# 13 (ADDL.) S.C.R. 605 ·MIS. CITADEL FINE PHARMACEUTICALS v. MIS. RAMANIYAM REAL ESTATES P. LTD. & ANR

- **Citation:** [2011] 13 S.C.R. 605
- **Court:** Supreme Court of India
- **Decided:** 2011-08-08
- **Case number:** Civil Appeal No. 6437 of 2011
- **Bench:** G.S. Singhvi, Asok Kumar Ganguly
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/13-addl-s-c-r-605-mis-citadel-fine-pharmaceuticals-v-mis-ramaniyam-real-estates-27328
- **Pages:** 31

## Headnote

Specific Relief Act, 1963 - s. 9 - Specific Performance
A
B
of Contract - Non-performance by plaintiff of its obligation
under the contract within stipulated time -
Effect of -
C
Defendant-vendor, a partnership firm, owned 66 cents of land
- It entered into an agreement for sale of said land for
consideration of Rs. 1 crore with plaintiff-purchaser, a ·company
engaged in the business of constructing buildings - Of the
said 66 cents, however, 19 cents were considered excess D
urban vacant land under the Tamil Nadu Urban Land (Ceiling
and Regulations) Act - As per clause 7 of agreement, it was
the plaintiff's responsibility to have the land cleared for sale ·
from the urban land ceiling authorities - However plaintiff
failed to get such clearance from the Urban Land Ceiling
E
Authorities within stipulated time - Defendant-vendor
cancelled the agreement - Suit for specific performance -
Decreed by Single judge of High Court - Division Bench
partly allowed appeal of defendant holding that plaintiffrespondents could be given relief of specific performance
F
only to the extent of 47 cents of lands that were not part of
the proceedings under the Tamil Nadu Act - Held: In the
instant case, prior to signing of the agreement, the terms were
discussed between the parties and the plaintiff-purchaser
willingly took upon itself the burden of obtaining clearance
from the Urban Land Ceiling Authorities within the time G
stipulated in the agreement - The parties clearly intended
time to· be of the essence of the contract (agreement) which
was a/so evident from the commercial nature of the transaction
605
H
606
SUPREME COURT REPORTS [2011] 13 (ADDL.) S.C.R
A and the surrounding circumstances - Since the plaintiff did
not discharge its burden within the time specified it was not
entitled to a specific performance of the contract - Moreover,
prior to filing of the suit, the defendant-vendor, in terms of the
agreement, had returned the earnest money of Rs.10 lakhs
B by sending an· accounts payee cheque of such amount in
favour of the plaintiff under registered post which was refused
by the plaintiff and yet the plaintiff-purchaser made averment
in the plaint that the defendant-vendor be directed to return
the advance amount of Rs. 10 lakhs with interest -
C Suppression by the plaintiff of the fact that it refused to accept
the said cheque of Rs.10 /akhs was a material fact - On that
ground also the plaintiff-purchaser was not entitled to any relief
in its suit of specific performance - Approach of the High
Court both by Single Judge and the Appellate Bench not
0 sustainable - Appeal of defendant-vendor allowed while
appeal of plaintiff-purchaser dismissed - Cortract Act, 1872
- s.55 - Tamil Nadu Urban Land (Ceiling and Regulations)
Act, 1978.
Specific Relief Act, 1963 - Plea for discretionary relief
E of specific performance - Suppression of material fact by the
plaintiff - Effect of - Held: When discretionary remedy is
prayed for by a party, such party must come to court on proper
disclosure of facts - The plaint filed before the Court in such
cases must state all facts with sufficient candour and clarity -
F Where the plaintiff is shown to have materially misled the court
or to have abused its process, or to have attempted to do so,
the discretionary relief of specific performance can be denied
to him -
To enable the court to refuse to exercise its
discretionary jurisdiction suppression must be of a material
G fact - However, what is a material fact, suppression whereof
would disentitle the suitor to obtain a discretionary relief, would
depend upon the facts and circumstances of each case -
Material fact would mean a fact material for the purpose of
determination of the tis.
H
CITADEL FINE PHARMACEUTICALS v. RAMANIYAM REAL 607
ESTATES P. LTD.
Words and Phrases - Material fact - Meaning of.
A
Mis. Citadel Fine Pharmaceuticals (defendant no.1),
a partnership firm, owned 66 cents of land. It entered into
an agreement for sale of the said land for

## Text

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[2011] 13 (ADDL.) S.C.R. 605
·MIS. CITADEL FINE PHARMACEUTICALS
v.
MIS. RAMANIYAM REAL ESTATES P. LTD. & ANR.
(Civil Appeal No. 6437 of 2011)
AUGUST 08, 2011
[G.S. SINGHVI AND ASOK KUMAR GANGULY, JJ.]
