 of 1973 and 58 of 1974 were dismissed and I.A No. 123 of 1974 was allowed. On 7-2-1974 the plaintiff deposited the entire amount which she was required to deposit under the terms of the compromise decree and on 5-4-1974 he filed E.P No. 26 of 1974 seeking to execute the compromise decree. No explanation was given in the execution petition for not depositing the amount before 15-4-1973 as required by the compromise decree. Nor was any application filed or any prayer made in the execution petition to extend the time for payment of the amount. The execution petition was opposed by the defendants on the ground that the payment was made long after the time stipulated for payment of the amount in the compromise decree in accordance with the terms of the memorandum of compromise. It was also pleaded that the executing court would have no jurisdiction to go behind the terms of the decree. The learned second additional Chief Judge, City Civil Court dismissed the execution petition. The order of the learned Judge was confirmed by a learned single Judge of this court in C.M.A No. 456 of 1975. The plaintiff has preferred this appeal. There appear to be three formidable obstacles in the way of the plaintiff's success in this appeal (1) the decree was one for reconveyance of property. In all agreements for reconveyance of property time has always been considered to be of the essence of the agreement on the ground that an option to repurchase property was in the nature of a concession or privilege subject to strict fulfilment of prescribed conditions. Vide Samarapuri Chettiar v. Sudarshanna Chariar, ILR 42 Mad 802 : (AIR 1919 Mad 544) Balasundara Mudaliar v. Muthu Venkatachala, AIR 1954 Mad 799 Shanmugham Pillai v. Annalakshmi Ammal, AIR 1950 FC 38, Simrathmul v. Nanjalingaiah, AIR 1963 SC 1182, Caltex India Ltd. v. Bhagavan Devi, AIR 1969 SC 405 and Mangalam Pillai v. C.S.A Udayar, AIR 1976 Mad 360. Since the decree in the present case was one for reconveyance of property, time was of the essence. The plaintiff not having deposited the amount in time the Court had no jurisdiction to extend the time and permit execution of the decree. (2) The decree was based on an agreement between the parties and, therefore, the decree could not be changed except by the agreement of the parties. The Court was, therefore, incompetent to permit the deposit of the amount by the plaintiff after the expiry of the time agreed upon between the parties. Vide Mooriantakath Ammoo v. Matathankandy Vadakkayil Pokkan, (1940) 2 Mad LJ 311 : (AIR 1940 Mad 817); Bethanna Nadar v. Srinivasan, (1962) 1 Mad LJ 418, Subramanya Mudaliar v. Shanmugham Chettiar, AIR 1968 Madras 48 and Hukamchand v. Bansilal, AIR 1968 SC 86.
(3) The application for extension of time, even if permissible should have been made to the Court which passed the decree and not to the executing court.
3. These objections were sought to be got over by the learned Advocate General by contending that the decree passed in the case was in the nature of a preliminary decree and that until the defendants got the suit dismissed by filing an application, the Court continued to have jurisdiction to grant time or to extend the time fixed by the terms of the original decree even if such decree was a consent decree. He argued that in granting a decree for specific performance, whether a compromise decree or a decree on contest, the Court merely declared the existence of the contract and gave time within which the contract had to be carried out. The Court always retained the jurisdiction to grant further time, if necessary. He invited our attention to Section 28 of the Specific Relief Act, 1963. He relied upon the decisions in Abdul Shaker Saheb v. Abdul Rahiman Saheb, ILR 46 Mad 148 : (AIR 1923 Mad 284) Manicka Gounder… v. Samikannu Gounder…., AIR 1967 Mad 397.
4. Section 28 of the Specific Relief Act, 1963, runs as follows:—
“28. (1) Where in any suit a decree for specific performance of a contract for the sale or lease of immovable property has been made and the purchaser or lessee does not, within the period allowed by the decree or such further period as the court may allow, pay the purchase money or other sum which the Court has ordered him to pay, the vendor or lessor may apply in the same suit in which the decree is made, to have the contract rescinded and on such application the Court may, by order, rescind the contract either so far as regards the party in default or altogether, as the justice of the case may require.
(2) Where a contract is rescinded under sub-section (1), the court—
(a) shall direct the purchaser or the lessee, if he has obtained possession of the property under the contract to restore such possession to the vendor or lessor, and
(b) may direct payment to the vendor or lessor of all the rents and profits which have accrued in respect of the property from the date on which possession was so obtained by the purchaser or lessee until restoration of possession to the vendor or lessor, and, if the justice of the case so requires, the refund of any sum paid by the vendee or lessee as earnest money or deposit in connection with the contract.”
5. It is seen that section 28 provides for the rescission, in certain circumstances, of contracts for the sale or lease of immovable property, the specific performance of which has been granted and further provides for the consequences of such rescission. Though it may be said to recognise the power of the Court to extend the time prescribed by the decree for payment of purchase money, it does not expressly confer any power on the Court to extend time. It does not purport to prescribe the conditions subject to which the Court may allow further time than that prescribed in the decree for payment of the purchase-money. It does not deal with that topic at all.
6. To discover when a court may or may not allow further time we must be guided by well established general principles of law and equity. Section 9 of the Specific Relief Act provides that where any relief of specific performances of a contract is claimed the person against whom the relief is claimed may plead by way of defence any ground which is available to him under any law relating to contracts. S. 20(1) further provides that the jurisdiction to decree specific performance is discretionary and the court is not bound to grant such relief merely because it is lawful to do so, but, that the discretion of the Court is not arbitrary but sound and reasonable, guided by judicial principles and capable of correction by a court of appeal. Now, a long settled rule of equity is that time is presumed not to be of the essence of a contract for the purchase of immovable property. A court may, therefore, relieve a party who has failed to pay the purchase money within the stipulated time and on the theory that in granting a decree for specific performance a court does no more than declare the existence of the contract, the Court may extend the time fixed by it for the payment of purchase money under the decree. On the other hand, the rule is equally well settled that in a contract for purchase of immovable property time is to be considered to be of the essence and relief cannot be granted in equity to the defaulting purchaser. It must follow that where a Court grants a decree for specific performance of an agreement to reconvey immovable property and stipulates a time for payment of purchase money, such time cannot later be extended.
