J.P. Builders v. A. Ramadas Rao

A buyer paid Rs 75 lakh of a Rs 5,55,48,000 price for 30 acres whose title deeds were with a bank. The sellers said he was not ready and willing and that the agreement was a contingent contract (a contract that depends on a collateral event). The Supreme Court upheld specific performance (a court order to carry out the contract), and the bank's mortgage debt was to be met first from the sellers' other properties.

Quick Revision

Read the full judgment: Indian Kanoon (unofficial copy)

Parties

M/s J.P. Builders — appellant no. 1; one of the owners of the suit property and defendant no. 1 in the suit.

J.P. Paramanandam — appellant no. 2; defendant no. 2 in the suit, an owner of the suit property and the sole proprietor of M/s Anand Agency, the sister concern that took the bank loan.

A. Ramadas Rao — respondent no. 1; the buyer and plaintiff.

Indian Bank — respondent no. 2 in the appeals; the mortgagee bank and the third defendant. The judgment calls it the Bank.

Procedural History

1. The appellants challenge the common judgment and order dated 23 February 2010 of the Division Bench of the Madras High Court in A.S. Nos. 708 of 2008 and 946 of 2009 and W.P. No. 23405 of 2009 (¶ 2).
2. The High Court partly allowed A.S. No. 708 of 2008, confirming the specific performance decree of the Principal District Court, Chengalpet, in O.S. No. 336 of 2008. It dismissed A.S. No. 946 of 2009 and disposed of the writ petition with directions (¶ 2).
3. By an order dated 29 April 2010 the High Court dismissed Review Application No. 37 of 2010 and Review Application No. 47 of 2010 (¶ 2).
4. On 30 April 2008 the Principal District Judge, Chengalpet, partly decreed the suit. He ordered the sellers to execute the sale deed on receipt of Rs 4,80,48,000, subject to the Bank's mortgage, and granted a permanent injunction. He refused the mandatory injunction to discharge the loan (¶ 3).
5. The buyer appealed the refusal and the lack of costs in A.S. No. 708. The buyer also filed interim applications M.P. Nos. 1 and 2 of 2008 and, on 1 February 2009, M.P. No. 1 of 2009. On 18 April 2009 the Division Bench restrained the appellants from selling or burdening the property during the appeal (¶ 3).
6. The appellants filed A.S. No. 946 of 2009, which was admitted on 20 October 2009. On 16 November 2009 the buyer filed W.P. No. 23405 of 2009 praying for a writ of mandamus. His M.P. No. 1 of 2009 asked to stay the auction. M.P. Nos. 2 and 3 of 2009 in A.S. No. 708 were dismissed the same day (¶ 3).
7. On 24 November 2009 the buyer filed SLP (C) No. 31358 of 2009 and SLP (C) Nos. 19154-55 of 2009. This Court ordered the auction to continue but the result not to be declared. On 11 December 2009 it dismissed the buyer's special leave petitions (¶ 3).
8. On 23 February 2010 the Division Bench passed the judgment under appeal (¶ 3).
9. The appellants appealed by special leave. Leave was granted in all the petitions (¶¶ 1, 3).