Specific Relief Act, 1963 - s. 9 - Specific Performance
A
B
of Contract - Non-performance by plaintiff of its obligation
under the contract within stipulated time -
Effect of -
C
Defendant-vendor, a partnership firm, owned 66 cents of land
- It entered into an agreement for sale of said land for
consideration of Rs. 1 crore with plaintiff-purchaser, a ·company
engaged in the business of constructing buildings - Of the
said 66 cents, however, 19 cents were considered excess D
urban vacant land under the Tamil Nadu Urban Land (Ceiling
and Regulations) Act - As per clause 7 of agreement, it was
the plaintiff's responsibility to have the land cleared for sale ·
from the urban land ceiling authorities - However plaintiff
failed to get such clearance from the Urban Land Ceiling
E
Authorities within stipulated time - Defendant-vendor
cancelled the agreement - Suit for specific performance -
Decreed by Single judge of High Court - Division Bench
partly allowed appeal of defendant holding that plaintiffrespondents could be given relief of specific performance
F
only to the extent of 47 cents of lands that were not part of
the proceedings under the Tamil Nadu Act - Held: In the
instant case, prior to signing of the agreement, the terms were
discussed between the parties and the plaintiff-purchaser
willingly took upon itself the burden of obtaining clearance
from the Urban Land Ceiling Authorities within the time G
stipulated in the agreement - The parties clearly intended
time to· be of the essence of the contract (agreement) which
was a/so evident from the commercial nature of the transaction
605
H
606
SUPREME COURT REPORTS [2011] 13 (ADDL.) S.C.R
A and the surrounding circumstances - Since the plaintiff did
not discharge its burden within the time specified it was not
entitled to a specific performance of the contract - Moreover,
prior to filing of the suit, the defendant-vendor, in terms of the
agreement, had returned the earnest money of Rs.10 lakhs
B by sending an· accounts payee cheque of such amount in
favour of the plaintiff under registered post which was refused
by the plaintiff and yet the plaintiff-purchaser made averment
in the plaint that the defendant-vendor be directed to return
the advance amount of Rs. 10 lakhs with interest -
C Suppression by the plaintiff of the fact that it refused to accept
the said cheque of Rs.10 /akhs was a material fact - On that
ground also the plaintiff-purchaser was not entitled to any relief
in its suit of specific performance - Approach of the High
Court both by Single Judge and the Appellate Bench not
0 sustainable - Appeal of defendant-vendor allowed while
appeal of plaintiff-purchaser dismissed - Cortract Act, 1872
- s.55 - Tamil Nadu Urban Land (Ceiling and Regulations)
Act, 1978.
Specific Relief Act, 1963 - Plea for discretionary relief
E of specific performance - Suppression of material fact by the
plaintiff - Effect of - Held: When discretionary remedy is
prayed for by a party, such party must come to court on proper
disclosure of facts - The plaint filed before the Court in such
cases must state all facts with sufficient candour and clarity -
F Where the plaintiff is shown to have materially misled the court
or to have abused its process, or to have attempted to do so,
the discretionary relief of specific performance can be denied
to him -
To enable the court to refuse to exercise its
discretionary jurisdiction suppression must be of a material
G fact - However, what is a material fact, suppression whereof
would disentitle the suitor to obtain a discretionary relief, would
depend upon the facts and circumstances of each case -
Material fact would mean a fact material for the purpose of
determination of the tis.
H
CITADEL FINE PHARMACEUTICALS v. RAMANIYAM REAL 607
ESTATES P. LTD.
Words and Phrases - Material fact - Meaning of.
A
Mis. Citadel Fine Pharmaceuticals (defendant no.1),
a partnership firm, owned 66 cents of land. It entered into
an agreement for sale of the said land for a consideration
of Rs.1 crore with Mis. Ramaniyam Real Estates Private
8
Limited (plaintiff), a company incorporated under the
Companies Act, 1956 and engaged in the business of
constructing buildings. In pursuance to the agreement,
the plaintiff-purchaser paid earnest money of Rs.10 Lakhs
which was received by defendant No.1-vendor.
c
Of the said 66 cents of land, however, 19 cents were
considered excess urban vacant land under the Tamil
Nadu Urban Land (Ceiling and Regulations) Act, 1978,
(hereinafter 'the Tamil Nadu Act'). Subsequently, when the
plaintiff preferred application in Form 37-1 prescribed
D
under Rule 48-L of the Income Tax Rules, 1962, before the
Appropriate Authority for clearance of the land in
question for sale vide section 269UC in Chapter XX of the
Income Tax Act, 1961, the Income Tax Authority refused
such clearance on the ground that as per section 6 of the
E
Tamil Nadu Act, agreement to sell a piece of urban land
declared excess vacant land, or a piece of land, part of
which had been declared excess vacant urban land, was
deemed as null and void.
F
As per clause 7 of the agreement entered between
the parties, it was the plaintiff's responsibility to have the
land in question cleared for sale by the urban land ceiling
authorities. However, the plaintiff-purchaser failed to get
clearance from the Urban Land Ceiling Authorities within
the stipulated time.
G
Since Form 37-1 was not cleared, the plaintiff sent
letter to the defendant requesting that the sale be split up
and two separate agreements be entered into - the first
for the unencumbered 47 cents and the second for 19
H
608
SUPREME COURT REPORTS [2011] 13 (ADDL) S.C.R.
'
A cents termed as excess lana by the urban land ceiling
authority. This proposal was rejected by the defendant
no. 1 on grounds that the agreement was not divisible;
that the bar under section 6 of the Tamil Nadu Act, as
pointed out by the Appropriate Authority was applicable
B not only in respect of the 19 cents of land termed as
excess, but in fact the entire 66 cents for the reason that
the said 19 cents could not be severed from the 66 cents
and thus the contract was hit by illegality and was thus
frustrated. The defendant-vendor cancelled the
c agreement, purportedly in terms of clause 9 of the
agreement and returned the advance money of Rs. 10
lakhs vide a cheque in terms of clause 9, which was
refused by the plaintiff.
