# MRS. SARADAMANI KANDAPPAN v. MRS. S. RAJALAKSHMI & ORS

- **Citation:** [2011] 8 S.C.R. 874
- **Court:** Supreme Court of India
- **Decided:** 2011-07-04
- **Case number:** Civil Appeal Nos. 7254-7256 of 2002
- **Bench:** R.V. Raveendran, K.S. Radhakrishnan
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/mrs-saradamani-kandappan-v-mrs-s-rajalakshmi-ors-27879
- **Pages:** 69

## Headnote

C
Contract Act 1872:
s. 55 - Effect of failure to perform at a fixed time in
contracts in which time is essential - Held: In a contract
relating to sale of immovable property if time is specified for
0
payment of sale consideration but not in regard to the
execution of sale deed, time will become the essence only
with reference to payment of sale consideration but not in
regard to execution of sale deed - Normally in regard to
contracts relating to sale of immovable properties, time is not
E considered to be the essence of the contract unless such an
intention can be gathered either from the express terms of the
contract or impliedly from the intention of the parties as
expressed by the terms of the contract - In the instant case,
in the agreement for sale, there was a conscious effort to de/ink
the terms relating to payment of balance sale consideration
F
from the term relating to execution of sale deed and making
the time essence only in regard to the payment of the balance
sale consideration - Therefore, failure of the plaintiff to pay
the balance consideration clearly amounted to breach since
time for such payment was the essence of the contract - The
G defendants were justified in determining the agreement of sale
-
The rejection of the prayer for specific performance is
upheld - However, there was no provision in the agreement
for forfeiture of the amounts already paid, even in the event
of breach by the purchaser - On the other hand, it provided
H
874
SARADAMANI KANDAPPAN v. S. RAJALAKSHMI & 875
ORS.
that if the vendors did not satisfy the purchaser in regard to
A
their title, the amounts received would be refunded - Though
the plaintiff is not entitled to the relief of specific performance,
it cannot be said that the plaintiff had filed false, frivolous and
mischievous suits - In view of that, in terms of the agreement
and in terms of its offer, the plaintiff was entitled to recover s
the amounts paid by her.
Principle " Time is not of the essence of the contracts
relating to immovable properties - Relevance of - Need for
legislation - Held: The said principle took shape in an era
C
when market value of immovable properties were stable and
did not undergo any marked change even over a few years -
As. a consequence, time for performance, stipulated in the
agreement was assumed to be not material, or at all events
considered as merely indicating the reasonable period within
which contract should be performed - This principle made
D
sense during the period when there was comparatively very
little inflation in India - But a drastic change occurred from
. the beginning of the last quarter of the twentieth century -
There is a galloping inflation and prices of immovable
properties are increasing steeply, by leaps and bounds -
E
Market values of properties are no longer stable or steady - ·
Judicial notice is taken of the comparative purchase power
of a rupee in the year 1975 and now, as also the steep
increase in the value of the immovable properties between
then and now - Properties in cities, worth a lakh or so in or F
about 1975 to 1980, may cost a crore or more now - The
reality arising from this economic change cannot continue to
be ignored in deciding cases relating to specific performance
- The steep increase in prices is a circumstance which makes
it inequitable to grant the relief of specific performance where
G
the purchaser does not take steps to complete the sale within
the agreed period, and the vendor has not been responsible
for any delay or non-performance - A purchaser can no longer
take shelter under the principle that time is not of essence in
performance of contracts relating to immovable property, to
H
876
SUPREME COURT REPORTS
(2011) 8 S.C.R.
A cover his delays, /aches, breaches and 'non-readiness' - The
precedents from an era, when high inflation was unknown,
holding that time is not the essence of the contract in regard
to immovable properties, may no longer apply, not because
the principle laid down

## Text

_Characters 0–39,846 of 138,027. This is a partial read: ask again with offset=39846 for what follows._

A
B
[2011] 8 S.C.R. 874
MRS. SARADAMANI KANDAPPAN
v.
MRS. S. RAJALAKSHMI & ORS.
(Civil Appeal Nos. 7254-7256 of 2002)
And
(Contempt Petition (C) No. 28-29 of 2009)
JULY 4, 2011
[R.V. RAVEENDRAN AND K.S. RADHAKRISHNAN, JJ.]
