Saradamani Kandappan v. S. Rajalakshmi

A buyer agreed to buy 24 acres 95 cents in Chingleput District for Rs 3,75,000 and paid Rs 2,25,000 in instalments. She missed the last two payment dates, and the sellers cancelled the agreement. The Supreme Court held that time for payment was of the essence, refused specific performance (a court order to carry out the contract), and raised the refund interest to 12 per cent.

Quick Revision

Read the full judgment: Indian Kanoon (unofficial copy)

Parties

Mrs. Saradamani Kandappan — appellant in Civil Appeal Nos. 7254-7256 of 2002 and the buyer. She was the plaintiff in the three suits.

Mrs. S. Rajalakshmi (respondent no. 1) — owner of Survey Nos. 13, 14 and 15; a seller and defendant no. 1.

Respondent no. 2 — the son of respondent no. 1 and owner of Survey Nos. 16 and 18; a seller and defendant no. 2.

Respondent no. 3 — the daughter of respondent no. 1 and owner of Survey Nos. 19 and 20; a seller and defendant no. 3.

Respondent no. 4 — the husband of respondent no. 1; he dealt with the buyer for the family and was defendant no. 4. He gave evidence as DW-2.

Procedural History

1. The buyer filed O.S. No. 1709/1981 in the court of the District Munsif, Poonamallee, for a permanent injunction (a court order to do or stop doing something). It was later moved to the Madras High Court and renumbered C.S. No. 302 of 1989 (para 9).
2. She filed C.S. No. 95/1984 in the Madras High Court on 19 June 1982 for specific performance (para 9).
3. She filed C.S. No. 170 of 1984 in the Madras High Court on 12 January 1984 against the fourth respondent to recover Rs 1,25,000 with interest (para 9).
4. Common evidence was led in the three suits. A Single Judge dismissed all three on 29 November 1991 (para 13).
5. The buyer filed O.S.A. Nos. 12 of 1992, 32 of 1995 and 148 of 1999. A Division Bench dismissed them on 19 June 2002 (paras 1, 14).
6. The Division Bench directed the sellers to repay Rs 3,50,000 with interest at 9 per cent a year for the time the buyer was not acting as caretaker (para 14).
7. The Division Bench also dismissed three applications (para 14):
   • C.M.P. No. 2888/1996 asked for an Advocate Commissioner to note the physical features of the property.
   • C.M.P. No. 17401/1997 was her son's request to be added as a party, saying a substantial part of the money came from him.
   • C.M.P. No. 7471 asked to receive as additional evidence a judgment in suo moto contempt proceedings, a letter from her counsel to Bank of India, Mylapore Branch, and its reply.
8. The buyer appealed by special leave (Civil Appeal Nos. 7254-7256 of 2002). On 11 November 2002, while granting leave, this Court ordered that the respondents must not encumber the property in any manner (paras 1, 48).
9. The sellers filed their own appeals (Civil Appeal Nos. 4641-42) against the refund order (para 52).
10. The buyer filed Contempt Petition (C) Nos. 28-29 of 2009 alleging breach of the order of 11 November 2002 (para 48).

Facts

1. Respondents 1 to 3 owned Survey Nos. 13, 14, 15, 16, 18, 19 and 20 in Chettiaragaram Village, Saidapet Taluk, Chingleput District. The land measured 24 acres 95 cents. With trees, wells, pump-houses, godowns, a fence and some furniture, it is called the schedule properties (para 2).
2. On 17 January 1981 respondents 1 to 4 agreed to sell the schedule properties to the buyer at Rs 15,000 an acre. The total was Rs 3,74,250, rounded to Rs 3,75,000. She paid Rs 1,00,000 as advance that day (para 2).
3. Clause 3 made the execution of the sale deed depend on the buyer being satisfied about title and nil encumbrance (para 2).
4. Clause 4 fixed the balance of Rs 2,75,000 in three instalments (para 2):
   • Rs 1,00,000 by 28 February 1981.
   • Rs 1,00,000 by 6 April 1981.
   • Rs 75,000 by 30 May 1981.
5. Clause 5 moved a payment date that fell on a holiday to the next working day (para 2).
6. Clause 6 said payment on the due dates was the essence of the contract. If the buyer failed, the sellers had to cancel the agreement (para 2).
7. Clause 7 let the buyer have the sale deed executed at her convenience, in her name or her nominees' names (para 2).
8. Clause 12 let the buyer give notice if she found the title unsatisfactory. If the sellers could not satisfy her, they had to refund all the money within three months (para 2).
9. Clause 15 made the buyer a caretaker of the properties until the sellers gave possession on payment of the full price (para 2).
10. On the same day the fourth respondent signed a letter acknowledging Rs 1,25,000 as commission. He promised to refund it within three months if the sale was not completed or was cancelled (para 3).
11. The buyer paid Rs 1,00,000 on 28 February 1981 and Rs 25,000 on 2 April 1981. She did not pay Rs 75,000 of the instalment due on 6 April 1981, or the last instalment of Rs 75,000 due by 30 May 1981 (para 4).
12. On 2 August 1981 respondents 1 to 3 cancelled the agreement under clause 6. They said they would refund Rs 2,25,000 once they sold to a third party and worked out any shortfall in the price (para 5).
13. On 7 August 1981 the buyer replied that time was never meant to be of the essence. She said the sellers never produced the original title deeds. She said her husband and the fourth respondent agreed in March 1981 that she would pay only after the deeds were made available. She said Rs 25,000 received on 2 April 1981 was a token of that understanding. She denied that she had examined the title documents at signing (para 6).
14. On 26 August 1981 the sellers denied any such variation and said the buyer had already satisfied herself about title. They said her husband had taken copies of the documents and the encumbrance certificate up to 1980 (para 7).
15. The buyer sent a second reply on 4 September 1981. On 11 November 1981 she published a public notice in The Hindu. It said she had bought the schedule properties and also Sy. Nos. 20/1, 21 and 24, was in possession and was cultivating them. It warned third parties that any deal with the owners would be at their own risk (para 8).
16. On 14 November 1981 Gulecha wrote that the documents for Survey Nos. 16 and 18 were with him as security for a loan to the second respondent. The same day the sellers denied her claim and said the caretaker appointment had been cancelled. They said the survey numbers she named were wrong. They said a deal with a third party had fallen through because of her notice, causing them loss. They asked her to hand over movables to a new caretaker on 19 November 1981 (para 8).
17. In the injunction and specific performance suits, the sellers said time was of the essence. They said the buyer's husband knew the original deeds were with the State Bank of Mysore and Gulecha (para 10).
18. The fourth respondent said the Rs 1,25,000 was security for due performance of the contract, not commission (para 11).
19. Three witnesses gave evidence for the buyer: herself as PW-1, Babu as PW-2 and Balaraman as PW-3. Exhibits P-1 to P-20 were marked. The sellers examined Rajendran as DW-1 and the fourth respondent as DW-2, and Exhibits D-1 to D-6 were marked (para 13).