Thereafter the plaintiff, the proposed purchaser,
D instituted suit for specific performance of the contract for
the entire 66 cents of land. The defendant, the proposed
vendor, resisted the suit contending that the suit was
liable to be dismissed in view of impossibility of
performance of the contract and non-performance by the
E plaintiff of its obligation under the contract within the
stipulated time.
The Single Judge of the High Court decreed the suit
holding that the suit property was in respect of
F agricultural land and not an urban land as contemplated
under the Tamil Nadu Act; and thus the same was outside
the purview of the Act; and that clause 7 of the agreement
in itself was not a condition precedent to the contract.
Aggrieved, defendant no.1 preferred appeal. The Division
G Bench partly allowed it holding that the plaintiffrespondents could be given the relief of specific
performance only to the extent of 47 cents of the lands
that were not part of the ?roceedings under the Tamil
Nadu Act. Hence the present cross-appeals.
H
Allowing the appeal filed by M/s. Citadel Fine
CITADEL FINE PHARMACEUTICALS v. RAMANIYAM
609
REAL ESTATES P. LTD.
Pharmaceuticals and dismissing the appeal filed by Mis. A
Ramaniyam Real Estates Private Limited, the Court
HELD: 1. The settled law seems to be that in a case
for specific performance of contract relating to immovable
property time is not normally of the essence. However, 8
this is not an absolute proposition and it has several
exceptions. In cases relating to specific performance,
equity, which governs the rights of the parties, does not
look always at the express term of the agreement but at
the substance of it in order to ascertain whether the C
parties named a specific time within which completion
was to take place and whether the parties in substance
intended that the completion should take place within a
reasonable time. Equity can operate in the construction
of a contract "unless excluded by any clearly expressed
stipulation". However, equity will not assist where there D
has been undue delay on the part of one party to the
contract and one party has given notice to the other
party that the defaulting party must complete the contract
within a definite time. Further, equity will not assist when
other circumstances will result in injustice on application E
of equitable principle. In this case, prior to the signing of
the agreement, the terms were discussed between the
parties and the plaintiff purchaser willingly took upon
itself the burden of obtaining the clearance within the
time stipulated in the agreement. From the terms of the
F
agreement in this case it is clear that time was of the
essence and this was clearly stipulated and understood
by the parties having regard to the previous
correspondence and also having regard to the laid down
terms of the contract and especially when the G
consequence of non-completion of the terms by
purchaser within the stipulated time was spelt out in
clause 9. [Paras 31, 32, 33, 34 and 36] [626-8-G; 627-C-DG; 628-8-C]
H
610
SUPREME COURT REPORTS [2011] 13 (ADDL) S.C.R
A
Gomathinayagam Pillai and Ors. v. Pa/aniswami Nadar
AIR 1967 SC 868 - relied on.
Jamshed Khodaram Irani v. Burjorji Dhunjibhai (191516) 43 I.A. 26 - referred to.
B
2.1. Time may be implied as essential in a contract
from the nature of the subject matter with which the
parties are dealing. In a contract relating to commercial
enterprise the Court is strongly inclined to hold time to
be essential, whether the contract is for the purchase of
C land or for such purposes or more 'directly for the
prosecution of trade'. The aforesaid principles squarely
apply to the facts of the present case. Here the purchaser
was admittedly in the business of building construction
and was entering with agreement for purchasing the plot
D on commercial basis. The instant case relates to a
contract in commercial transaction and the Court can
take judicial notice of the fact that in the city of Chennai
the price of real estate is constantly escalating and the
clear intention of the parties, as 1i appears from the
E stipulations of the agreement, was to treat time as the
essence of the contract. The court cannot attribute a
different intention to the parties and cannot specifically
enforce the contract at the instance of the plaintiff.
purchaser who failed to perform his part of the obligation
F within the time stipulated. [Paras 39, 40, 41, 43 and 44]
[629-E-G-H; 630-A-D-H; 631-A-B]
2.2. In K. S. Vidyanadam's case, this Court explained
how discretion is to be exercised by the Court before
granting specific performance. It was held that the Court
G cannot be oblivious of the reality of constant and
continuous rise in the value of urban properties and in
that context the time limit set in the contract has to be
strictly construed. In the case of Vidyanadam there was
no such strict stipulation as time being of the essence of
H
CITADEL FINE PHARMACEUTICALS v. RAMANIYAM
611
REAL ESTATES P LTD.
the contr~ct as is in the instant case even then the Court A
refused to grant the relief of specific performance. The
same questi.on, whether time was of essence of the
contract was discussed in a Constitution Bench
judgment of this Court in Chand Rani's case. The
Constitution Bench in Chand Rani formulated the B
proposition that even where parties have expressly
provided time to be of the essence of the contract, such
a stipulation will have to be read along with other terms
of the contract. Such other terms, on a proper
construction, may exclude the inference that the c
completion of work by a particular date was meant to be
fundamental. The Judges indicated the following
circumstances which may indicate a contrary inference;
(a) if a contract includes clauses providing for extension
of time in certain contingencies, or (b) if there are clauses 0
for payment of fine or penalty for every day or week the
work undertaken remains unfinished after the expiry of
time. The Constitution Bench held that such clauses
would be construed as rendering ineffective the express
provision relating to time being of the essence of
contract. In the instant case, in the said agreement no
E
such clause, as aforesaid, exists. Rather the stipulation
as time being of the essence of the contract was
specifically mentioned in clause 10 and the
consequences of non-completion are mentioned in
clause 9. So the express terms of the contract and the
F
commercial nature of the transaction and the
surrounding circumstances make it clear that the parties
intended time in this case to be of the essence of the
contract. (Paras 45, 46, 47] (631-C-H; 632-A-F]
Chand Rani (Smt.) (Dead) by LRs. v. Kamal Rani (Smt.)