C
Contract Act 1872:
s. 55 - Effect of failure to perform at a fixed time in
contracts in which time is essential - Held: In a contract
relating to sale of immovable property if time is specified for
0
payment of sale consideration but not in regard to the
execution of sale deed, time will become the essence only
with reference to payment of sale consideration but not in
regard to execution of sale deed - Normally in regard to
contracts relating to sale of immovable properties, time is not
E considered to be the essence of the contract unless such an
intention can be gathered either from the express terms of the
contract or impliedly from the intention of the parties as
expressed by the terms of the contract - In the instant case,
in the agreement for sale, there was a conscious effort to de/ink
the terms relating to payment of balance sale consideration
F
from the term relating to execution of sale deed and making
the time essence only in regard to the payment of the balance
sale consideration - Therefore, failure of the plaintiff to pay
the balance consideration clearly amounted to breach since
time for such payment was the essence of the contract - The
G defendants were justified in determining the agreement of sale
-
The rejection of the prayer for specific performance is
upheld - However, there was no provision in the agreement
for forfeiture of the amounts already paid, even in the event
of breach by the purchaser - On the other hand, it provided
H
874
SARADAMANI KANDAPPAN v. S. RAJALAKSHMI & 875
ORS.
that if the vendors did not satisfy the purchaser in regard to
A
their title, the amounts received would be refunded - Though
the plaintiff is not entitled to the relief of specific performance,
it cannot be said that the plaintiff had filed false, frivolous and
mischievous suits - In view of that, in terms of the agreement
and in terms of its offer, the plaintiff was entitled to recover s
the amounts paid by her.
Principle " Time is not of the essence of the contracts
relating to immovable properties - Relevance of - Need for
legislation - Held: The said principle took shape in an era
C
when market value of immovable properties were stable and
did not undergo any marked change even over a few years -
As. a consequence, time for performance, stipulated in the
agreement was assumed to be not material, or at all events
considered as merely indicating the reasonable period within
which contract should be performed - This principle made
D
sense during the period when there was comparatively very
little inflation in India - But a drastic change occurred from
. the beginning of the last quarter of the twentieth century -
There is a galloping inflation and prices of immovable
properties are increasing steeply, by leaps and bounds -
E
Market values of properties are no longer stable or steady - ·
Judicial notice is taken of the comparative purchase power
of a rupee in the year 1975 and now, as also the steep
increase in the value of the immovable properties between
then and now - Properties in cities, worth a lakh or so in or F
about 1975 to 1980, may cost a crore or more now - The
reality arising from this economic change cannot continue to
be ignored in deciding cases relating to specific performance
- The steep increase in prices is a circumstance which makes
it inequitable to grant the relief of specific performance where
G
the purchaser does not take steps to complete the sale within
the agreed period, and the vendor has not been responsible
for any delay or non-performance - A purchaser can no longer
take shelter under the principle that time is not of essence in
performance of contracts relating to immovable property, to
H
876
SUPREME COURT REPORTS
(2011) 8 S.C.R.
A cover his delays, /aches, breaches and 'non-readiness' - The
precedents from an era, when high inflation was unknown,
holding that time is not the essence of the contract in regard
to immovable properties, may no longer apply, not because
the principle laid down therein was unsound or erroneous, but
B the circumstances that existed when the said principle was
evolved, no longer exist - Legislation - Specific relief- Equity.
s. 54 -
Reciprocal promises -
In the instant case,
agreement of sale of immovable property contained an
unconditional promise to pay the balance consideration in
C three instalments and the said promise by the purchaser was
not made dependent upon performance of any obligation by
vendors - The contract specifically stated that having paid the
balance price, if the purchaser is not satisfied about the title
and on being intimated about the same if the vendors fail to
D satisfy the purchaser about their title, all amounts paid
towards the price should be refunded to purchaser - This
showed that the payment of balance of sale price in terms of
the contract was not postponed nor made conditional upon
the purchaser being satisfied about the title, but that payment
E of the balance price should be made to the vendors as agreed
unconditionally -
The sale deed was not required to be
executed within any specific period - The purchaser had to
fulfil her obligation in regard to payment of price and thereafter
vendors were required to perform their reciprocal promise of
F executing the sale deed, whenever required by the purchaser
- The sale deed had to be executed only after payment of
complete sale consideration within the time stipulated.
Agreement of sale - Suit by purchaser for permanent
G injunction to protect possession - Held: As per the terms of
the contract, the purchaser was only entrusted with the suit
schedule properties as a caretaker until possession is given
on receipt of the entire sale consideration - As neither the
entire sale consideration was paid nor possession delivered,
the plaintiff remained merely a caretaker and on cancellation
H
SARADAMANI KANDAPPAN v. S. RAJALAKSHMI & 877
ORS.
of the agreement of sale by the defendants, the plaintiff A
became liable to leave the suit schedule properties as the
possession continued to be with the defendants - Since
appe./lant never had 'possession' she was not entitled to seek
a permanent injunction to protect her possession.
Agreement of sale whether amounts to encumbrance -
Held: An 'encumbrance' is a charge or burden created by
transfer of any interest in a property - It is a liability attached
B
to the property that runs with the land - Mere execution of an
MOU, agreeing to enter into an agreement to sell the property,
C
does not amount to encumbering a property - Receiving
advances or amounts in pursuance of an MOU would also not
amount to creating an encumbrance.