Issues Raised

The trial court framed these issues (para 12):

1. In the injunction suit: is the plaintiff entitled to a permanent injunction, and to what reliefs?
2. In the specific performance suit: did the plaintiff breach the contract by defaulting in payment, so that she lacked readiness and willingness?
3. Is time the essence of the contract?
4. If so, is the termination by the defendants valid?
5. Is the plaintiff not entitled to specific performance, and to what relief are the parties entitled?
6. Additional issues: is the fourth defendant a necessary and proper party, and does the filing of C.S. No. 170 of 1984 entitle the plaintiff to specific performance?
7. In the refund suit: was the Rs 1,25,000 paid as commission or as part of the sale consideration, is it returnable, and what other relief is due?

The Supreme Court framed four questions for itself (para 16):

1. Was the time for payment of the balance consideration of the essence of the contract, and were the defendants justified in cancelling the agreement when the schedule was not kept?
2. Had the parties agreed on a sequence of performance that required payment of the balance only after the respondents satisfied the appellant about title?
3. Did the respondents fail to disclose encumbrances and so commit fraud, which would entitle the appellant to extra time and make the cancellation illegal?
4. Should an adverse inference be drawn because defendants 1 to 3, the vendors, did not give evidence?

Arguments Contended

For the appellant (the buyer):

• Time was not of the essence of the agreement. If the vendors fail to give title documents and the buyer is ready and willing, the vendors' termination is illegal and a breach (para 17).
• The High Court failed to apply Section 55 of the Contract Act (para 17).
• She relied on N. Srinivasa v. Kuttukaran Machine Tools Ltd. for the view that in a contract relating to immovable property, time cannot be the essence, even if the contract says so (para 18).
• Before the Division Bench she argued that the payment schedule was changed by an oral understanding in March 1981. The second and third instalments were to be paid only after the original title deeds were produced (para 29).
• Before the Supreme Court she relied on Section 52 of the Contract Act. She said the agreement fixed an order of performance in which the vendors first had to furnish the original deeds and a nil encumbrance certificate, and she could withhold the price until then (para 30).
• She said clause 3 comes before clause 4. So satisfaction about title was a condition that had to be met before the balance became payable (para 35).
• The vendors did not disclose the mortgages (charges on property to secure loans) to Bank of India, Gulecha and State Bank of Mysore. Under Section 55(1) of the Transfer of Property Act this was fraud. She said Section 34 of that Act entitled her to extra time for the delay caused by the fraud (para 38).
• The debt to Bank of India was fraudulently suppressed. She relied on Bank of India v. Vijay Transport (para 42).
• An adverse inference should be drawn because defendants 1, 2 and 3 did not enter the witness box. She relied on Vidhyadhar v. Mankikrao and Balasaheb Dayandeo Naik v. Appasaheb Dattatraya Pawar (para 47).
• In the contempt petitions she said that money taken by respondents 1 to 3 from one Jeevanandam under memoranda of understanding created an encumbrance. She asked for an inquiry into whether the memoranda were back-dated (paras 48, 49).

For the respondents (the sellers):

• Time for payment was of the essence. The agreement was cancelled because the buyer defaulted on the balance instalments (para 10).
• The buyer's husband knew before signing that the original documents were with State Bank of Mysore and Gulecha. They could be released only if the buyer paid the instalments (para 10).
• The buyer had examined copies of the title documents and the encumbrance certificate up to 1980 before signing. They were not bound to deliver the original documents before the full price was paid (paras 7, 41).
• The sellers meant to use the last two instalments to clear the loans and get back the original deeds (para 41).
• The fourth respondent alone had full knowledge of the transaction and gave evidence for all of them (para 47).
• In their own appeals they argued that their offer to repay was conditional. It required the buyer not to obstruct them or file frivolous suits, and to hand over possession. Because she did not, the offer stood withdrawn (para 52).
• During the appeals the buyer stayed in possession as Receiver and gained more than Rs 37,00,000 over about 15 years. So no further benefit should come from a refund with interest (para 52).
• On the contempt petitions the memoranda of understanding created no encumbrance (para 50).