Facts

1. The suit property is 30 acres 86 cents in 38 items at Senthamangalam Village, Sriperumbadur Taluk, Kancheepuram District. J.P. Builders and J.P. Paramanandam own it under various sale deeds (¶ 3).
2. M/s Anand Agency, a sister concern of J.P. Builders, took financial assistance from the Indian Bank. The appellants offered several properties, including the suit property, as security. Paramanandam is its sole proprietor (¶ 3).
3. On 15 August 2005 the appellants signed a memorandum of understanding (Ex. A-2) with the buyer. The price was Rs 14 lakh an acre, and Rs 1 lakh was paid by cheque as advance. The balance was due within three months of obtaining a confirmation letter from the Bank (¶ 3).
4. On 10 October 2005 J.P. Builders offered Rs 100 lakh as full and final settlement of Anand Agency's dues. The Bank declined on 15 October 2005 and asked for a substantial improvement (¶ 3).
5. On 23 January 2006 the Bank said there was no improvement and that it would enforce its rights under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. On 1 February 2006 Paramanandam offered Rs 148 lakh as a one time settlement (¶ 3).
6. On 3 February 2006 the buyer signed a sale agreement (Ex. A-3). The price rose to Rs 18 lakh an acre, a total of Rs 5,55,48,000. He paid Rs 24 lakh more that day (¶ 3).
7. On 18 April 2006 he paid a further Rs 50 lakh (¶ 3).
8. On 26 April 2006 the Bank rejected the Rs 148 lakh offer as too low and went on with its recovery application before the Debts Recovery Tribunal, Chennai (¶ 3).
9. On 15 May 2006 the Bank said it would settle for Rs 629.60 lakh, with interest at 11 per cent compound on the principal outstanding on 31 March 1993. That was more than the sale price, so Paramanandam did not agree (¶ 3).
10. On 26 July 2006 the buyer's legal notice asked the appellants to clear the loans from the money received and get back the original documents (¶ 3).
11. On 27 July 2006 J.P. Builders replied that the buyer had not paid the balance despite repeated requests. It doubted he wanted to buy and called on him to pay Rs 1 crore as liquidated damages (¶ 3).
12. On 7 August 2006 the buyer filed O.S. No. 336 of 2006 against the appellants and the Bank (¶ 3).
13. On 6 October 2006 the Bank filed OA No. 491 of 1999 withdrawing its Rs 629.60 lakh offer. On 15 May 2009 the Tribunal held the Bank entitled to Rs 11,08,51,875 from Anand Agency (¶ 3).
14. The Recovery Officer issued D.R.C. No. 102 of 2009 and a first sale notification on 23 October 2009. The upset price (the reserve price) was Rs 27 crore and the sale date was 25 November 2009 (¶ 3).
15. On 19 November 2009 the buyer filed I.A. Nos. 1 to 3 before the Recovery Officer for release of the property and stay of the sale. The Recovery Officer dismissed them on 23 November 2009 (¶ 3).
16. On 23 February 2010 the High Court directed the buyer to deposit the balance Rs 4,80,48,000 with 18 per cent interest from the filing of the suit. It directed the appellants to execute the sale deed and the Bank to proceed against the appellants' other properties in O.A. No. 491 of 1999 for the balance (¶ 3).
17. The Agreement for Sale (Ex. A-3) recited that the sale was to discharge the bank loan and for the vendors' business. The vendors undertook to discharge the loans and hand over the original title deeds within three months for scrutiny of title. The buyer had to pay further advance if the vendors needed it to release the documents (¶ 15).

Issues Raised

The appellants raised these contentions, which the Court answered in order (¶ 5):

1. Did the plaintiff fail to establish readiness and willingness under Section 16(c) of the Specific Relief Act, 1963, so that the discretionary decree should not have been granted?
2. Was the agreement a contingent contract that is impossible to fulfil and cannot be implemented, so that relief should not have been granted?
3. Is marshalling by a subsequent purchaser under Section 56 of the Transfer of Property Act, 1882 available to a decree holder in a suit for specific performance? Was the High Court justified in granting it without pleading or an issue in the trial court?
4. Was the High Court justified in hearing a writ petition under Article 226 along with a regular first appeal under Section 96 of the Code of Civil Procedure?
5. Was the High Court justified in giving directions to the Bank that are contrary to the orders of the Debts Recovery Tribunal?
6. Was the High Court justified in granting costs to the plaintiff when the trial court rightly refused them?

Arguments Contended

For the appellants (L. Nageswara Rao and Nalini Chidambaram, senior counsel):

• The plaintiff did not establish readiness and willingness under Section 16(c). The courts below should not have granted a discretionary decree (¶ 5).
• The agreement was contingent and impossible to fulfil (¶ 5). The contract depended on the uncertain act of Indian Bank in agreeing to a one time settlement, so it became impossible and void (¶ 20).
• They relied on clauses 4, 6 and 7 of the memorandum of understanding (Ex. A-2). Under clause 4 the balance was payable within one week of the Bank's confirmation letter, and there was no material that the plaintiff had the money in that week (¶ 18).
• The events named in the contract were a letter stating the balance due to the Bank, an undertaking from the Bank that it would accept the balance, and handing over the original documents to the plaintiff. The Bank also declined the Rs 148 lakh offer and got a decree for Rs 8,51,825.29 from the Tribunal (¶ 21).
• The plaintiff withdrew Rs 10,01,000 from a no lien account, which upset the settlement talks (¶ 18).
• Marshalling was not pleaded or put in issue in the trial court, so it could not be applied on appeal. They relied on Anathula Sudhakar v. P. Buchi Reddy and Bachhaj Nahar v. Nilima Mandal (¶¶ 29, 31).
• The writ petition should not have been heard with the appeal (¶ 5).
• The jurisdiction of the Recovery Officer and Tribunal is exclusive, and no other court can go into their orders. They relied on Allahabad Bank v. Canara Bank, State Bank of India v. Allied Chemical Laboratories and India Household and Healthcare Ltd. v. LG Household and Healthcare Ltd. (¶ 41).
• Costs were rightly refused by the trial court (¶ 5). In their appeal grounds they also challenged the High Court's costs award (¶ 40).