(Dead) by LRs. (1993) 1 SCC 519: 1992 (3) Suppl. SCR 798
- followed.
G
H
612
SUPREME COURT REPORTS [2011] 13 (ADDL.) S.C.R.
A
K.S. Vidyanadam and Ors. v. Va1ravan (1997) 3 SCC 1:
1997 (1) SCR 993 - relied on.
Mis. Hind Construction Contractors by its sole proprietor
Bhikamchand Mulchand Jain (Dead) by LRs. v. State of
8
Maharashtra (1979) 2 sec 70: 1979 ( 2) SCR 1147 ands. V.
Sankaralinga Nadar v. P. TS. Ratnaswami Nadar AIR 1952
Mad 389 - referred to.
Chitty on Contracts, (Volume 1, Thirteenth Edition, Sweet
& Maxwell in paragraph 21-015; Treaties on Specific
C Performance of contracts by Fry (Sixth Edition) and Treaties
on Specific Performance by Gareth Jones and William
Goodhart(Second Edition, Butterworths) - referred to.
3. Section 55 of the Indian Contract Act deals with a
0
contract, in which time is of essence. On a combined
reading of Section 9 of the Specific Relief Act and Section
55 of The Indian Contract Act it is clear that in this case
the vendor as a promisee, was within its right to terminate
the contract by sending the letter daled 4th September,
E 1996 in terms of Clause 9 of the Contract while returning
the advance money of Rs.10,00,000/-. It is clear that the
plaintiff had not discharged its burden within the time
specified and was not entitled to a specific performance
of the contract. Therefore, the approach of the High Court
F both by the Single Judge and the Appellate Bench cannot
be sustained. [Paras 50, 51) (633-C-F]
4:i. Moreover, in the instant case by asking for
specific performance of the contract, the plaintiff.
purchaser was praying for a discretionary remedy. It is
G axiomatic that when discretionary remedy is prayed for
by a party, such party must come to court on proper
disclosure of facts. The plaint filed before the Court in
such cases must state all facts with sufficient candour
and clarity. In the instant case the plaintiff-purchaser
H
CITADEL FINE PHARMACEUTICALS v. RAMANIYAM REAL613
ESTATES P LTD.
made an averment in the plaint that the defendant-vendor A
be directed to return the advance amount of Rs.10,00,000/
- at the rate of 24% interest from the date of payment of
the said amount till the realization and an alternative
prayer to that effect was also made. However, the fact
remains that prior to the filing of the suit the defendantB
vendor returned the said amount of Rs.10,00,000/- by its
letter dated 4th September, 1996 by an account payee
cheque in favour of the plaintiff and the same was sent
to the plaintiff under registered post which was refused
by the plaintiff on 6.9.1996. The plaintiff suppressed this C
fact in the plaint and filed the suit on 9.9.1996 with a
totally contrary representation before the court as if the
amount has not been returned to it by the vendor. This
is suppression of a material fact, and disentitles the
plaintiff-purchaser from getting any discretionary relief of 0
specific performance by Court. [Paras 53, 54] [633-H; 634A-E
4.2. Where the plaintiff is shown to have materially
misled the court or to have abused its process, or to have
attempted to do so, the discretionary relief of specific E
performance can be denied to him. It is trite law that to
enable the court to refuse to exercise its discretionary
jurisdiction suppression must be of a material fact. Of
course, what is a material fact, suppression whereof
would disentitle the suitor to ,obtain a discretionary relief,
F
would depend upon the facts and circumstances of each
case. However, material fact would mean that fact which
is material for the purpose of determination of the lis. In
the instant case, suppression of the fact that the plaintiff
refused to accept the cheque of Rs.10 lakhs sent to it by G
the defendant under registered post with A.O. in terms of
Clause 9 of the Contract is a material fact. So on that
ground also the plaintiff-purchaser is not entitled to any
relief in its suit of specific performance. [Paras 55, 56, 57)
[634-F-H 635-A-C]
H
614
SUPREME COURT REPORTS (2011] 13 (ADDL.) S C.R
A
Arunima Baruah v. Union of India and Ors (2007) 6 SCC
120: 2007 (5) SCR 904 - relied on.
Armstrong v. Sheppard & Short Ltd. (1959) 2 Q.B. 384.
p.397 - referred to.
B
5. Mis. Citadel Fine Pharmaceuticals is directed to
return the amount of Rs.10,00,000/· by an account payee
cheque to Mis. Ramaniyam Real Estates P. Ltd., if not
already returned, within 4 weeks from date. In default Mi
s. Citadel Fine Pharmaceuticals will have to pay interest
C
at the rate of 12% per annum on the same from the expiry
of the period of 4 weeks from date till actual payment.