Court's Reasoning

The judgment has numbered paragraphs and one opinion, delivered by Raveendran, J. Both Judges signed it. Steps follow the order of the paragraphs. The first, unnumbered paragraph of the judgment only introduces the appeals and the parties.

Raveendran, J. (judgment of the Bench)

1. Noted: The appeals challenge the common Division Bench judgment of 19 June 2002 in three original side appeals, which arose from three suits dismissed by a Single Judge on 29 November 1991. The parties are called by their ranks in the suits.
2. Noted: The agreement of 17 January 1981 covered 24 acres 95 cents at Rs 15,000 an acre, with Rs 1,00,000 paid as advance. The Court extracts clauses 3, 4, 5, 6, 7, 12 and 15 (para 2).
3. Noted: The fourth respondent's letter of the same day acknowledged Rs 1,25,000 as commission and promised a refund within three months if the sale was not concluded or was cancelled (para 3).
4. Noted: The buyer paid Rs 1,00,000 on 28 February 1981 and Rs 25,000 on 2 April 1981. She did not pay the balance of the second instalment or the last instalment (para 4).
5. Noted: The sellers cancelled on 2 August 1981 under clause 6. The Court quotes the notice, which said they were always ready and willing and had waited a long time (para 5).
6. Noted: The buyer's reply of 7 August 1981 said time was never intended to be of the essence. She pleaded that the deeds were not produced and that the March 1981 understanding postponed payment. She said a further Rs 25,000 was received on 2 April 1981 as a token of that understanding. She denied having examined the title documents at signing. She was ready to pay if the documents were handed over for scrutiny (para 6).
7. Noted: The sellers' reply of 26 August 1981 denied any variation. It said payment did not depend on the buyer scrutinising title again, and that she could have asked for inspection of the originals (para 7).
8. Noted: The second reply followed. In her public notice of 11 November 1981 the buyer claimed the schedule properties and Sy. Nos. 20/1, 21 and 24, said she was cultivating them and warned third parties. Gulecha and the sellers answered on 14 November 1981. The sellers said the survey numbers were wrong and that a third-party deal had fallen through, causing them loss (para 8).
9. Noted: The buyer filed three suits: for injunction, for specific performance and for refund of Rs 1,25,000 with interest at market rate from 17 January 1981 (para 9).
10. Noted: The sellers resisted the first two suits on the ground that time was of the essence. The fourth respondent resisted the refund suit by saying the money was security (paras 10, 11).
11. Noted: The Court lists the issues framed in each suit and the evidence led. The Single Judge dismissed all three suits (paras 12, 13).
12. Noted: The Division Bench dismissed the appeals but ordered a refund of Rs 3,50,000 with 9 per cent interest. It also dismissed the three applications (para 14).
13. Noted: The two courts below recorded concurrent findings (para 15):
    • The sellers agreed to sell 24 acres 95 cents for Rs 3,75,000 and received Rs 2,25,000 as advance.
    • The buyer paid a further Rs 1,25,000 for movables and took a letter calling it commission, as security. It was to be refunded if the sale did not happen.
    • Time for payment of the balance under clause 4 was of the essence.
    • The buyer did not prove an oral change of the payment schedule in March 1981.
    • She failed to pay Rs 1,00,000 due on 6 April 1981 (except Rs 25,000 paid on 2 April 1981) and Rs 75,000 due on 30 May 1981. The sellers were justified in cancelling on 2 August 1981.
    • Possession was not given in part performance. The buyer held the land only as caretaker and had to return it when the agreement was cancelled.
    • The buyer and her husband knew of the mortgage before signing. The sellers had no duty to produce the original deeds or proof of loan clearance before the full price was paid.
    • The buyer did not prove readiness and willingness, so she was not entitled to specific performance.
14. Noted: Where the trial court's findings of fact are affirmed on appeal by the High Court, this Court is reluctant to interfere under Article 136 of the Constitution, unless there are very strong reasons. The Court then framed four questions (para 16).
15. Noted (Question 1): The buyer argued that time was not of the essence and that Section 55 of the Contract Act was ignored. The Court sets out Section 55: a contract becomes voidable at the promisee's option when a party fails to perform at a fixed time, if the parties intended time to be of the essence. If time is not essential, the promisee gets compensation only. If the promisee accepts late performance, there is no claim for compensation unless notice is given at that time (para 17).
16. Held: Where a time is fixed for payment but not for executing the sale deed, time becomes the essence only for payment. Normally "time is not considered to be the essence of the contract unless such an intention can be gathered" from the express terms or from the parties' intention shown by those terms (para 17).
17. Noted: The buyer relied on a sentence in N. Srinivasa v. Kuttukaran Machine Tools Ltd. that in a contract relating to immovable property time cannot be the essence. The Court read that sentence as a conclusion on the facts of that case. The legal position is in para 27 of that decision: time is normally presumed not to be of the essence, the presumption can be rebutted even where the contract says otherwise, and the contract's terms must be examined (para 18).
18. Noted: The Constitution Bench in Chand Rani v. Kamal Rani stated the rule. In a sale of immovable property time is never regarded as the essence, and there is a presumption against it. An intention to make time the essence must be expressed in unequivocal language. It followed Gomathinayagam Pillai and Govind Prasad Chaturvedi. Fixing a period for performance does not make time the essence. Even if time is not the essence, the Court may infer a reasonable time from the express terms, the nature of the property and the surrounding circumstances. Circumstances that are sufficiently strong can displace the normal presumption (para 19).