For the first respondent (R.F. Nariman, senior counsel):

• The plaintiff established his readiness and willingness all along, and the trial court and the High Court rightly accepted it (¶ 6).
• The contract is not a contingent contract under Sections 31 and 32 of the Indian Contract Act, 1872 (¶ 6).
• The Agreement for Sale of 3 February 2006 is a fresh agreement, so clauses 4, 6 and 7 of the memorandum of understanding do not govern the parties (¶ 21).
• The plaintiff prayed for larger relief and the trial court gave lesser relief. Marshalling is a question of law, and the High Court rightly applied it with equity and justice in mind (¶ 6).
• The appeals and the writ petition were interconnected, so the High Court was justified in disposing of them together (¶ 6).
• The plaintiff paid substantial court fee and got partial relief, so the High Court was justified in awarding the costs the trial court omitted (¶ 6).
• This Court should not interfere under Article 136. Even after leave, it has ample power to dismiss an appeal without going into all the issues (¶¶ 6, 42).
• The writ petition itself had pleaded the facts that support marshalling, in grounds (j) and (k) (¶ 36).

Indian Bank, respondent no. 2, was represented by Himanshu Munshi. The judgment records no separate argument by the Bank (¶ 4).

Court's Reasoning

The judgment has numbered paragraphs written as "N)". The page cites them with the sign ¶. There is one opinion, delivered by P. Sathasivam, J. Both Judges signed it. Steps follow the order of the paragraphs.