[Para 59] [635-E-F]
D
E
F
Case Law Reference:
(1915-16) 43 I.A. 26
referred to
Para 32
AIR 1967 SC 868
relied on
Para 35
1997 (1) SCR 993
relied on
Para 45
AIR 1952 Mad 389
referred to
Para 45
1992 (3) Suppl. SCR 798
followed
Para 46
1979 (2) SCR 1147
referred to
Para 46
(1959) 2 Q.B. 384
referred to
Para 55
2007 (5) SCR 904
relied on
Para 56
CIVIL APPELLATE JURISDICTION : Civil Appeal No.
6437 of 2011.
G
From the Judgment & Order dated 02.09.2008 of the High
H
Court of Judicature at Madras in O.S.A. No. 332 of 2007.
V'JITH
Civil Appeal No. 6438 of 2011.
CITADEL FINE PHARMACEL!TICALS v. RAMANIYAM
615
REAL ESTATES P LTD.
Abhishek Manu Singhvi, Prashant Mehta, R.
A
Venkatverdhan, Rishi Agrawala, Amit Kumar Sharma, E.C.
Agrawala for the Appellant.
Jayanth Muth Raj, Sundaresan for the Respondents.
The Judgment of !he Court was delivered by
GANGULY, J. 1. Leave is granted in both the special
leave petitions.
B
2. These appeals have been preferred from the judgment
and final order dated 2nd September, 2008 passed in O.S.A.
C
No.332/2007 and C.M.P. No.1/2007 by the Division Bench of
the Madras High Court.
3. The controversy arose out of a suit of specific
performance. Mis. Citadel Fine Pharmaceuticals (defendant D
No.1 ), a partnership firm, owned 66 cents of agricultural land
(hereinafter 'the suit property'), forming a part of total of 2.87
acres of agricultural land in survey nos. 363, 364, 366i1 of
Velachery village, Mamblam, Guindy Taluk, Registration District
of Madras, and entered into an agreement for sale of the suit E
property (hereinafter 'the agreement') for a consideration of
Rs.1,00,00,000i- with Mis. Ramaniyam Real Estates Private
Limited (plaintiff), which was a company incorporated under the
Companies Act, 1956 and engaged in the business of
constructing buildings.
·
F
4. The agreement dated 7th July, 1995 was the subject
matter of suit between the above parties. As per the
agreement, Rs.10,00,000/- of the sale consideration was to be
paid upfront as earnest money, and the remainder of
Rs.90,00,000/- was to be paid at the time of the registration of G
the sale deed. At the time of agreement, the suit property was
encumbered by way of security with Mis. State Bank of India,
Guindy Branch (defendant No.2) and therefore one of the
conditions of the agreement was that defendant No. 1 would
get the suit property released from such encumbrance before H
616
SUPREME COURT REPORTS [2011] 13 (ADDL.) S.C.R.
A the final payment of Rs.90,00,000/- was to be made. Apart from
this encumbrance, it was stated in the agreement, the suit
property was to be without any other encumbrance; vide clauses
2 and 6 of the agreement.
B
5. Of the said 66 cents, however, 19 cents were
considered excess urban vacant land under the Tamil Nadu
Urban Land (Ceiling and Regulations) Act (24 of 1978),
(hereinafter 'the Tamil Nadu Act') As per clause 7 of the
agreement, it was for the plaintiff to have the land cleared for
C sale from the urban land ceiling authorities. Under clauses 8,
10 and 11 of the agreement, the sale was made time bound.
Clause 10 stated that time was the essence of this contract.
Clause 8 mandated that under all circumstances, the sale had
to materialize within a year from the date of the agreement. In
terms of clause 9, if the sale failed on account of lapses on
D plaintiffs part, the sale was to stand completely cancelled, and
the earnest money of Rs.10,00,000/- was to be returned. As
per clause 11, however, if the sale failed because of defendant
No. 1, the plaintiff was at liberty to sue for specific performance
of the contract.
E
6. In pursuance to the agreement, the earnest money was
paid by the plaintiff and received by defendant No. 1. The
plaintiff then preferred an application in Form 37-1 prescribed
under Rule 48-L of the Income Tax Rules, 1962, before the
F Appropriate Authority for the clearance of the suit property for
sale vide section 269UC in Chapter XX of the Income Tax Act,
1961.
7. However, the Income Tax Authority refused such
clearance on the ground that as per section 6 of the Tamil Nadu
G Act, agreement to sell a piece of urban land declared excess
vacant land, or a piece of land, part of which had been declared
excess vacant urban land, was deemed as null and void.
8. From the Statement and Objects and Reasons of the
H Tamil Nadu Act it appears that it was enacted to impose a
CITADEL FINE PHARMACEUTICALS v. RAMANIYAM REAL 617
ESTATES P LTD. [ASOK KUMAR GANGULY, J]
ceiling on the quantum of land that could be held or owned
A
within an urban agglomeration. The object of the Act was to
prevent concentration of ownership of urban land in the hands
of a few, and to regulate the construction of buildings on such
lands, speculative trading of urban land and illegal profiteering.
Under the Act, the ceiling limit had been fixed by Section 5.