19. Noted: In Chand Rani time for the first payment of Rs 98,000 was held to be of the essence. The buyer there insisted on possession and an income-tax clearance before paying, and the Court found she could not insist on these for that payment (para 19).
20. Held: Time for payment is the essence where the intention is clear from the express terms or from the circumstances behind the sale. Examples are a need to repay a loan by a date, or an urgent medical or educational need. Even without a stated need, clear words showing that intention are enough (para 19).
21. Noted: Standard agreements ask for earnest money (a deposit that binds the contract) at signing and the balance at execution or registration of the sale deed. Absent a contrary term, the buyer need only offer to pay the balance at completion, under Section 55(5)(b) of the Transfer of Property Act (para 20).
22. Held: Here there was a conscious effort to separate payment of the balance (clauses 4, 5 and 6) from execution of the sale deed (clause 7). Time was the essence only for payment of the balance and not for execution of the sale deed (para 20).
23. Why: Clause 4 fixed three dated instalments. Clause 5 shifted a date only if it fell on a holiday, so even a day's delay was unacceptable. Clause 6 said payment on due dates was the essence and the sellers shall cancel on failure (para 20).
24. Noted: The terms for completing the sale show time was not meant to be the essence for completion. Clause 3 made the sale deed, and not the payment, depend on the buyer's satisfaction about title. Clause 7 left execution to her convenience. Clause 12 gave her a refund if the title was not made good (para 21).
25. Held: The buyer, on her initial examination of the documents, agreed unconditionally to pay in three instalments. Payment of the balance did not depend on later satisfaction about title (para 21).
26. Noted: The buyer admitted in evidence that time was the essence and that the title also had to be proved. Her bank pass book showed she lacked the funds for Rs 75,000 due on 6 April 1981 and Rs 75,000 due on 30 May 1981. It was possible that she invented the modification because she was not ready to perform (para 22).
27. Held: The concurrent finding that time was of the essence and that no change was agreed stood. Time for payment under clauses 4, 5 and 6 was the essence, and the buyer's failure justified cancellation (para 22).
28. Noted (an aside on the principle for the future): The distinction between immovable property and other contracts is not drawn by Section 55 of the Contract Act or by the Specific Relief Act, 1963. Indian courts adopted it from nineteenth-century English law. They held that specific performance is ordinarily granted despite delay if it is not inequitable. The Court cites Gomathinayagam Pillai, Govind Prasad Chaturvedi, Indira Kaur v. Sheo Lal Kapoor and Chand Rani, following Jamshed Khodaram Irani v. Burjorji Dhunjibhai of the Privy Council. It adds that Chand Rani made a slight departure from this view (para 23).
29. Noted: The principle took shape when property values were stable. The assumption was that specific performance after a few months would not prejudice the vendor. That made sense in the first half of the twentieth century. From the last quarter of that century there was very fast inflation and prices rose steeply. The Court took judicial notice of this, saying city property worth a lakh around 1975 to 1980 may cost a crore now (para 24).
30. Obiter: The steep rise in prices makes it inequitable to grant specific performance where the purchaser did not complete within the agreed period and the vendor was not at fault. "A purchaser can no longer take shelter under the principle that time is not of essence" to cover delays, laches (unreasonable delay), breaches and non-readiness (para 25).
31. Obiter: Older precedents may no longer apply, not because they are wrong but because the conditions have changed. To say a vendor who took about 10 per cent earnest money and allowed three or four months did not mean time to be of the essence would be very harsh on him. Suits and appeals take two to three decades, so an owner who agreed to sell for Rs 1 lakh may have to sell a quarter-century later when the property is worth a crore (para 25).
32. Noted: Laws that were reasonable when made can become arbitrary with the passage of time. The Court cites Rattan Arya v. State of Tamil Nadu, where a Rs 400 rent ceiling set in 1973 had become unreal. That case also mentions Motor General Traders v. State of A.P., which held that a valid provision may be challenged later as violating Article 14 (para 26).
33. Noted: In Malpe Vishwanath Acharya v. State of Maharashtra a three-Judge Bench held that standard rent pegged to 1 September 1940 or the date of first letting under the Bombay Rents, Hotel and Lodging House Rates Control Act, 1947 had become unreasonable because of inflation. It said a rent law must balance rival interests and be revised periodically. It said the standard rent provisions (sections 5(10)(B), 7, 9(2)(b) and 12(3)) could no longer be considered reasonable (para 26).
34. Held: The principle behind these decisions on statutes applies on the same logic to decisions of courts (para 26).
35. Noted: K.S. Vidyanadam v. Vairavan, written by Jeevan Reddy, J., who sat on the Chand Rani Bench, gave the correct view. It said courts in India, following early English decisions, held that time is not of the essence in a land sale unless specifically provided. Urban property prices have risen sharply since 1973, driven by large-scale migration to cities and by inflation. The rigour of the rule that time is not of the essence in immovable property, evolved when prices were stable, needs to be relaxed, if not modified (para 27).
36. Obiter: There is an urgent need to revisit the principle and to explain the current law for contracts made after 1975. The Court did not do so here and did not refer the matter to a larger Bench, because it held on the facts that time was of the essence even under the principles of Chand Rani (para 27).
37. Held: Until the issue is considered in an appropriate case, the Court repeated the suggestions in K.S. Vidyanadam (para 28):
