SPECIFIC RELIEF ACT | Party Can't Claim Time Is Essence Of Contract When Specific Performance Of Terms Not Done : Supreme Court

The Supreme Court has held that when specific performance of the terms of the contract has not been done, the question of time being the essence of contract does not arise.

The Bench comprising of Justice Krishna Murari and Justice Sanjay Karol, while adjudicating an appeal filed in Gaddipati Divija & Anr v Pathuri Samrajyam & Ors., observed that time would not be of essence in a contract wherein the obligations of one party are dependent on the fulfillment of obligations of another party.

BACKGROUND FACTS

On 14.08.2002, Mr. G. Venugopala Rao (“Mr. Rao”) executed an agreement of sale with Ms. Pathuri Samrajyam (“Respondent No. 1”) in respect of his immovable property (“Property”). The Respondent No. 1 paid partial advance consideration amount to Mr. Rao. The Agreement recorded that Mr. Rao would execute sale deed in favour of Respondent No. 1 within three months, after demarcating the Property and receiving the balance sale consideration.

Subsequently, the Respondent No. 1 became aware of the fact that the Property was attached by the Civil Court in a recovery proceeding against Mr. Rao. Therefore, the Respondent No. 1 asked Mr. Rao to get the Property measured and its attachment removed; following which the Respondent No. 1 would pay the balance sale consideration and get the property registered in her name. In the meanwhile, Mr. Rao died in 2003 and was survived by two minor children and a wife (“Appellants”).

On 29.03.2004, Respondent No. 1 sent a legal notice to the legal heirs of the Mr. Rao and expressed her willingness to perform part of the contract by paying the balance sale consideration.

Subsequently, Respondent No. 1 filed a suit before the Civil Court seeking specific performance of the Agreement of Sale dated 14.08.2002, by directing the Legal Heirs to execute a sale deed in favour of Respondent No. 1.

On 22.08.2007 the Trial Court observed that the Respondent No. 1 failed to prove that she is entitled for specific performance of the contract and directed refund of advance consideration amount to her.

In appeal, the High Court set aside the Trial Court’s order and observed that mere stipulation of time would not make time the essence of the contract and in case of sale of immovable property normally the time may not be essence of the contract. The High Court held that the Respondent No. 1 had fulfilled the conditions laid down in Section 16(c) of the Specific Relief Act, 1963 (prior to 2018 amendment), and thus entitled to seek specific relief. The High Court thus directed the Appellants to discharge the debt of Mr. Rao, relive the Property from attachment and thereafter execute a sale deed in favour of Respondent No. 1 after demarcating the Property.

The Appellants filed an appeal before the Supreme Court.

SUPREME COURT VERDICT

Requirements under Section 16 of Specific Relief Act

Originally, Section 16 of the Specific Relief Act, 1963 (“SRA Act”) required a plaintiff to aver in pleadings and also prove that he has performed or has always been ready and willing to perform his obligation under the contract, in order to seek specific performance of contract. Further, the explanation to Section 16(c) states that in a contract involving the payment of money, the plaintiff need not actually deposit the money to the defendant, but must aver that he has performed, or is ready and willing to perform the contract according to its true construction.

However, after the 2018 amendment to Section 16 of SRA Act, the requirement of averring its willingness to perform has been done away with. Since the matter at hand dates back to 2002, the amended Section 16 of SRA Act was inapplicable.

When specific performance of the terms of the contract has not been done, the question of time being the essence does not arise

While deciding whether time is of the essence in the concerned Agreement of Sale or not, the Bench placed reliance on the judgement in Katta Sujatha Reddy v. Siddamsetty Infra Projects (P) Ltd. & Or 2022 LiveLaw (SC) 712, wherein it was reiterated that in sale of immovable property, there is no presumption that time is the essence of the contract. However, the Court may infer performance in a reasonable time if the conditions are evident from the express terms of the contract, from the nature of the property, and from the surrounding circumstances.

The Bench observed that the purchaser’s obligation to pay balance consideration amount was dependent upon the fulfilment of the vendor’s obligation to get the land measured and demarcated within three months. Thus, the facts of case at hand distinguished from that of Katta Sujatha Reddy v. Siddamsetty Infra Projects (P) Ltd. & Ors.

Accordingly, it was observed as under:

“Therefore, it can be deduced that unless the vendor got the subject land measured and demarcated within three months, it would be impossible for the purchaser (Respondent No. 1 herein/Plaintiff) to get a sale deed executed, and as such, the question of paying the balance sale consideration does not arise. This was also observed by the High Court while placing reliance on the recitals in the sale agreement coupled with the evidence of PW1 and PW2. Moreover, as has been held above, it is clear that the vendor (deceased G. Venugopala Rao) failed to perform his part of the obligations by getting the subject land measured and demarcated, while the purchaser (Respondent No. 1 herein/Plaintiff) was ever ready and willing to pay the balance consideration. As such, when specific performance of the terms of the contract has not been done, the question of time being the essence does not arise. In this way, the facts of the present case are distinguishable from that of Siddamsetty (supra), and the Appellants herein cannot claim that time was of the essence of the contract.”

The Bench opined that the legal heirs of Mr. Rao failed to perform their obligation of demarcating the Property, while the Respondent No.1 had established her willingness to perform her obligation by paying the balance sale consideration, which is the primary requirement as per Section 16(c) of the SRA Act.

The High Court’s order has been upheld and the appeal has been dismissed.

Case Title: Gaddipati Divija & Anr v Pathuri Samrajyam & Ors.

Citation: 2023 LiveLaw (SC) 327

Counsel for Appellant: Mr. A. Sirajuddin (Sr. Adv.)

Counsel for Respondent: Mr. C. Mohan Rao (Sr. Adv.)

Specific Relief Act 1963 - In sale of immovable property there is no presumption that time is the essence of the contract, however, the court may infer performance in a reasonable time if the conditions are evident from the express terms of the contract, from the nature of the property, and from the surrounding circumstances- referred to Katta Sujatha Reddy v. Siddamsetty Infra Projects (P) Ltd. & Or 2022 LiveLaw (SC) 712- Para 32

Specific Relief Act 1963 -  when specific performance of the terms of the contract has not been done, the question of time being the essence does not arise -time would not be of essence in a contract wherein the obligations of one party are dependent on the fulfillment of obligations of another party.

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