B
Section 6 of the Act prevented transfer of such excess vacant
urban land by its owner to any other person. Section 6 is set
out:
6. Transfer of vacant land. - No person holding in excess
C
of the ceiling limit immediately before the commencement
of this Act, vacant land, shall transfer any such land or part
thereof by way of sale, mortgage, gift, lease or otherwise
until he has furnished a statement under section 7 and a
notification regarding the excess vacant land held by him
has been published under sub section (1) of section 11;
D
and any such transfer made in contravention of this
provision shall be deemed to be null and void.
9. The section thus enjoined that landowners holding
excess vacant land are to furnish a statement under Section 7.
E
In this case, 19 cents were considered excess urban vacant
land vide case no. R.C.6160/86 and defendant No. 1 filed its
statement under Section 7.
10. Section 9 provided for preparation of a draft statement
F
as regards the excess vacant land. Under clause (5) of Section
9, the Competent Authority, so designated under the Tamil
Nadu Act, was to consider objections preferred by a land
owner, and then pass orders with respect to the question of
excess land. Defendant no. 1 preferred its objections before
the Competent Authority. The objections however were
G
dismissed. The defendant no. 1 then preferred an appeal before
the Special Commissioner (Land Reforms), Madras and the
appeal was kept pending.
11. In accordance with Section 11 (1), a notification
H
618
SUPREME COURT REPORTS [2011] 13 (ADDL) S C.R
A regarding the 19 cents being excess vacant land was published
and any transfer made in contravention of this provision was
deemed to be null and void. Section 11 provided for acquisition
of such vacant urban land by the State Government.
8
12. Defendant no. 1 also preferred an application for
exemption of that 19 cents of land under the provisions of
Section 21. Section 21 empowered the State Government to
exempt a piece of vacant excess land from acquisition
mentioned above.
C
13. That application was also dismissed. Defendant no. 1
then preferred Writ Petition No. 13906/2008 before the High
Court challenging the declaration in R C. 6160/86. In the writ
petition, defendant no. 1 prayed for a stay of the proceedings
and which was allowed. However, during the pendency of this
D writ petition the Tamil Nadu Act was repealed on 16th June,
1999 by the Tamil Nadu Urban Land (Ceiling and Regulation)
Repeal Act, 1999 (20of1999) (hereinafter 'the Repealing Act').
Under Section 4 of the repealing Act, all proceedings relating
to any order made or purported to be made under the Principal
E Act, that is the Tamil Nadu Act, shall abate. Section 4 of the
F
G
H
Repealing Act is as follows:-
"4. Abatement of legal proceedings. - All proceedings
relating to any order made or purported to be made under
the Principal Act pending immediately before the
commencement of this Act before any court, tribunal or any
authority shall abate.
Provided that this section shall not apply to the proceedings
relating to Sections 12, 13, 14, 15, 15-B and 16 of the
Principal Act in so far as such proceedings are relatable
to the land, possession of which has been taken over by
the State Government of any person duly authorised by the
State Government in this behalf or by the competent
authority.''
CITADEL FINE PHARMACEUTICALS v. RAMANIYAM
619
REAL ESTATES P LTD. [ASOK KUMAR GANG UL Y, J ]
1A. Admittedly, possession of 19 cents of land. in respect
A
of which proceeding was pending, was not taken over by the
Government. So the pending proceeding in respect of that land
under the Principal Act. that is the Tamil Nadu Act. shall abate
in view of Section 4 of the Repealing Act.
15. However, Income Tax authorities, as noted above, had
refused to process Form 37-1 in view of the proceedings initiated
under the Tamil Nadu Act. Having referred to section 6 of the
Act, the appropriate authority, while rejecting form 37-1 stated:
B
" ... In column 8, it has been mentioned that an extent of 19
C
cents has been declared as excess vacant land under
section 9 (5) of Tamil Nadu Urban Land (Ceiling and
Regulations) Act, 1978 that an appeal is pending before
the Special Commissioner (Land Reforms), Madras and
that the transferor has also applied to the State Government
D
for exemption under Section 21 of the said Act but the
same has been rejected and the matter is pending in W.
P. No. 13906/1988, before the High Court, Madras.
2. It transpires, therefore, that the transferor intends to
E
transfer the entire extent of 66 cents, inclusive of the 19
cents of land which is declared as excess vacant land by
the Competent Authority under the Urban Land Ceiling Act,
which is prohibited by section 6 of the Tamil Nadu Urban
Land (Ceiling and Regulations) Act, 1978 .....
In view of the prohibition contained in section 6,
quoted above, the agreement .entered into between the
parties on 7.7.95 to transfer the entire land, including the
excess vacant land of 19 cents, shall be deemed to be null
F
and void. In view of this legal prohibition, we are unable to
G
process the 37-1 statement filed by you and there.fore, the
same is lodged in this office. If you are so advised, you
may file a fresh 37-1 statement for transfer of the balance
land only."
H
620
SUPREME COURT REPORTS [2011] 13 (ADDL) S.C.R.