    • Courts exercising discretion in specific performance suits must remember that a time or period fixed by the parties has some significance and cannot be ignored.
    • Courts will apply greater scrutiny and strictness in judging whether the purchaser was ready and willing.
    • A suit need not be decreed merely because it is filed within the limitation period. Courts disapprove of suits not filed immediately after the breach or refusal.
    • The three-year period is meant to help purchasers in special cases, for example where most of the price is paid and possession is delivered in part performance.
38. Noted (Question 2): Before the Single Judge the buyer argued that time was not of the essence. Before the Division Bench she argued an oral variation in March 1981. Her husband, PW-2 and PW-3 said they visited the sellers, who asked for more time to get the original deeds, and that Rs 25,000 was paid on 2 April 1981 on that understanding. Neither court accepted any such discussion or variation (para 29).
39. Noted: Before this Court her stand shifted to Section 52 of the Contract Act. She said the agreement fixed the order of reciprocal promises, so the sellers had to furnish original deeds first and she could withhold the balance until then. She also said the courts ignored Sections 51 to 54 (para 30).
40. Noted: Section 51 says no promisor need perform unless the promisee is ready and willing to perform the reciprocal promise, where promises are to be performed together. Neither side need go first (para 31).
41. Noted: Section 52 fixes the order of reciprocal promises. If the contract expressly fixes it, that order is followed. If not, the order follows the nature of the transaction. The Court gives an example where the vendor must first make out title and obtain a clearance certificate, and only then execute the deed and take payment (para 32).
42. Noted: Under Section 53, a party who prevents the other from performing makes the contract voidable at the other party's option, and pays compensation. The Court gives an example where a buyer's failure to pay Rs 4,00,000 in a month stops the vendor buying another property and giving vacant possession (para 33).
43. Noted: Under Section 54, where one promise cannot be performed, or cannot be claimed, until the other is performed, the party who fails cannot claim the other's performance and must pay compensation. This agreement is a good illustration. The buyer could not demand the original deeds or the sale deed until she paid the price on time, because the price would let the sellers repay the loans and release the deeds (para 34).
44. Noted: The buyer argued that clause 3 comes before clause 4, so satisfaction about title was a condition precedent to paying the balance (para 35).
45. Held: The order of performance of reciprocal promises "does not depend upon the order in which the terms of the agreement are reduced into writing". The agreement must expressly say that the buyer pays only after the vendors perform clause 3. It did not (para 36).
46. Why: The contract has two separate streams. Payment by the buyer is not tied to any act of the vendors. Clause 4 does not make payment depend on title. Clause 3 does not make payment depend on satisfaction about title. Clause 12 gives a refund if the buyer is not satisfied after paying, and would be redundant if payment came only after satisfaction. If payment had waited for title, she would not have paid Rs 1,00,000 as further advance (dated 28.1.1981 in para 36) and Rs 25,000 on 2 April 1981 (para 36).
47. Held: The contract does not fix the order of performance of reciprocal promises, expressly or impliedly (para 36).
48. Held: Payment of the price did not depend on executing the sale deed. The deed was to be executed only after full payment in time. Section 52 therefore does not help the buyer and supports the sellers (para 37).
49. Noted (Question 3): The buyer said the lands were mortgaged to Bank of India (first respondent's lands), Gulecha (second) and State Bank of Mysore (third), and that no original deeds were with the vendors. She said Section 55(1) of the Transfer of Property Act required disclosure of material defects, and that non-disclosure was fraud. She claimed extra time under Section 34 of that Act (para 38).
50. Noted: The Court sets out Section 55 of the Transfer of Property Act. Without a contract to the contrary, the seller must disclose material defects in the property or title unknown to the buyer, produce title documents on request, and answer relevant questions. It also sets out Section 34. Where fraud by a person who would benefit prevents performance of a conditional act within the set time, further time is allowed to make up the delay. If no time is set, the condition is treated as fulfilled against that person (para 39).
51. Held: A contention of fraud "has to be specifically pleaded and proved". The plaint alleged no fraud (para 40).
52. Why: Before the agreement, the buyer's husband and legal adviser examined copies of the title deeds and were satisfied. She admitted this. The buyer drafted the agreement, and it made the sale depend on her satisfaction about title. The agreement said nothing about the lands being free of encumbrance. Payment was not linked to the sale deed. She took possession only as caretaker, and on full payment on 30 May 1981 she would be entitled to possession in part performance (para 40).
53. Held: These provisions show the vendors urgently needed money, the buyer knew of the encumbrances, and the vendors were to clear them after payment and then convey free of encumbrance. Fraud by suppression was neither pleaded nor proved (para 40).
54. Noted: The plaint tried to justify the non-payment of the instalments. It had only one passing sentence on damages for non-disclosure of encumbrances. The sellers' written statement said the encumbrance certificate up to 1980 had been given to her husband, showing the State Bank of Mysore encumbrance. It also disclosed a document detained by Gulecha (para 41).