Suit: Recovery suit - Claim of plaintiff that she paid
Rs.1,~.0001- to defendant no.4 as commission - Trial court D
·----held that the said amount was not paid as commission but
was paid as consideration for the movables - Said suit
dismissed by trial court - In the High Court, the appellant did
not press for any decree in view of the finding that the amount
paid was part of the consideration for movables - No reason
E
to interfere with the dismissal of the suit for recovery.
Legislation: Reasonableness of- Held: Laws, which may
be reasonable and valid when made, can, with passage of
time and consequential change in circumstances, become
F
arbitrary and unreasonable - There is an urgent need to
revisit the principle that time is not of the essence in contracts
relating to immovable properties and also explain the current
position of law with regard to contracts relating to immovable
property made after 1975, in view of the changed
circumstances arising from inflation and steep increase in G
prices - Contract Act, 1872.
Specific relief: Suit for specific performance - Held:
Courts, while exercising discretion in suits for specific
performance, should bear in mind that when the parties H
878
SUPREME COURT REPORTS
[2011] 8 S.C.R.
A
prescribe a time/period, for taking certain steps or for
completion of the transaction, that must have some
significance and, therefore, time/period prescribed cannot be
ignored - Courts will apply greater scrutiny and strictness
when considering whether the purchaser was 'ready and willing'
B
to perform his part of the contract - Every suit for specific
performance need not be decreed merely because it is filed
within the period of limitation by ignoring the time-limits
stipulated in the agreement - Courts will also 'frown' upon suits
which are not filed immediately after the breach/refusal - The
c fact that limitation is three years does not mean a purchaser
can wait for 1 or 2 years to file a suit and obtain specific
performance - The three years period is intended to assist
purchasers in special cases, as for example, where the major
part of the consideration has been paid to the vendor and
0
possession has been delivered in part performance, where
equity shifts in favour of the purchaser- Equity- Contract Act,
1872.
Pleadings: Plea of fraud - Held: Whenever a party wants
to put forth a contention of fraud, it has to be specifically
E pleaded and proved - In the instant case, plaint did not allege
any fraud by the defendants - The _contention that the vendors
deliberately or intentionally suppressed any information
regarding the pending encumbrances or the fact that the
original documents were not available and thereby committed
F fraud was neither pleaded nor proved - The appellant did not
allege in the plaint, any fraud on the part of vendors, in regard
to suppression of encumbrances over the property- From the
evidence on record as rightly held by the courts below it was
not possible to make out either any fraud or any suppression
G or failure to disclose facts on the part of the respondents.
Evidence: Defendants 1 to ;3 entered into an agreement
of sale of properties - Entire transaction done on behalf of
the defendants 1 to 3 by defendant No.4 who alone had
H complete knowledge of the entire transaction -
In suits
.SARADAMANI KANDAPPAN v. S. RAJALAKSHMI & 879
ORS.
between the plaintiff and defendants, defendant no. 4 gave
A
evidence on behalf of all the other defendants ~ Nonexamination of defendants 1 to 3 - Held: When one of the
defendants who was conversant with the facts has given
evidence, it was not necessary for the other defendants to be
examined as witnesses to duplicate the evidence - Where the
B
entire transaction has been conducted through a particular
agent or representative, the principal has to examine that
agent to prove the transaction; and that where the principal at
no point of time had personally handled or dealt with or
participated in the transaction and has no personal knowledge c
of the transaction, and where the entire transaction has been
handled by the agent, necessarily the agent alone can give
evidence in regard to the transaction -
Therefore, the
evidence of the fourth defendant was sufficient to put forth the
case of the defendants and there was no need to examine the
0
other three defendants who did not have full or complete
knowledge of the transactions.
The respondent nos. 2, 3 and 4 were respectively the
son, daughter and husband of the first respondent. They
owned the suit properties which they agreed to sell to the
E
appellant for Rs.3.75 lacs on 17.1.1981. On the date of
agreement, Rs.1 lac was paid as advance to respondents.
As per the agreement, the appellant was to pay Rs.1 lac
on or before 28.2.1981, Rs.1 lac on or before 6.4.1981 and
Rs.75000 on or before 30.5.1981. Clause 6 of agreement
F
stated that the payment on due dates was the essence
of the contract and in case of failure on the part of the
appellant, the respondents would cancel the agreement.
On the same day (i.e. 17 .1.1981 ), respondent no.4 in a
letter addressed to the appellant acknowledged the G
receipt of Rs.1.25 lacs paid on various dates as
commission for the said transaction relating to sale of suit
properties, By the said letter, he agreed that in case the
transaction of sale remained unconcluded or got
1cancelled because of default on the part of the sellers or H
880
SUPREME COURT REPORTS
[2011] 8. S.C.R.