P. Sathasivam, J. (judgment of the Bench)

1. Noted: The appeals challenge the common judgment of 23 February 2010 and the review order of 29 April 2010. The High Court confirmed the specific performance decree in O.S. No. 336 of 2008 and disposed of the writ petition with directions (¶ 2).
2. Noted: The Court sets out the facts at length: the property, the memorandum of understanding of 15 August 2005, the settlement offers, the agreement of 3 February 2006, the notices and the suit. It also records the trial court's decree, the buyer's appeal, the Bank's recovery proceedings, the interim orders and the High Court's judgment (¶ 3).
3. Noted: The Court heard counsel for the appellants, the first respondent and the Bank. It records the six contentions of the appellants and the replies of the first respondent. It has considered the oral and documentary evidence (¶¶ 4, 5, 6, 7).
4. Noted (readiness and willingness): Section 16(c) of the Specific Relief Act bars specific performance for a person who fails to aver and prove that he has performed, or has always been ready and willing to perform, the essential terms he must perform. Explanation (i) says a plaintiff need not tender or deposit money in court unless the court directs. Explanation (ii) says he must aver readiness and willingness according to the contract's true construction (¶ 8).
5. Noted: The clause was not in the Act of 1877. It was inserted on the recommendation of the 9th Law Commission report (¶ 8).
6. Noted: Ready and willing mean the person was prepared to carry out the terms. The distinction is that "the former refers to financial capacity and the latter to the conduct of the plaintiff wanting performance". Generally readiness is backed by willingness (¶ 9).
7. Noted: N.P. Thirugnanam v. R. Jagan Mohan Rao held that continuous readiness and willingness is a condition precedent. The plaintiff must prove from the date of the agreement to the decree that the money was available and that he was always willing. The Court quotes the passage (¶ 10).
8. Noted: P. D'Souza v. Shondrilo Naidu held that the plaintiff must establish readiness and willingness, and no strait-jacket formula applies. It also said that readiness depends on whether the defendant did everything the agreement required of him (¶ 11).
9. Held: Readiness and willingness is "a condition precedent for obtaining relief of grant of specific performance". The plaintiff must allege and prove it continuously from the date of the contract. The onus is on him (¶ 12).
10. Noted: R.C. Chandiok v. Chuni Lal Sabharwal held that it "cannot be treated as a straight jacket formula". It is judged from the whole facts, intention and conduct of the party (¶ 12).
11. Held: The statute requires compliance even when the opposite party makes no specific plea. If the plaintiff does not comply, the court must dismiss the suit. Readiness must be shown throughout the relevant times, judged from the conduct of the parties (¶ 12).
12. Noted: The Court then asked whether the plaintiff established his case for a decree (¶ 13).
13. Noted: The appellants argued that he failed to prove he fulfilled his obligations under Ex. A-2 and Ex. A-3. The Court recites the undisputed facts (¶ 14):
    • The memorandum of 15 August 2005 and the settlement offers.
    • The agreement of 3 February 2006, with Rs 24 lakh as further advance.
    • The Rs 50 lakh paid on 18 April 2006.
    • The Bank's reply of 15 May 2006.
14. Noted: Ex. A-3 recited that the sale was to discharge the bank loan. It said the vendors undertook to discharge the loans and hand over the original title deeds within three months. It was the plaintiff's definite case that he paid Rs 24 lakh and Rs 50 lakh for this (¶ 15).
15. Noted: The plaint says the plaintiff paid a further advance of Rs 50 lakh on 18 April 2006 (¶ 16).
16. Noted: The plaintiff as PW-1 said he was always ready with the money and pursued the settlement with the defendants. He also placed letters showing he corresponded with the Bank (¶ 17).
17. Held: The specific plea, the letters and his evidence show the courts below were right to find that he complied with Section 16(c) (¶ 17).
18. Noted: Counsel for the appellants relied on clause 4 of the memorandum, which required payment of the balance within one week of the confirmation letter. She said there was no material the plaintiff had the money in that week. She also said he had to pay the amount to clear the bank loan first (¶ 18).
19. Held: After Ex. A-3 the vendors undertook to discharge the loans and hand over the original title deeds. The plaintiff had to pay further advance only if the vendors required it to release the documents. He showed by oral and documentary evidence that he paid Rs 24 lakh and Rs 50 lakh (¶ 18).
20. Why: He deposited Rs 2,45,00,000 in a fixed deposit (Ex. A-11 and Ex. A-13). Ex. A-12 and Ex. A-13 showed large savings balances. He asserted he had ready cash. The Court found he had sufficient cash and financial capacity (¶ 18).
21. Noted: Under Ex. A-4 the plaintiff said he was prepared to get the sale executed, and the bank deposit receipts were being perused (¶ 18).
22. Held: He had to pay the balance only on a demand based on the Bank's confirmation letter. There was no evidence of any demand by the defendants. It was not their case that they asked for further advance and he did not respond (¶ 18).
23. Noted: The defendants did not give oral evidence and avoided the witness box. Their claim that the plaintiff admitted their stand was factually incorrect and unacceptable (¶ 18).
24. Held: The plaintiff deposited Rs 10,01,000 in the no lien account for a possible settlement, and could ask for it back if the settlement failed. When the Bank refused the Rs 148 lakh offer, he withdrew it. That withdrawal had no significance, because both parties signed Ex. A-3 afterwards. The defendants raised no protest and took a further Rs 50 lakh. The withdrawal did not show breach or lack of readiness (¶ 18).
25. Held: On the pleading, the evidence of the agreement, the part payments, the financial capacity and the bank statements, the plaintiff proved readiness and willingness. The concurrent findings stand, absent acceptable contrary evidence (¶ 19).
26. Noted (contingent contracts): The appellants said the contract depended on the Indian Bank agreeing to a settlement, so it was contingent and void. The Court notes there was no such plea in the written statement and no issue was framed. It decided to answer the point anyway (¶ 20).