55. Held: The amounts due to Gulecha (about Rs 40,000) and to the State Bank of Mysore (about Rs 39,000) could each have been cleared from one of the last two instalments. A buyer who defaulted on those instalments cannot fault the vendors for not securing the original deeds (para 41).
56. Held: The vendors' legal duty is to convey an encumbrance-free, good and marketable title, subject to a contrary contract. The stage of executing the deed had not arrived (para 41).
57. Held: The claim of a Bank of India mortgage fails. It appeared in neither the plaint nor her evidence. No one from the bank was examined and no document proved it. Her application to bring documents under Order 41 Rule 27 of the Code of Civil Procedure was rejected by the High Court (para 42).
58. Noted: Bank of India v. Vijay Transport concerned a bank suit against Vijay Transport, of which the first respondent was stated to be a partner. The bank sued in 1975 for Rs 18,14,817.91, and the firm counterclaimed Rs 34,48,799. On 6 July 1976 the bank got a decree for Rs 1,00,418.55 and the firm for Rs 34,48,799. On 20 September 1983 the High Court decreed the bank's suit for Rs 18,49,209.70 with interest and dismissed the counterclaim. The case showed that on 17 January 1981 the first respondent was not a debtor of the bank. The bank itself owed more than Rs 33,00,000 with interest. The Court found no fraud, suppression or failure to disclose (para 42).
59. Held: Failure to pay Rs 75,000 on 6 April 1981 and Rs 75,000 by 30 May 1981 was a breach. Time for these payments was of the essence, so the sellers rightly cancelled by the notice of 2 August 1981 (Ex. P5). The refusal of specific performance was upheld (para 43).
60. Held: The injunction suit was rightly dismissed. The buyer was never put in possession in part performance. Under clause 15 she was only a caretaker, and on cancellation she had to leave. Having never had possession, she could not seek an injunction to protect it (para 44).
61. Held: The refund suit for Rs 1,25,000 against the fourth respondent was rightly dismissed. The trial court held it was consideration for movables, not commission. Her counsel told the High Court she was not pressing for a decree against him (para 45).
62. Held: The Division Bench's refund direction of Rs 3,50,000 stays. The agreement does not allow forfeiture of the advance, and says the advance is refunded if the buyer is not satisfied about title. The sellers also offered to refund in their written statement (para 46).
63. Held: The High Court should have awarded interest from the date of cancellation, 2 August 1981, to payment. The duty to refund has nothing to do with the buyer's caretaker role. The rate rises from 9 per cent to 12 per cent a year (para 46).
64. Noted (Question 4): The buyer sought an adverse inference because defendants 1, 2 and 3 did not give evidence. She relied on Vidhyadhar v. Mankikrao and Balasaheb Dayandeo Naik v. Appasaheb Dattatraya Pawar. Defendants 1 to 3 were the wife, son and daughter of defendant 4, who did the whole transaction for them and alone knew it (para 47).
65. Held: When one defendant who knows the facts gives evidence, "it is not necessary for the other defendants to be examined as witnesses to duplicate the evidence" (para 47).
66. Noted: Man Kaur v. Hartar Singh Sangha held that where an agent handled the whole transaction, the principal must examine that agent. Where the principal never dealt with it, only the agent can give evidence. Such an attorney may even speak to bona fides (good faith) and readiness and willingness, as with a spouse or a child who manages all the affairs of the principal (para 47).
67. Held: The fourth respondent's evidence as DW-2 was enough. There was no merit in the claim that the suits should have been decreed because defendants 1 to 3 did not testify (para 47).
68. Noted (contempt petitions): The buyer asked that respondents 1 to 4 be punished for breaching the order of 11 November 2002, made when leave was granted. That order said the respondents must not encumber the property in any manner (para 48).
69. Noted: She alleged that one Jeevanandam sued respondents 1 to 3 in 2007 and 2008. He claimed three memoranda of understanding dated 5 July 2002, advances paid on that date, and Rs 1,50,00,000 paid in 2004 and 2005. She said these created an encumbrance and asked for an inquiry into whether the memoranda were back-dated (para 49).
70. Held: The Court did not need to decide whether the memoranda were back-dated. The question was irrelevant, and no material was produced to show it (para 49).
71. Held: An encumbrance is a charge or burden created by transfer of an interest in property, a liability that runs with the land. Merely signing a memorandum of understanding to enter into a sale agreement later does not encumber property. Receiving advances under it does not either. The memoranda only promised sale agreements after pending litigation was cleared, so they were not even sale agreements. The contempt petitions failed (para 50).
72. Noted: Nothing said on the contempt petitions expresses any opinion on the dispute between Jeevanandam and respondents 1 to 3 (para 51).
73. Noted (the sellers' appeals): Defendants 1 to 3 appealed the refund direction. They said their offer to repay was conditional and had been withdrawn. They also said the buyer made over Rs 37,00,000 from about 15 years in possession as Receiver (para 52).
74. Held: There was no dispute that Rs 2,25,000 was received by the sellers and Rs 1,25,000 by the fourth respondent, who agreed to refund it on cancellation. The agreement had no clause for forfeiting amounts paid, even if the buyer breached. It required a refund if the sellers did not satisfy her about title. Her consistent case was that they did not (para 53).
75. Held: The sellers' offer to refund was conditional on the buyer not filing false, frivolous and mischievous suits. Although she lost, her suits were not false, frivolous or mischievous. She was entitled to recover under the agreement and the offer. The finding that Rs 1,25,000 was also consideration for movables was not challenged. The Division Bench was justified in decreeing Rs 3,50,000 with interest, and the sellers' appeals failed (para 54).
76. Held: The Court disposed of the appeals and contempt petitions as set out under Judgement (para 55).