A buyer or because of defective title, the entire amount of
Rs.1.25 lacs received by him as commission would be
refunded. In pursuance of the said agreement the
appellant paid further advances of Rs.1,00,000 on
28.2.1981 and of Rs.25,000 on 2.4.1981. The balance of
B 75,000 in regard to the instalment payable on 6.4.1981 and
the last instalment of Rs.75,000 payable on or before
30.5.1981 was not paid by the appellant.
Respondent nos.1 to 3 sent a notice to the appellant
C cancelling the agreement dated 17 .1.1981 on the ground
of default in payment of the balance of the sale
consideration in exercise of their right to cancel the
agreement on such default under clause 6 of the
agreement. The appellant sent a reply that time was
never intended to be the essence of the agreement; that
D respondents failed to produce the original documents of
title inspite of repeated demands and, therefore, it was
agreed between the appellant's husband and the fourth
respondent during discussions held in March 1981 in the
presence of witnesses that the original documents would
E be made available as soon as possible and the appellant
would pay the balance only thereafter and that sale would
be completed within a reasonable time of handing over
the documents and, therefore, a further advance of
Rs.25000 was received on 2.4.1981. Thereafter, the
F appellant got a notice published in the newspaper
informing the public about the said sale transaction. One
'G' sent a response notice that the documents relating to
the suit properties were deposited with him and if the
appellant purchased the said lands, she would be doing
G at her own risk. A notice was also sent by the
respondents stating that the claim of the appellant that
she purchased the said land and was in possession
thereof and was cultivating them was false; the survey
numbers mentioned in the notice were erroneous; that
H after the agreement dated 17.1.1981 was cancelled, they
SARADAMANI KANDAPPAN v. S. RAJALAKSHMI & 881
ORS.
had entered into an agreement with a third party which A
fell through because of the public notice, causing loss to
them; and that the appellant was appointed only as a
caretaker of the lands under the agreement dated
17 .1.1981 and the said appointment was cancelled and a
new caretaker was appointed. Respondents 1 to 3 called
B
upon the appellant to hand over all movables on
19.11.1981 to the new caretaker.
The ~ppellant filed three different suits. First and
second suits were filed against respondent nos.1 to 4 for C
permanent injunction and for specific performance of
contract. The third suit was filed against respondent no.4
for return of Rs.1.25 lacs paid as commission with
interest. The Single Judge of the High Court dismissed
all the suits. A Division Bench of the High Court
dismissed the appeals affirming the judgment of the trial D
court. The Division Bench, however, directed . .the
respondents to return Rs.3,50,000 (i.e. Rs.2,25,000 paid
to defendants 1 to 3 and Rs.1,25,000 paid to defendant
No. 4) with interest at 9% per annum for the period during
which the appellant was not acting as caretaker till the E
complete payment was made.
The questions which arose for consideration in the
instant appeals were:
(i) whether the time stipulated for payment of balance
F
consideration was the essence of contract and
whether the defendants were justified in cancelling
the agreement, when the time schedule stipulated for
such payment was not adhered to;
(ii) whether the parties had agreed upon sequence
of performance, which required payment of balance
consideration by appellant, as stipulated in clause (4)
of the agreement, only after the respondents
G
H
A
B
c
D
882
SUPREME COURT REPORTS
[2011] 8 S.C.R.
satisfied the appellant regarding their title to the
lands;
·
(iii) whether the respondents had failed to disclose
the encumbrances over· the properties and thereby
committed fraud, entitling the appellant for extension
of time stipulated for payment corresponding to the
delay caused by the fraud and consequently the
cancellation of the agreement by notice dated
2.8.1981 was illegal and invalid;
(iv) whether an adverse inference ought to be drawn
on account of the non-examination of defendants 1
to 3 who were the vendors under the agreement of
sale.
Dismissing the appeals and disposing of the
contempt petition, the Court
HELD: QUESTION (i)
1.1. Section 55 of the Contract Act 1872 deals with
E the effect of failure to perform at a fixed time, in contracts
in which time is essential. In a contract relating to sale of
immovable property if time is specified for payment of the
sale price but not in regard to the execution of the sale
deed, time will become the essence only with reference
F to payment of sale price but not in regard to execution
of the sale deed. Normally in regard to contracts relating
to sale of immovable properties, time is not considered
to be the essence of the contract unless such an
intention can be gathered either from the express terms
G of the contract or impliedly from the intention of the
parties as expressed by the terms of the contract. The
standard agreements of sale normally provide for
payment of earnest money deposit or an advance at the
time of execution of agreement and the balance of
H consideration payable at the time of execution/registration
SARADAMANI KANDAPPAN v. S. RAJALAKSHMI & 883
ORS.
of the sale deed. In the absence of contract to the
A
contrary, the purchaser is bound to tender the balance
consideration only at the time and place of completing the
sale. In this case there was a conscious effort to delink
the terms relating to payment of balance price (clauses
4, 5 and 6) from the term relating to execution of sale
deed (clause 7) and making the time essence only in
regard to the payment of the balanc.e sale consideration.