27. Noted: Section 31 of the Indian Contract Act defines a contingent contract as one to do or not do something if an event collateral to it does or does not happen. Section 32 says such contracts cannot be enforced until the event happens, and become void if the event becomes impossible (¶ 21).
28. Held: If a condition described in the contract is impossible, the contract becomes void under Section 32 (¶ 21).
29. Noted: The appellants listed the events as a letter stating the balance due, the Bank's undertaking to receive it, and delivery of the original documents. The respondent said the fresh Agreement for Sale of 3 February 2006 replaced the memorandum's clauses 4, 6 and 7 (¶ 21).
30. Held: The plaintiff specifically pleaded in paragraph 7 of the plaint that he sought performance in accordance with the memorandum as it emerged with the agreement of 3 February 2006. He said so in his reply notice of 31 July 2006, and the defendants never disputed it. So clauses 4, 6 and 7 of the memorandum do not govern the parties after Ex. A-3 (¶ 21).
31. Noted: Clauses 3, 4 and 6 of Ex. A-3 are quoted. The balance is payable on or before registration of the sale deed. The vendors undertake to discharge the loans and hand over the original title deeds within three months. The sale is to be completed within six months of production of the documents (¶ 21).
32. Held: Under Ex. A-3 the conditions of Ex. A-2 need not be met. The contract is not contingent on a confirmation letter from the Bank. Only execution of the sale deed was postponed. Ex. A-3 does not require the deed to wait for the Bank to accept a settlement (¶ 22).
33. Held: Under clause 4 the vendors could ask the plaintiff for further advance and then secure the documents. The courts below found no material that they ever did. The plaintiff kept the money ready in his savings account. Discharging the Bank's loans and handing over the deeds is not an impossible event (¶ 22).
34. Held: The agreement cannot be termed a contingent contract. It did not end on that ground, and the court has jurisdiction to grant relief in terms of the contract (¶¶ 22, 23).
35. Held: Obtaining a no objection certificate, an income tax clearance or other authority's clearance, and securing title deeds after clearing loans, are incidental and implied covenants on the vendors' part to do the needful to give effect to the agreement (¶ 23).
36. Held: Performance was not impossible. The Bank first asked Rs 629.60 lakh, though the vendors offered Rs 148 lakh. The sister concern had borrowed a large sum, and the vendors had many properties in prime localities of Chennai and its suburbs (¶ 24).
37. Held: The contract is capable of performance. The plea of a contingent contract was not an issue in the trial court and was not raised in the written statement. The defendants did not enter the witness box. The plaintiff paid Rs 25 lakh and Rs 50 lakh in addition to Rs 1 lakh, and proved readiness, willingness and financial ability. The second contention is rejected (¶ 25).
38. Noted (marshalling): The plaintiff claimed in the High Court that, having a decree, he was entitled to marshalling under Section 56 of the Transfer of Property Act. He asked that the Bank be directed to proceed first against the other Chennai properties (¶ 26).
39. Noted: The High Court noted that the plaintiff had paid a substantial advance and obtained a decree. It concluded that the right of marshalling is available to him. Section 56 gives a subsequent purchaser the right to have the mortgage debt met from the properties not sold to him, so far as they extend, without prejudicing the mortgagee or others who acquired an interest for consideration. Section 81 gives the similar right to a subsequent mortgagee (¶ 27).
40. Noted: The Court explains the doctrine by an illustration. A owns properties X and Y, both mortgaged to C, and sells X to B. B can insist that A's mortgage debt be met first from Y. Only if a balance remains is X drawn upon (¶ 28).
41. Noted: The doctrine rests on the principle that a creditor who can satisfy his debt from several funds must not, by exercising his right, prejudice another creditor whose security is only one of the funds (¶ 28).
42. Held: Because of the decree for specific performance, the plaintiff can insist that the mortgage debt be satisfied from the properties not sold to him, and if the proceeds fall short, then against the suit property (¶ 29).
43. Noted: The appellants objected that marshalling was not pleaded in the trial court. It is not disputed that it was not raised there. But the plaintiff claimed larger relief in paragraph 12 of the plaint. The Court sets out the prayers for specific performance, a mandatory injunction to discharge the loan, a permanent injunction, other reliefs and costs (¶ 29).
44. Held: The plaintiff expected the trial court to grant the whole relief and did not expect part of it. So there was no occasion to plead marshalling at filing. As a pure question of law based on the decree, it cannot be thrown out only because it was not specifically pleaded (¶ 30).
45. Noted: The appellants relied on Anathula Sudhakar v. P. Buchi Reddy, where the High Court in a second appeal on a bare injunction suit decided title without pleadings and issues. They also relied on Bachhaj Nahar v. Nilima Mandal, no. 23, which says relief can be granted only with reference to the prayers in the pleadings (¶ 31).
46. Held: There is no dispute about those propositions, but they do not apply to this case (¶ 31).
47. Held: The plaintiff paid a substantial court fee of Rs 41,66,326.50 and got a decree for specific performance with clearance of the mortgage amount. In such a case "it is the duty of the Court to mould the relief so as to render substantial justice between the parties". The High Court's course is accepted (¶ 32).
48. Held: The Recovery of Debts due to Banks and Financial Institutions Act, 1993 is a special Act for recovery of bank loans. It does not bar a civil court from granting other relief such as Section 56 of the Transfer of Property Act (¶ 33).
49. Held: The High Court's direction under Section 56 did not modify or erode the Tribunal's order. The Bank accepted the High Court's verdict and did not appeal. The Bank is not prejudiced, because it can proceed against the suit properties if the other sale proceeds fall short (¶ 33).
50. Noted: The doctrine "cannot be permitted to become a device for destructing the sanctity of contract". The Court will not apply the doctrine of impossibility to assist a party that does not want to fulfil its obligations (¶ 34).