Authorities

• Chand Rani v. Kamal Rani, 1993 (1) SCC 519 (Constitution Bench). Followed. In a sale of immovable property time is not the essence unless clearly expressed. Time for the Rs 98,000 payment was the essence there. The Court said it made a slight departure from earlier views (paras 19, 23, 27).
• N. Srinivasa v. Kuttukaran Machine Tools Ltd., 2009 (5) SCC 182. Relied on by the buyer. The Court said the sentence she relied on was a conclusion on facts and quoted its para 27 for the law (para 18).
• Gomathinayagam Pillai v. Pallaniswami Nadar, 1967 (1) SCR 227. Followed by Chand Rani; the Court cites it for the rule that time is not the essence in land sales (paras 19, 23).
• Govind Prasad Chaturvedi v. Hari Dutt Shastri, 1977 (2) SCC 539. Followed by Chand Rani; cited for the same rule (paras 19, 23).
• Indira Kaur v. Sheo Lal Kapoor, 1988 (2) SCC 188. Cited for the same rule (para 23).
• Jamshed Khodaram Irani v. Burjorji Dhunjibhai, AIR 1915 PC 83. The Privy Council decision these Indian cases followed (para 23).
• Rattan Arya v. State of Tamil Nadu, (1986) 3 SC 385 (as printed). Cited to show that a law valid when made can become unreal over time. It quotes Motor General Traders v. State of A.P., (1984) 1 SCC 222 (para 26).
• Malpe Vishwanath Acharya v. State of Maharashtra, (1998) 2 SCC 1 (three Judges). Cited for the same point on frozen rents (para 26).
• K.S. Vidyanadam and Others v. Vairavan, (1997) 3 SCC 1. Followed. Property prices have risen; the rule needs to be relaxed. Its suggestions were repeated (paras 27, 28).
• Bank of India v. Vijay Transport, 2000 (8) SCC 512. Relied on by the buyer. The Court read it as showing the bank owed the first respondent money on the agreement date (para 42).
• Vidhyadhar v. Mankikrao, (1999) 3 SCC 573, and Balasaheb Dayandeo Naik (Dead) through LRs. and Ors. v. Appasaheb Dattatraya Pawar, (2008) 4 SCC 464. Relied on by the buyer for an adverse inference. They did not help her (para 47).
• Man Kaur (dead) by LRS. v. Hartar Singh Sangha, (2010) 10 SCC 512. Followed on who must give evidence of a transaction handled by an agent (para 47).
• National Textile Corporation v. State of Maharashtra, AIR 1977 SC 1566, and State of H.P. v. Tarsem Singh, 2001 (8) SCC 104. Cited for the meaning of an encumbrance (para 50).

Also cited in footnotes: the judgment has no footnotes.

Provisions

• Section 51, Indian Contract Act, 1872: where reciprocal promises are to be performed together, no promisor need perform unless the other is ready and willing (para 31).
• Section 52: reciprocal promises are performed in the order the contract expressly fixes, or else the order the nature of the transaction requires (para 32).
• Section 53: a party who prevents the other from performing makes the contract voidable at the other's option, with compensation (para 33).
• Section 54: a party who fails to perform a promise that must come first cannot claim the other's performance and must pay compensation (para 34).
• Section 55: failure to perform at a fixed time makes the contract voidable at the promisee's option if time is of the essence (para 17).
• Section 55, Transfer of Property Act, 1882: the seller must disclose material defects, produce title documents and answer questions, absent a contrary contract. Section 55(5)(b) makes the buyer's duty to offer the price arise at completion (paras 20, 39).
• Section 34, Transfer of Property Act: extra time where fraud prevents a conditional act, and deemed fulfilment where no time was set (para 39).
• Section 30(ii), as quoted in Rattan Arya: a Rs 400 ceiling on residential rent set by amendment in 1973, which that Court called unreal today (para 26).
• Specific Relief Act, 1963: it draws no distinction between land and other contracts on time (para 23).
• Order 41 Rule 27, Code of Civil Procedure: the buyer's application to produce additional evidence was rejected (para 42).
• Article 136 of the Constitution: this Court rarely disturbs concurrent findings of fact (para 16). Article 14 is mentioned in the quoted passage in Rattan Arya (para 26).

Judgement

1. Civil Appeal Nos. 7254-7256 of 2002 (the buyer's appeals) are allowed in part only on the rate of interest and the period for it (para 55).
2. Respondents 1 to 3 must refund Rs 3,50,000 to the appellant, as directed by the High Court, with interest at 12 per cent a year from 2 August 1981 to the date of payment (para 55).
3. Subject to that change, the Division Bench judgment of the Madras High Court is upheld in its entirety (para 55).
4. Contempt Petition Nos. 28-29 of 2009 are dismissed (para 55).
5. Civil Appeal Nos. 4641-4642 (the sellers' appeals) are dismissed (para 55).
6. The parties bear their own costs (para 55).
7. As a result, C.S. No. 170/1984 and C.S. No. 302/1989 stand dismissed. C.S. No. 95/1984 is decreed in part for the appellant for Rs 3,50,000 with interest at 12 per cent a year from 2 August 1981 to the date of payment (para 55).