A
16. As per clause (7) of the agreement, it was the plaintiffs
responsibility to have the suit property cleared for sale by the
urban land ceiling authorities. Since Form 37-1 was not
cleared, the plaintiff sent two letters dated 10th June, 1996 and
3rd July, 1996 to the defendant requesting that the sale be split
8 up and two separate agreements be entered into. The first for
the unencumbered 4 7 cents and the second for 19 cents termed
as the excess land by the urban land ceiling authority. This
proposal was rejected by the defendant no. 1 o·~ the grounds
that the agreement is not divisible. According to defendant
C No.1, the splitting up of the agreement into two in effect meant
the writing of an entirely new contract. The bar under section 6
of the Tamil Nadu Act, as pointed out by the Appropriate
Authority was applicable not only in respect of the 19 cents of
land termed as excess, but in fact the entire 66 cents for the
reason that the said 19 cents could not be severed from the
D 66 cents. The defendant No. 1 urged that the contract was hit
by illegality and was thus frustr;.: '.ed.
17. The plaintiff, the proposed purchaser, under these
circumstances instituted on 9th September, 1998 the suit for
E specific performance of the contract, viz. C. S. 589/1996 for
the entire 66 cents of land.
18. The plaint case is that at the time the agreement for
sale was entered into, it was known to both the parties that 19
F cents of the suit property had been declared excess land under
the Tamil Nadu Act, and that an appeal to the Special
Commissioner (Land Reforms), Madras was pending. It also
submitted that the parties knew that a writ petition challenging
the State Government's refusal to exempt the property under
section 21 of the Tamil Nadu Act was also pending. With
G knowledge the parties entered into the agreement to sell. The
plaintiff submitted that this meeting of minds was reflected in
clause 7 of the agreement. There was thus no new and
unforeseen development leading to the frustration of contract
as such the relief for specific performance of the contract was
H prayed or in the alternative, it was prayed the plaintiff be
CITADEL FINE PHARMACEUTICALS v. RAMANIYAM REAL 621
ESTATES P. LTD. [ASOK KUMAR GANGULY, J.]
allowed a refund of the earnest money with an interest of 25%
A
per annum and liquidated damages to the tune of Rs.75,00,000/
- along with costs.
19. The defendant, the proposed vendor, resisted the suit
by submitting that the agreement to sell was with respect to the
8
entire suit property, Le. 66 cents, and thus could not have been
split into separate agreements to sell for 4 7 cents and 19 cents.
It submitted that in view of the bar placed because of section 6
of the Tamil Nadu Act and the consequential refusal by the
appropriate authority under the income tax department to allow C
the execution of the sale, the contract itself had become
frustrated and thus unenforceable in law.
20. It was further urged that time was the essence of \he
contract and it was for the plaintiff purchaser to seek exemption
for the said 19 cents land from the urban land ceiling D
department, which however it failed to do. As a result of this
failure, the sale could not be affected within ~ year's time. This
clearly rendered the contract void in terms of clauses 8 and 10
insofar as the contract was not performed within a year's time.
Hence, clause 9 was attracted and the contract stood cancelled
E
for default of the plaintiff. It submitted that in terms of clause 9,
the proposed vendor (defendant no.1) refunded the earnest
money to the plaintiff-purchaser. However the cheque sent under
registered post came back to the defendant no. 1 'refused'. It
appears that the same refused by the plaintiff-purchaser either
F
by 6th or 7th September, 1996.
21. As such the defendant no. 1 prayed for dismissal of
the suit in view of impossibility of performance of the contract
and non-performance by the plaintiff of its obligation under the
contract within the stipulated time.
G
22. However, the learned Single Judge held that the suit
property was in respect of agricultural land and not about an
urban land as contemplated under the Tamil Nadu Act. It was
further noted by the learned Judge that as the Tamil Nadu Act H
622
SUPREME COURT REPORTS [2011] 13 (ADDL) S.C.R.
A
had been repealed in 1999, its application itself would be
limited to only those instances where possession of the excess
vacant land had been taken over by the State Government.
23. The learned Judge noted that the suit property in the
B instant case did not attract any of the provisions mentioned in
Section 3 of the Repealing Act. According to the learned Judge,
there were two reasons for which the provisions of Tamil Nadu
Act would not apply to the instant agreement: firstly, the suit
property was agricultural in nature and thus the same was
C outside the purview of the Act. Secondly, after the repeal of the
Tamil Nadu Act in 1999, none of its provisions affected the
agreement. The Judge held that clause (7) in itself, however,
was not a condition precedent to the contract. It merely stated
that clearance of the said 19 cents from the urban land ceiling
authorities was upon the plaintiff, and that in the event the
D plaintiff was unable to have it cleared, the defendant no. 1 shall
not be provided with any alternative pie.ce of land or any
compensation. Thus, the learned Judge held that the plaintiff
was entitled to specific performance of the contract and
decreed the suit.
E
24. Aggrieved, the defendant no. 1 preferred an appeal.
The learned Division Bench partly allowed it holding that the
respondents could be given the relief of specific performance
only to the exlent of 47 cents of the lands that were not part of
F the proceedings under the Tamil Nadu Act.
25. Apart from upholding the judgment of the learned
Judge with respect to the agricultural nature of the suit property,
the Division Bench noted that in none of the letters exchanged
between the parties it had come on record that the agreement
G had become illegal in view of the provisions of Section 6 of the
Tamil Nadu Act. On the contrary, in all these communications,
the only position that the defendant no. 1 had insisted upon was
the satisfaction of the conditions mentioned in clause (7) of the
agreement, viz., permission for the sale of 19 cents by the urban
H land ceiling authorities. The learned Division Bench noted that
CITADEL FINE PHARMACEUTICALS v. RAMANIYAM REAL 623
ESTATES P-LTD [ASOK KUMAR GANGULY. J.]
if this was the stance of the defendant no. 1, it could not be
A
allowed to resist the suit on the grounds of illegality of contract.