There was also a clear indication that while time would
B
be the essence of the contract in regard to the terms
relating to payment of balance price, time would not be c
the essence of the contract in regard to the execution of
the sale deed. The intention making time essence of the
contract for payment of balance price was clear from the
following: (a) clause 4 required the balance consideration
to be paid in thr.ee instalments; (b) Clause 5 made it clear
0
that if any of the dates of payment was subsequently
declared as a holiday, then the next immediate working
day would be the date of payment. This showed a clear
intention that payment was to be made on the stipulated
dates and even a day's delay was not acceptable unless
E
the due date was declared to be a holiday; (c) Clause 6
specifically stipulated that the payments on due dates
was the essence of the contract and in case of failure on
the part of· the purchaser the vendors would canc~I the
agreement. On the other hand, the terms relating to
performance of sale clearly indicated that time was not
intended to be the essence, for completion of the sale.
1 Clause 3 provided that the execution of sale deed would
! depend upon the second party (purchaser) getting
i satisfied regarding the title to the lands, so also the nil
F
• encumbrance. The said clause did not say that payment G
. of balance consideration would depend upon the
purchaser getting satisfied regarding title or nil
encumbrances. Clause 7 provided that the sale deed
would be executed at the convenience of the purchaser,
as and when she wanted them to be executed either in
H,
884
SUPREME COURT REPORTS
[2011] 8 S.C.R.
A her name or in the name of her nominee or nominees.
Clause 12 provided that if the second party (purchaser)
found the ti!le of the properties to be unsatisfactory or
unacceptabJ~. the vendors would be put on notice about
her intention not to conclude the sale and in such an
B event, if the vendors failed to satisfy the purchaser
regarding their title, the vendors shall pay to the
purchaser within three months from that date, all monies
advanced by the purchaser till then. Clause 12 also
provided that the payments of balance sale price in three
c instalments on the specified .due. dates were not
dependent upon the further examination of title or the
satisfaction of the purchaser about the title which
showed that the purchaser on the basis of whatever initial
examination she had taken of the documents, had
0
unconditionally agreed to pay the amounts in three
instalments and if the purchaser was not thereafter
satisfied with the title or found the title unacceptable and
if the vendors failed to satisfy her about their title when
she notified them about her dissatisfaction, the vendors
had to refund all payments made within three months.
E Thus it was categorically made clear in the agreement that
time regarding payment of balance price was the essence
of the contract and such payment was not dependent
upon the purchaser's satisfaction regarding title. Apart
from that, the plaintiff in her evidence admitted that time
F for performance was the essence of the contract. Her
evidence also showed that she apparently did not have
the funds to pay the balance of Rs.75,000 due on 6.4.1981
and Rs.75000/- due on 30.5.1981 as was evident from the
Bank pass book. It was, therefore, possible that being not
G ready to perform the contract in terms of the agreement,
the appellant had invented a modification in the terms of
the agreement. The Single Judge and the Division Bench
recorded a concurrent finding that the time was the'
essence of the contract and that no change was agreed
H
SARADAMANI KANDAPPAN v. S. RAJALAKSHMI & 885
ORS.
In respect of the agreement terms as alleged by the A
appellant. The appellant was unable to place any material
which called for reversal of the said findings. Therefore,
time regarding payment stipulated in clauses (4), (5) and
(6) of the agreement of sale was the essence of the
contract and failure of the appellant to adhere to it,
B
justified cancellation of the agreement by the
respondents. [Para 17, 20-22] [912-F-G; 913-A; 915-G-H;
916-A-H; 917-A-H; 918-A-E]
N.Srinivasa v. Kuttukaran Machine Tools Ltd. 2009 (5) c:
SCC 182:2009 (2) SCR 852; Chand Rani v. Kamal Rani
1993 (1) sec 519: 1992 (3) Suppl. scR 798;
Gomathinayagam Pillai v. Pallaniswami Nadar 1967 (1) SCR
227; Govind Prasad Chaturvedi v. Harl Dutt Shastri 1977 (2)
sec 539: 1977 (2) SCR 877 - relied on.
1.2. The distinction between contracts relating to
immovable properties and other contracts was not drawn
D
by section 55 of Contract Act (or any other provisions of
Contract Act or Specific Relief Act, 1963). Courts in India
made the said distinction, by following the English law E
evolved during the nineteenth century. This Court held
that time is not of the essence of the contracts relating
to immovable properties; and that notwithstanding
default in carrying out the contract within the specified
period, specific performance will ordinarily be granted, if F
having regard to the express stipulation of the parties,
nature of the property and surrounding circumstances,
it is not inequitable to grant such relief. The principle that
time is not of the essence of contracts relating to
immovable properties took shape in an era when market G
value of immovable properties were stable and did not
undergo any marked change even over a few years
(followed mechanically, even when value ceased to be
stable). As a consequence, time for performance,
stipulated in the agreement was assumed to be not H
886
SUPREME COURT REPORTS
[2011) 8 S.C.R.