51. Noted (writ petition): During the appeals the plaintiff filed Writ Petition No. 23405 of 2009 against the appellants, M/s Anand Agency, the Bank and the Union of India. He prayed for a writ of mandamus to stop the auction of the decree property and for other directions. The appellants objected to hearing it with the appeals (¶ 35).
52. Held: The parties and the subject matter were the same in the appeals and the writ petition, except the Union of India, against which no relief was sought. There is no bar to the Division Bench hearing a connected writ petition with the appeal. No serious objection was raised in the High Court (¶ 35).
53. Noted: On the earlier special leave petitions against interim orders, this Court asked the High Court to dispose of all the matters together, and no clarification was sought (¶ 35).
54. Noted: The respondent pointed out that grounds (j) and (k) of the writ petition already described the facts supporting marshalling. They say other properties of the judgment debtors were available for sale, and that the Bank acted with the borrowers to defeat the decree (¶ 36).
55. Noted: Since the appellants seriously objected, the Court reproduced grounds (j) and (k). Ground (j) says that leaving out the other valuable properties belonging to the judgment debtors, and bringing to sale only the property situate at Senthamangalam village, is an action that would frustrate the decree. Ground (k) says three valuable properties at Chennai were left out of the auction. It says the Bank had not been willing to receive the money offered since August 2006 and acted with the borrowers to destroy the decree holder's rights. The Court notes it is not clear whether respondents 4 to 6 in the writ petition filed any counter on these details (¶ 36).
56. Held: Although the plea of marshalling is not named in those grounds, all the details are there. The Court has already concurred with the High Court in applying the principle given the larger relief claimed and the decree subject to clearing the mortgage loan (¶ 36).
57. Noted: Sain Ditta Mal v. Bulagi Mal and Sons held that the Section 56 doctrine exists only for the benefit of the buyer. Karam Singh Sobti v. Smt. Shukla Bedi reiterated the principle (¶ 37).
58. Noted: Brahm Parkash v. Manbir Singh held that the question of prejudice to a mortgagee under the last part of Section 56 is a question of fact, which must be pleaded and shown. The Court quotes the passage (¶ 38).
59. Held: The Court read that case as saying prejudice from marshalling is a pure question of fact, depending on various factors (¶ 38).
60. Held: The High Court was right to apply marshalling in the plaintiff's favour while protecting the Bank's interest. The Bank did not challenge the judgment. The contrary arguments on applying it at the appellate stage are rejected (¶ 39).
61. Held (costs): The plaintiff valued the suit, paid a substantial court fee of Rs 41,66,326.50 and secured a decree for specific performance, although not all relief. Under Section 35 of the Code of Civil Procedure he is entitled to costs. The High Court rightly ordered costs payable by defendants 1 and 2, and the Court agrees (¶ 40).
62. Noted (directions to the Recovery Officer and Tribunal): The appellants said the jurisdiction of the Recovery Officer and Tribunal is exclusive, relying on Allahabad Bank v. Canara Bank, State Bank of India v. Allied Chemical Laboratories and India Household and Healthcare Ltd. v. LG Household and Healthcare Ltd. The Court says it is conscious of these principles (¶ 41).
63. Held: The High Court considered connected issues on the same properties, in which both the civil court and the Tribunal passed several orders. The appellants had enough other properties, and the Bank was a party and did not appeal. So the direction does not run counter to the Tribunal's orders and safeguards the interest of all parties (¶ 41).
64. Held: Property value rose only because the appellants delayed settling the Bank's dues. On that ground the Court will not interfere with the direction on sale of the properties (¶ 41).
65. Noted (Article 136): The first respondent said that even after granting leave this Court need not go into every issue and has ample power to dismiss all appeals, given the concurrent findings (¶ 42).
66. Noted: The Court cites Balvantrai Chimanlal Trivedi v. M.N. Nagrashna (AIR 1960 SC 407), which declined to interfere where there was no failure of justice. It also cites the Constitution Bench in AIR 1960 SC 1292, which said this Court need not decide every question merely because leave was granted (¶¶ 43, 44).
67. Noted: Taherakhatoon v. Salambin Mohammad concerned a trespass by two rooms, a delay of seven years, and damages held adequate. It held that the discretion available at the special leave stage continues after leave, and the Court may declare the law yet not interfere if justice does not require it. It refers to the Constitution Bench in Pritam Singh v. State (¶ 45).
68. Noted: Chandra Singh v. State of Rajasthan, a three-Judge decision, followed Taherakhatoon. It said that after leave the appellants must show exceptional circumstances and that grave injustice will result without interference. It also said certiorari is discretionary (Champalal Binani). It said relief can be denied if it would be opposed to public policy, or if quashing an illegal order would revive another illegal one. It refers to Articles 226, 32 and 142 and to S.D.S. Shipping v. Jay Container Services (¶ 46).
69. Held: Even after notice and leave, the appellants must show exceptional and special circumstances, and that without interference substantial and grave injustice will result (¶ 46).
70. Held (conclusion): The Court entirely agrees with the High Court on the specific performance decree and on marshalling under Section 56. The High Court also dealt fully with the review petitions, and the Court agrees (¶ 47).
71. Held: Because the High Court judgment is confirmed in full, there is no need to refer to the affidavit of undertaking filed by the first respondent or to the appellants' objection to it (¶ 47).
72. Held: The Court gives three more months from the day of judgment to deposit the balance as directed by the High Court in paragraph 85 of its judgment. If defendants 1 and 2 fail to execute the sale deed, the trial court must execute it, incorporating the High Court's directions. All appeals are dismissed with no order as to costs (¶ 47).

