Property Prices Soaring High, Need To Relook At Principle Of Time Not Being Essence Of Contract Involving Immovable Property: Karnataka HC

The Karnataka High Court has said that the principle that time is not the essence of the contract in a suit for specific performance of immovable property, cannot be applied as if it is a statute. The said principle must be applied by considering the facts and circumstances of each case, it said.A single judge bench of Justice Anant Ramanath Hegde while partly allowing an appeal filed by one Mohammed Farughuddin, challenging the trial court order rejecting the suit for specific performance, observed, “In the last couple of decades, the value of the immovable properties is soaring high and that too in a short span of time. Indeed, such equitable consideration had strong justifications in good old times, where hardly there was any change in the property value for a considerable length of time. However, many things concerning real estate have changed beyond comprehension. Perhaps the general principle that the time is not an essence of the contract when it comes to immovable property, certainly calls for a relook in the present-day context.” Court clarified it is not suggesting that the said principle is obsolete in the present-day context. "However, the kind of laxity shown earlier on the party who took his own sweet time to approach the court seeking specific performance of contract of immovable property, probably cannot be applied in the same measure. Thus, the Courts need to be a bit circumspect while applying the said principle.” The trial court had held that the agreement for sale dated 20.07.2006 between plaintiff and respondent Ramachandra Balu Shinde, is proved. However, the decree for specific performance was declined holding that the plaintiff failed to prove his readiness and willingness to perform his part of the contract. The trial Court passed a decree for refund of the earnest amount of Rs.5,00,000 along with interest at the rate of 6% per annum as against the claim of 15% per annum. The decree for compensation is also declined. The appellant contended that the agreement is held to be proved and the defendant did not challenge the decree for refund of the earnest money. Thus, he cannot dispute the execution of the agreement for sale. Further, he submitted time is not the essence of the contract when it comes to the sale of immovable property and this well-established principle is not considered by the trial Court in proper perspective. The respondents opposed the appeal stating that plaintiff alone could have spoken about his readiness and willingness to perform his part of the contract and he shied away from the witness box. The alleged power of attorney holder is incompetent to speak about the intention of the plaintiff to perform his part of the contract. Moreover, it was argued the Court has granted the decree for refund of the earnest amount. Thus, the plaintiff is not an aggrieved person and has no right to challenge the decree granting refund of the earnest amount which is granted pursuant to the prayer made in the plaint itself.Firstly the bench noted that the option to challenge the adverse finding in a judgment, being a respondent, without there being any cross objection, is available only when the respondent can support the decree and not when he attacks the decree to set aside it either partially or fully. “There is not just an adverse finding, but also an adverse decree against the respondent which is not questioned by either filing an appeal or cross objection. Thus, the respondent who has not filed cross objection cannot assail the finding on proof of agreement dated 20.07.2006 or the power of attorney.”Considering the contention of the respondent that time was the essence of the contract, the court referred to the sale agreement wherein six months' time is fixed for payment of balance consideration amount by the purchaser. At two places in the agreement, six months' time is fixed for payment of the balance consideration amount. The right to cancel the contract was also available to the vendor in case the balance consideration amount is not paid within the time prescribed, court noted. Taking into account that the appellant is an advocate by profession the court referring to his evidence said “His admission cannot be equated with an admission of a lay man. Probably it stands on a higher pedestal. Except executing the sale deed on receipt of the balance consideration amount, nothing else was required to be done by the defendant/respondent. Nothing is placed on record to hold that the parties agreed to relax the condition relating to the time stipulated in the agreement for sale.”The court held that if the terms of the contract stipulate the time frame for payment of the consideration amount by the purchaser and nothing was required to be done by the vendor except executing the sale deed on receipt of the entire consideration amount and when there is an admission in the cross-examination which would point to the fact that the time was the essence of the contract, the principle...

Property Prices Soaring High, Need To Relook At Principle Of Time Not Being Essence Of Contract Involving Immovable Property: Karnataka HC

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