A material, or at all events considered as merely indicating
the reasonable period within which contract should be
performed. The assumption was that grant of specific
performance would not prejudice the vendor-defendant
financially as there would not be much difference in the
B market value of the property even if the contract was
performed after a few months. This principle made sense
during the first half of the twentieth century, when there
was comparatively very little inflation, in India. The third
quarter of the twentieth century saw a very slow but
c steady increase in prices. But a drastic change occurred
from the beginning of the last quarter of the twentieth
century. There has been a. galloping inflation and prices
of immovable properties increased steeply, by leaps and
bounds. Market values of properties are no_ longer stable
0 or steady. Judicial notice is taken of the comparative
purchase power of a rupee in the year 1975 and now, as
also the steep increase in the value of the immovable
properties between then and now. It is no exaggeration
to say that properties in cities, worth a lakh or so in or
E about 1975 to 1980, may cost a crore or more now. The
reality arising from this economic change cannot
continue to be ignored in deciding cases relating to
specific performance. The steep increase in prices is a
circumstance which makes it inequitable to grant the
relief of specific performance where the purchaser does
F not take steps to complete the sale within the agreed
period, and the vendor has not been responsible for any
delay or non-performance. A purchaser can no longer
take shelter under the principle that time is not of
essence in performance of contracts relating to
G immovable property, to cover his delays, laches,
breaches and 'non-readiness'. The precedents from an
era, when high inflation was unknown, holding that time
is not of the essence of the contract in regard to
immovable properties, may no longer apply, not because
H the principle laid down therein is unsound or erroneous,
. SARADAMANI KANDAPPAN v. S. RAJALAKSHMI & 887
ORS.
but the circumstances that existed when the said A
principle was evolved, no longer exist. In these days of
galloping increases in prices of immovable properties, to
hold. that a vendor who took an earnest money of say
about 10% of the sale price and agreed for three months
or four months as the period for performance, did not B
intend that time should be the essence, will be a cruel
joke on him, and will result in injustice. Adding to the
misery is the delay in disposal of cases relating to
specific performance, as suits and appeals therefrom
routinely take two to three decades to attain finality. As a c
result, an owner agreeing to sell a property for Rs.One
lakh and received Rs.Ten Thousand as advance may be
required to execute a sale deed a quarter century later by
receiving the remaining Rs.Ninety Thousand, when the
property value has risen .to a crore of rupees. [Paras 230 .
25] [918-F-H; 919-A-H; 920-A-F]
Indira Kaur v. Sheo Lal Kapoor 1988 (2) $CC 188;
Jamshed Khodaram Irani v. Burjorji Dhunjibhai AIR 1915 PC
83 - relied on.
1.3. It is now well settled that laws, which may be
E
reasonable and valid when made, can, with passage of
time and consequential change in circumstances,
become arbitrary and unreasonable. There is an urgent
need to revisit the principle that time is not of the essence
in contracts relating to immovable properties and also
F
explain the current position of law with regard to
contracts relating to immovable property made after 1975,
in view of the changed circumstances arising from
inflation and steep increase in prices. [Paras 26-27] [920G; 923-0-E]
G
Rattan Arya v. State of Tamil Nadu (1986) 3 SC 385;
Malpe Vishwanath Acharya v. State of Maharashtra (1998) 2
SCC 1: 1997 (6) Suppl. SCR 717; KS. Vidyanadam and
Others vs. Vairavan (1997) 3 SCC 1: 1997 (1) SCR 993 -
relied on.
H
888
SUPREME COURT REPORTS
(2011] 8 S.C.R.
A
1.4. Courts, while exercising discretion in suits for
specific performance, should bear in mind that when the
parties prescribe a time/period, for taking certain steps or
for completion of the transaction, that must have some
significance and, therefore, time/period prescribed
B cannot be ignored. Courts will apply greater scrutiny and
strictness when considering whether the purchaser was
'ready and willing' to perform his part of the contract.
Every suit for specific performance need not be decreed
merely because it is filed within the period of limitation
c by ignoring the time-limits stipulated in the agreement.