Authorities

• N.P. Thirugnanam v. Dr. R. Jagan Mohan Rao & Ors., (1995) 5 SCC 115, at no. 5. Followed. Continuous readiness and willingness is a condition precedent, and funds must be shown available (¶ 10).
• P. D'Souza v. Shondrilo Naidu, (2004) 6 SCC 649, nos. 19 and 21. Followed. The plaintiff must establish readiness and willingness, depending on the facts and on whether the defendant did what the agreement required (¶ 11).
• R.C. Chandiok & Anr. v. Chuni Lal Sabharwal & Ors., (1970) 3 SCC 140. Followed. It is no straight-jacket formula and is judged from the whole circumstances (¶ 12).
• Anathula Sudhakar v. P. Buchi Reddy (Dead) By Lrs. And Ors., (2008) 4 SCC 594. Relied on by the appellants. The Court said it was not applicable (¶ 31).
• Bachhaj Nahar v. Nilima Mandal and Anr., (2008) 17 SCC 491. Relied on by the appellants. No. 23 was quoted and held not applicable (¶ 31).
• Sain Ditta Mal v. Bulagi Mal & Sons and others, AIR (34) 1947 Lahore 230. Cited. It held that the Section 56 doctrine exists for the benefit of the buyer alone (¶ 37).
• Karam Singh Sobti v. Smt Shukla Bedi, AIR 1962 Punjab High Court at Delhi 477. Cited. It reiterated the same principle (¶ 37).
• Brahm Parkash v. Manbir Singh & Ors., [1964] 2 SCR 324 at 335. Relied on for the rule that prejudice to a mortgagee is a question of fact (¶ 38).
• Allahabad Bank v. Canara Bank & Anr., (2000) 4 SCC 406; State Bank of India v. Allied Chemical Laboratories & Anr., (2006) 9 SCC 252; India Household and Healthcare Ltd. v. LG Houshold and Healthcare Ltd., (2007) 5 SCC 510. Relied on by the appellants for the exclusive jurisdiction of the Tribunal. The Court was conscious of the principles but did not apply them here (¶ 41).
• Balvantrai Chimanlal Trivedi, Manager Raipur Manfg. Co. Ltd., Ahmedabad v. M.N. Nagrashna and Others, AIR 1960 SC 407 (three Judges). Cited on declining interference under Article 136 (¶ 43). It cites A.M. Allison v. B.L. Sen, (1957) SCR 359 (AIR 1957 SC 227).
• Balvantrai Chimanlal Trivedi v. M.N. Nagrashna and Others, AIR 1960 SC 1292 (Constitution Bench). Cited. Leave does not bind the Court to decide every question (¶ 44).
• Taherakhatoon (D) By Lrs. v. Salambin Mohammad, (1999) 2 SCC 635. Cited. The discretion continues after leave (¶ 45). It refers to Pritam Singh v. State (Constitution Bench).
• Chandra Singh and Ors. v. State of Rajasthan and Anr., (2003) 6 SCC 545 (three Judges). Cited, and the Court adopted its general principle (¶ 46). It cites Champalal Binani v. CIT and S.D.S. Shipping (P) Ltd. v. Jay Container Services Co. (P) Ltd.

Also cited in footnotes: the judgment has no footnotes.