7. In Abdul Shaker Saheb v. Abdul Rahiman Saheb, (AIR 1923 Mad 284) Sir Walter Schwabe, C.J, and Wallace J., held that the Court had power to extend the time stipulated for payment of purchase money by the decree for specific performance. Both the learned Judges appeared to think and proceed on the assumption that time was not of the essence of the terms of the decree. The learned Chief Justice observed:—
“In my judgment, it was not intended by this decree that the payment of Rs. 4,000/- by the date named should be a condition, failing to comply with which would deprive the successful plaintiff of all his rights under the decree.” Wallace J., observed:
“Regarding the decree from this point of view as a contract, it is clear in this case as in most others of the same Kind, that time is not of the essence of the contract, and that until the contract is rescinded by formal order or decree, such time for performance, not being an essential part of the contract may be varied by the Court which has declared what the essential terms of the contract are.”
8. Proceeding as they did on the basic assumption that time was not of the essence of the contract, the conclusion necessarily followed that the court had the power to grant extension of time. But, pointed out the learned Advocate General, the learned Judges were also dealing with an agreement to reconvey immovable property. It is true. It only means that the basic assumption that time was not of the essence of the contract was wrong, for, it is not disputed and it cannot be disputed that in the case of an agreement to reconvey immovable property time is of the essence of the contract. Reference may be made to the cases already cited: Samarapuri Chhettiar v. Sudarsanachariar (AIR 1919 Mad 544) : Balasundara Mudaliar v. Mutthu Venkatachala (AIR 1954 Mad 799) Shanmugham Pillai v. Anna Lakshmi Ammal (AIR 1950 FC 38), Simrathmal v. Nanjalingiah (AIR 1963 SC 1182); Caltex India Ltd. v. Bhagvan Devi; (AIR 1969 SC 405) and Mangalam Pillai v. C.S.A Udayar, AIR 1976 Mad 360. Somehow, the learned Judge lost track of the fact that the agreement was for reconveyance of property, in which case time had to be considered as of the essence of the contract. The learned Judges did not notice the distinction between a contract to sell and contract to re-convey immovable property. We do not, therefore, consider that Abdul Shaker Saheb v. Abdul Rahiman Saheb can be considered to be an authority for the proposition that even in cases of agreements to reconvey immovable property time fixed for payment by the decree for specific performance may be extended.
9. In Manicka Gounder… v. Samikannu Gounder…., (AIR 1967 Mad 397) Venkatadri J., purported to follow the decision in Abdul Shaker Saheb v. Abdul Rahiman Saheb, (AIR 1923 Mad 284) while agreeing that time was of the essence of a contract to reconvey property, the learned Judge observed:
“Unfortunately, as noted in the Courts below, there is no default clause.”
10. However, it does not appear to be the law that the existence of a default clause is always necessary to make time of the essence of the contract. In Caltex (India) Ltd. v. Bhagwan Devi, (AIR 1969 SC 405) the Supreme Court said, (at p. 407).
“At common law stipulations as to time in a contract giving an option for renewal of a lease of land were considered to be of the essence of the contract even if they were not expressed to be so and were construed as conditions precedent. Equity followed the common law rule in respect of such contracts and did not regard the stipulation as to time as not of the essence of the bargain, the reason being that a renewal of a lease is a privilege and if the tenant wishes to claim the privilege he must do so strictly within the time limited for the purpose …………. A delay on the part of the lessee to apply for renewal arising by mere neglect on his part and which could have been avoided by reasonable diligence will not entitle him to claim renewal.”
11. The argument of the learned Advocate General was that Section 28 enabled the vendor to apply to the court to rescind the contract where the purchaser had committed default in payment of the purchase money before the date fixed by the decree and, therefore, until the vendor filed such an application the Court would have the power to grant extension of time. But, that is non sequitur. Section 28 is not intended to enable the defaulting party to invoke the Court's discretionary powers but is intended to enable the non-defaulting party to seek the court's assistance to be restored to the position that obtained before the contract. For example, a purchaser who has obtained possession of the property at the time of the agreement may commit default in paying the purchase money before the date fixed in the decree for specific performance. What is the remedy of the vendor who has lost possession of the property and who has not received the purchase-money? Is he to file a suit to recover possession? Section 28 provides a simple remedy. He may file an application to rescind the contract and to restore possession of the property to him. The non-defaulting party is enabled to file an application to rescind the contract as a step towards obtaining relief against the defaulting party. There is nothing in Section 28 which warrants the conclusion that it enables the defaulting party to seek extension of time until the non-defaulting party files an application to rescind the contract.
12. As we said earlier, S. 28 does not deal with the topic of extension of time at all. We are therefore of opinion that in the case of an agreement to reconvey property the time fixed by the decree for payment of purchase money cannot be extended. An equally difficult hurdle in the way of the appellant is the circumstance that the decree was a compromise decree and it cannot be varied except by consent. The learned Advocate General relied once again on the language of Sec. 28. We do not think S. 28 helps the appellant. We consider it unnecessary to pursue the matter further. The appeal is dismissed. No costs.
13. Appeal dismissed.
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