Legal Principle / Ratio

Where a contract fixes dated instalments and says payment on those dates is the essence, time for payment is the essence even in a sale of immovable property, and default justifies cancellation. A buyer cannot withhold payment until the sellers show title unless the contract expressly fixes that order. A fraud claim must be pleaded and proved. Key holding: "A purchaser can no longer take shelter under the principle that time is not of essence".

Subsequent Treatment

Analysis from the later judgments' own text. Both later files name this case.

Katta Sujatha Reddy v. Siddamsetty Infra Projects — Civil Appeal No. 5822 of 2022 (arising out of SLP (C) No. 13565 of 2021), Supreme Court of India, N.V. Ramana, CJI, Krishna Murari and Hima Kohli, JJ., decided 25 August 2022. The Court held that the 2018 amendment to the Specific Relief Act is prospective (¶ 56). It then quoted paras 42 and 43 of Saradamani Kandappan, on the need to revisit the rule and on the suggestions repeated from K.S. Vidyanadam (¶ 57). It said the purchaser should have been vigilant and could not be lackadaisical (¶ 58). It held that the claim was barred by delay, laches and limitation, and that the purchaser was not willing to perform a time sensitive agreement (¶¶ 78, 79). Although the agreement had a forfeiture clause, the Court directed the vendors to repay the part consideration. Interest was at 7.5 per cent a year from the date each payment was made. The amount was to be paid into the suit account within six months. The parties bore their own costs (¶¶ 79, 80).

R. Kandasamy v. T.R.K. Sarawathy — 2024 INSC 884, Civil Appeal No. 3015 of 2013, Supreme Court of India, Dipankar Datta and Sanjay Karol, JJ., decided 21 November 2024. The Court called the discussion in Saradamani Kandappan instructive on how the principle that time is not of the essence took shape, and reproduced it (¶ 14). It placed this passage after Chand Rani (¶ 13) and before N.P. Thirugnanam (¶ 16) in its survey of the law. It allowed the appeals, set aside the High Court decree and restored the trial court's dismissal of the buyer's suit. The buyer was to get the Rs 25 lakh advance back (¶¶ 48, 49).

The paragraphs of the later judgments that name Saradamani Kandappan do not say that it is overruled.

Other later cases (not summarized): none.

Comparative Analysis

Analysis from the supplementary judgments only.

• Katta Sujatha Reddy quotes the passages on revisiting the rule and on the K.S. Vidyanadam suggestions (¶ 57).
• R. Kandasamy also quotes the passages on inflation and the effect of rising prices (¶ 14).
• Katta Sujatha Reddy ties the passages to the purchaser's vigilance and to a time sensitive agreement. It directs repayment of part consideration, as Saradamani did, but at 7.5 per cent a year from the date of each payment rather than 12 per cent from cancellation (¶ 79).
• R. Kandasamy sets the passage beside the Chand Rani Constitution Bench test and the N.P. Thirugnanam rule on readiness and willingness (¶¶ 13, 14, 16).

Critical Analysis

Analysis based on the judgment text.

• The statements on inflation in paras 24 and 25, and the call to revisit the rule in para 27, are not needed for the result. The Court decided on the facts that time was of the essence, even under Chand Rani. These passages are therefore obiter.
• The Court did not refer the question to a larger Bench, so the older presumption stays in place. The judgment leaves open exactly how far it is relaxed for contracts made after 1975.
• The Court said the buyer's bank pass book showed no funds for the last two instalments. It left open whether she was ready and willing in any other sense, since it decided on time being the essence.
• The text has small inconsistencies. Para 36 gives the date of the first further advance as 28 January 1981 where para 4 says 28 February 1981. The heading lists Civil Appeal Nos. 4641-42/2002, while para 55 says 4641-4642/2003.

Significance

• The judgment explains how to decide whether time is of the essence for payment in a land sale: look at the express terms and surrounding circumstances.
• It says a court should examine the buyer's readiness with greater strictness and give weight to time limits the parties set.
• It explains Sections 51 to 54 of the Contract Act with examples from sale agreements.
• It shows how a refund can be ordered with interest even when specific performance is refused and cancellation is upheld.
• It sets out the meaning of an encumbrance and the rule on who must give evidence for a represented party.

Exam-Important Points

• Rule first: in a land sale, time is normally not the essence. It becomes the essence where the contract says so clearly, or the circumstances show it.
• Time can be the essence for payment of the price only, and not for executing the sale deed.
• The Court said that with steep price rises, a buyer can no longer use the presumption to excuse delay. This is obiter. Chand Rani and the earlier cases were not overruled.
• Courts apply greater scrutiny to readiness and willingness. They frown on late suits even within the three-year limitation period.
• Section 52: the order of reciprocal promises is the order the contract expressly fixes. The order of clauses on paper does not decide it.
• Fraud under Section 55 of the Transfer of Property Act must be specifically pleaded and proved.
• Trap: the buyer lost specific performance but still got a refund of Rs 3,50,000 with 12 per cent interest from the date of cancellation, because the agreement had no forfeiture clause.
• An agent who handled the whole transaction can give evidence for the principals. No adverse inference arises from the principals' absence.
• A memorandum of understanding to enter a sale agreement later is not an encumbrance.

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.