Provisions

• Section 16(c), Specific Relief Act, 1963, with Explanations (i) and (ii): the plaintiff must aver and prove readiness and willingness. He need not tender money in court unless directed (¶ 8).
• Sections 31 and 32, Indian Contract Act, 1872: contingent contracts and their enforcement (¶ 21).
• Section 56, Transfer of Property Act, 1882: marshalling by a subsequent purchaser. Section 81: marshalling by a subsequent mortgagee (¶ 27).
• Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002: the Bank's enforcement rights (¶ 3).
• Recovery of Debts due to Banks and Financial Institutions Act, 1993: it does not bar a civil court from applying Section 56 (¶ 33).
• Section 35, Code of Civil Procedure: costs (¶ 40). Section 96: regular first appeal (¶ 5). Section 100 is named in the passage from Taherakhatoon, which held that a High Court erred in a second appeal by not framing a substantial question of law (¶ 45).
• Article 226: the writ petition (¶ 5). Article 136: this Court's discretion after leave (¶¶ 42-46). Articles 226, 32 and 142: also mentioned in the quoted passage of Chandra Singh (¶ 46).

Judgement

1. The High Court judgment of 23 February 2010 is confirmed in full, including the decree for specific performance and the application of marshalling under Section 56 (¶ 47).
2. The Court gives three months from 22 November 2010 to deposit the balance amount as the High Court directed in paragraph 85 of its judgment (¶ 47).
3. If defendants 1 and 2 fail to execute the sale deed as directed, the trial court must execute it, incorporating all the directions and observations in the High Court judgment (¶ 47).
4. The High Court's own directions, as recorded: the buyer deposits Rs 4,80,48,000 with 18 per cent interest from the filing of the suit. The appellants execute the sale deed. The Bank proceeds against the appellants' other properties for the balance (¶ 3).
5. All the appeals are dismissed as without merit, with no order as to costs (¶ 47).

Legal Principle / Ratio

A plaintiff in a specific performance suit must prove continuous readiness, meaning financial capacity, and willingness, meaning conduct, from the date of the contract. Part payments, bank deposits and statements, and the defendants' failure to ask for payment or to testify can establish it. A contract is not contingent merely because performance needs the vendors to clear a bank loan. Key holding: readiness and willingness is "a condition precedent for obtaining relief of grant of specific performance".

Critical Analysis

Analysis based on the judgment text.

• The Court treats Section 16(c) as mandatory, even without a plea by the defendants. It then decides the question on the buyer's deposits and statements, which shows that capacity to pay is judged on evidence.
• The Court says the plea of a contingent contract was neither pleaded nor put in issue. It still answers it on the merits. The finding that Ex. A-3 replaced the memorandum's clauses rests on the plaint, the reply notice and the defendants' silence.
• The text has small inconsistencies. Item 2 gives the suit as O.S. No. 336 of 2008 while item 3 gives O.S. No. 336 of 2006. Item 3 says the buyer paid Rs 24 lakh on 3 February 2006 and later passages say Rs 25 lakh (¶¶ 18, 25). The Bank's decree is Rs 11,08,51,875 in one place and Rs 8,51,825.29 in another (¶¶ 3, 21). The recovery application is O.A. No. 491 of 1999 in one place and of 1991 in another (¶ 3).
• The Court states that marshalling cannot become a device to destroy the sanctity of contract, and that impossibility will not help a party unwilling to perform (¶ 34). It does not set a general test for these limits.

Significance

• The judgment separates readiness (financial capacity) from willingness (conduct) and repeats that both must continue to the decree.
• It shows the kind of evidence that proves capacity: deposits, bank certificates, part payments and correspondence.
• It holds that a duty on vendors to clear a mortgage or obtain clearances does not make a contract contingent.
• It allows marshalling under Section 56 for a decree holder in a specific performance suit, even where it was not pleaded at trial, because it is a question of law.
• It affirms that a High Court may hear a connected writ petition with a first appeal.

Exam-Important Points

• Rule first: Section 16(c) readiness and willingness is a condition precedent. The plaintiff must allege and prove it continuously.
• Readiness is financial capacity. Willingness is conduct. Generally readiness is backed by willingness.
• Explanation (i): the plaintiff need not tender or deposit money in court unless the court directs. He must still show he had the means.
• The statute requires compliance even if the defendant takes no specific plea. Non-compliance means the court must dismiss the suit.
• A contract is contingent only if it depends on a collateral event. If the condition is impossible, the contract becomes void under Section 32. Clearing a loan and handing over deeds was held not impossible.
• Marshalling (Section 56, Transfer of Property Act): a buyer can insist that the mortgage debt be met first from the unsold properties. It is for the buyer's benefit and must not prejudice the mortgagee.
• Trap: marshalling was not pleaded at trial but was still allowed. The Court called it a pure question of law arising from the decree.
• Trap: a special recovery Act does not stop a civil court from applying Section 56.
• Even after leave under Article 136, the Court may decline to interfere where no grave injustice is shown.

Prepared from the full text of the judgment. Paragraph numbers follow the official Supreme Court judgment text; law reports may number the same paragraph differently.