Courts will also 'frown' upon suits which are not filed
immediately after the breach/refusal. The fact that
limitation is three years does not mean a purchaser can
wait for 1 or 2 years to file a suit and obtain specific
0 performance. The three year period is intended to assist
purchasers in special cases, as for example, where the
major part of the consideration has been paid to the
vendor and possession has been delivered in part
performance, where equity shifts in favour of the
E purchaser. [Para 28) [923-F-H; 924-A-C)
QUESTION (ii)
2.1 Section 54 of Contract Act provides that when a
contract consists of reciprocal promises, such that one
F of them cannot be performed, or that its performance
cannot be claimed till the other has been performed, and
the promisor of the promise last mentioned fails to
perform it, such promisor cannot claim the performance
of the reciprocal promise, and must make compensation
G to the other party to the contract for any loss which such
other party may sustain by the non-performance of the
contract. There was no such express fixation of the order
in which the reciprocal promises were to be performed.
Clause (4) of the agreement did not say that the balance
H of the sale price shall be paid only after the vendors
SARADAMANI KANDAPPAN v. S. RAJALAKSHMI & 889
ORS.
satisfied the purchaser in regard to title or that the A
purchaser shall pay the balance of sale price only after·
she satisfies herself regarding title of the vendors to the
lands. Nor did clause (3) contain a provision, after stating
that execution of the sale deed shall depend upon the
purchaser getting satisfied regarding title to the land as
B
also the nil encumbrance, that the payment of sale
con_sideration will also depend upon such satisfaction
regarding title and nil encumbrance. There is an
unconditional promise to pay the balance consideration
in three instalments and the said promise by the c
purchaser is not dependent upon performance of any
obligation by vendors. The contract specifically stated
that having paid the balance price, if the purchaser is not
satisfied about the title and on being intimated about the
same if the vendors fail to satisfy the purchaser about 0
their title, all amounts paid towards the price should be
refunded to purchaser. This clearly demonstrated that the
payment of balance of sale price in terms of the contract
was not postponed nor made conditional upon the
purchaser being satisfied about the title, but that payment E
of the balance price should be' made to the vendors as
agreed unconditionally. In fact if the intention of the
parties was that only after the vendors satisfying the
purchaser about their title, balance consideration had to
be paid, clause (12) would be redundant as the situation
contemplated therein would not arise. Further, if that was
F
the intention, the purchaser would not have paid
Rs.1,00,000 as further advance on 28.1.1981 and
Rs.25,000 on 2.4.1981. Therefore, the contract did not
expressly (or even impliedly) specify the order of
performance of reciprocal promises, as alleged. by the G
appellant. The terms of the contract made it clear that
payment of sale price did not depend on execution of the
sale deed. The sale deed was not required to be executed
within any specific period. The purchaser had to fulfil her
obligation in regard to pa1"\•nt of price as provided in H
(
890
SUPREME COURT REPORTS
[2011] 8 S.C.R.
A clause 4 and thereafter vendors were required to perform .
their reciprocal promise of executing the sale deed,
whenever required by the purchaser, either in her name
or in the names of her nominees. The sale deed had to
be executed only after payment of complete sale
B consideration within the time stipulated. In these
circumstances, Section 52 of the Contract Act which talks
about the order of performance of reciprocal promises did
not help the appellant but actually supported the
vendors-respondents. [Paras 34, 36, 37) [927-F-G; 928-FC H; 929-A-H; 930-A-B]
QUESTION (iii)
3.1. Whenever a party wants to put forth a contention
of fraud, it has to be specifically pleaded and proved. The
D plaint did not allege any fraud by the defendants.
Evidence showed that before the agreement was entered,
the purchaser's husband and legal advisor had examined
the xerox copies of the title de'9ds and satisfied
themselves about the title of the vendors. The appellant
E in her evidence clearly admitted that xerox copies of the
title deeds were shown to her husband. The agreement
of sale provided that the sale would depend upon
purchaser getting satisfied about the title of the vendors.
The manner in which the agreement was drafted by the
F purchaser showed that the purchaser and/or her
husband were made aware of the encumbrances. Firstly
there was no provision in the agreement that the lands
were not subject to any encumbrances. Secondly, the
provision for payment of sale price within a specified time
G did not link the payment to execution of a sale deed.
Thirdly the contract provided that on execution of the
agreement the purchaser will take possession as
caretaker of the suit schedule properties and that on
complete payment of the sale price on 30.5.1981, she will
be entitled to possession in part performance and that the
H execution of the sale deed will be whenever required by
SARADAMANI KANDAPPAN v. S. RAJALAKSHMI & 891
ORS.
the purchaser, totally disconnected with either payment A
of price or delivery of possession. All. these provisions
demonstrated that the vendors were in urgent need of
money, that the purchaser was made aware of the
encumbrances, that on the purchaser paying the sale
price, the vendors had to clear the encumbrances and B
thereafter convey the property, free from encumbrances.