26. However, it disagreed with the decision of the learned
Judge to the extent the repeal of the Tamil Nadu Act did not in
itself released 19 cents of the excess vacant land from the
B
proceedings initiated under that Act. It held that Section 3 of
the Repeal Act provided that repealing of the Tamil Nadu Act
would not affect the vesting of any vacant land under sub section
(3) of Section 11 of the Tamil Nadu Act in cases where the
possession of such vacant land had been taken over by the
State Government. Relying upon and following decision of a Full
C
Bench of the High Court in P. Gopirathnam and 4 Others v.
Ferrodous Estate (Private) Limited, represented by its Power
of Attorney Holder Sri G. John Arthur, 1999 (2) Current Tamil
Nadu Cases 181, the learned Bench held that the proceedings
with respect to the said 19 cents had been initiated and that
D
the same were pending. The Division Bench held that decree
for specific performance as given by the learned Judge had to
be modified to the extent that the same was possible only to
the extent of the unencumbered portion of the land.
E
27. One of the main questions which arise for
consideration in the facts of this Court is whether in the said
agreement time is of the essence of the contract. In order to
appreciate this question, the Court has to consider several
clauses in the said agreement. The relevant clauses are
F
clauses 7, 8, 9 & 10, which are set out below:
"7. The vendor states that an extent of 770 sq.mis. in
S.No.363/1 B & 363/1 C forming part of the property
described below and agreed to be sold has been
declared as excess vacant land under Sec 9(5) of the Tamil
G
Nadu Urban Land Ceiling (C&R) Act, 1978. An appeal is
pending before the Special Commissioner (Land
Reforms), Madras. The Vendor also applied to the State
Government for exemption under Sec 21 of the Act but the
same has been rejected and the matter is pending in
H
624
SUPREME COURT REPORTS [2011] 13 (ADDL.) S.C.R
A
W.P.13906/1988 before the High Court, Madras. It shall
be the sole responsibility of the Purchaser to get clearance
from the Urban Land Ceiling Authorities by negotiation or
getting exemption under the Act or permission to sell, at
his own cost and the Vendor shall not be responsible for
B
the same. But, the Vendor shall sign all applications or
petitions necessary for this purpose. While, getting
permission to sell or exemption under the Act in respect
of the property agreed to be sold, the Purchaser shall
ensure that no compensatory claim or alternate land is
c
claimed by the Urban Land Ceiling authorities in the rest
of the land to be retained by the Vendor.
8. The time for completion of the purchase shall be one
year from the date of this agreement.
D
9. If the purchaser fails to complete the transaction within
the time stipulated, this agreement shall stand cancelled
and a sum of Rs.10,00,000/- (Rupees Ten Lakhs only) paid
as earnest money will be returned without interest to the
Purchaser and the Vendor shall be at liberty to sell the
E
property to whomsoever he likes.
10. Time shall be the essence of the contract."
28. Admittedly, the agreement was entered into on 7th July,
1995 and the period of one year expired by 6th July, 1996.
F Within that period the plaintiff-purchaser could not get clearance
from the Urban Land Ceiling Authorities nor could they obtain
the exemption under the Act for permission to sell a part of the
property in respect of which the suit for specific performance
was filed.
G
29. It is not the case of the plaintiff-purchaser that the
vendor in any way delayed the signing of application or petition
necessary for getting such permission for clearance. From
some correspondence exchanged between the parties it is
H clear that purchaser took a few steps but.could not get the
CITADEL FINE PHARMACEUTICALS v. RAMANIYAM REAL 625
ESTATES P LTD. [ASOK KUMAR GANG UL Y. J ]
clearance within the time agreed by it. The Vendor, however,
A
by a letter dated 4th September, 1996 cancelled the
agreement in terms of clause 9 of the agreement and returned
the advance money of Rs.10,00,000/- vide a cheque in terms
of clause 9. The said letter written by the vendor is set out
below:-
B
"CITADEL FINE PHARMACEUTICALS
Ref: 3852/96
4th September 1996 C
Mis. Ramaniyam Real Estates Pvt. Ltd.,
Rep. by Mr. V. Jagannathan,
Managing Director,
'Sruthi'. No.11, 2nd Main Raad,
Gandhi Nagar,
Madras 600 020.
Dear Sir,
Re: 1. Our letter dated 11.7.96
2. Your letter dated 19.7.96.
D
E
As would be appreciated by you, at the meeting had with
you, by ourself through our Mr. Rajiv and further by
telephone on 30.8.1996 as you have expressed your
reluctance in accepting our terms put to you on the sale of
F
the property, we are returning the advance money of
Rs.10,00,000/- vide SBI, Guindy, Cheque No.904014
dt.4.9.1996 in terms of Clause 9 of the Agreement dated
7th July, 1995.
Kindly acknowledge the receipt of this.
Thanking you,
Yours faithfully,
G
H
626
SUPREME COURT REPORTS [2011] 13 (ADDL.) S.C.R.
A
For CITADEL FINE PHARMACEUTICALS
Sd/-
Partner
Encl: as above"
B
30.