The contention that the vendors deliberately or
intentionally suppressed any information regarding the
pending encumbrances or the fact that the original
documents were not available and thereby committed c
fraud was neither pleaded nor proved. The appellant did
not allege in the plaint, any fraud on the part of vendors,
in regard to suppression of encumbrances over the
property. The entire plaint tried to justify that the plaintiff
did not commit breach of contract by not paying the 0
balance instalments on 6.4.1981 and 30.5.1981, except for
a stray sentence that the plaintiff will be entitled to
proceed against the third defendants 1 to 3 for damages,
for not performing their part of the contract and not
disclosing several prior encumbrances over the property. E
In the written statement, the defendants submitted that
the encumbrance certificate upto the year 1980 had been
given to appellant's husband, which showed the
encumbrance in favour of State Bank of Mysore, that
plaintiff and her husband both knew before entering into
the agreement of sale that original documents were with
F
the said bank and that therefore the allegation that the
encumbrance was not disclosed was false. It was also
disclosed in the written statement, that a document was
surreptitiously detained by one 'G'. It was stated that the
defendants intended to utilise the last two instalments for G
securing back the original documents by discharging the
loans. It was not disputed that the amount due to 'G' was
around Rs.40,000 and the amount due to State Bank of
Mysore was around Rs.39,000 and any of the last two
instalments would have been sufficient to discharge the H
892
SUPREME COURT REPORTS
(2011) 8 S.C.R.
A said liabilities. The appellant having committed default in
paying the last two instalments which would have
enabled discharging the debts, cannot find fault with the
vendors by contending that they did not secure the
original title deeds. If the mortgage/encumbrance was
B made known to appellant's husband and if it had been
understood that the same would be cleared from the last
of the instalments paid by the appellant, the absence of
original title deeds could not be made a ground for not
paying the last two instalments. The claim of the
c appellant that the vendors should have cleared all the
encumbrances before payment of the last two
instalments is not borne out by any evidence. Even in law,
the obligation of the vendors is to convey an
encumbrance free, good and marketable title subject to
0 contract to the contrary. The stage of execution of sale
deed had not arrived as the appellants did not pay the
amount due in terms of the contract. The appellant
contended that the debt due to the Bank of India had
been fraudulently suppressed by the vendors. There was
E no reference to such a mortgage either in the plaint or the
evidence of the plaintiff. No one was examined from the
bank nor any document produced to prove the existence
of such mortgage. Appellant attempted to produce some
documents relating to the said mortgage with an
application under Order 41 Rule 27 CPC which was 1
F rejected by the High Court. What is significant and
relevant is the fact that as on the date of the agreement
of sale (17.1.1981) the first defendant was not a debtor of
Bank of India but on the other hand the bank itself was a
debtor to the extent of more than Rs.33,00,000 with
G interest. Therefore the contention of the appellant that an
encumbrance in favour of Bank of India was in existence
and that was not disclosed and the said liability was not
disclosed, was wholly untenable. From the evidence on
record as rightly held by the courts below it was not
H possible to make out either any fraud or any suppression
SARADAMANI KANDAPPAN v. S. RAJALAKSHMI & 893
ORS.
or failure to disclose facts on the part of the respondents.
A
[Para 40, 42] [932-D-H; 933-A-B; 934-D-H; 935-A-B]
Bank of India v. Vijay Transport 2000 (8) SCC 512: 2000
(3) Suppl. SCR 685 - relied on.
3.2. The failure of the appellant to pay the balance of 8
Rs.75,000 on 6.4.1981 and failure to pay the last
ins.talment of Rs.75,000 on or before 30.5.1981 clearly
amounted to breach since time for such payment was the
essence of the contract, the respondents were justified
in determining the agreement of sale. Therefore rejection C
of the prayer for specific performance is upheld. The
appellant was not put in possession of the suit properties
in part-performance of the agreement of sale. Under
clause 15 of the agreement of sale, she was only
entrusted with the suit schedule properties as a caretaker D
until possession is given on receipt of the entire sale
consideration. As neither the entire sale consideration
was paid nor possession delivered, the plaintiff remained
merely a caretaker and on cancellation of the agreement
of sale by the respondents, the plaintiff became liable to E
leave the suit schedule properties as the possession
continued to be with the defendants. As appellant never
had 'possession' she was not entitled to seek a
permanent injunction to protect her possession. There
was also no reason to interfere with the dismissal of the
F
suit for recovery of Rs.1,25,000 from the fourth
respondent. The trial court held that the said amount was
not paid as commission but was paid as consideration
for the movables. The said suit was dismissed by the trial
court. In the High Court, the appellant did not press for G
any decree against the fourth respondent in view of the
finding that the amount paid was part of the
consideration for movables. Therefore the dismissal of
suit for Rs.1,25,000 is also upheld. [Paras 43 to 45] [935C-H; 936-A-C}
H
894
SUPREME COURT REPORTS
[2011) 8 S.C.R.
A
3.3.