Verdict

In the Supreme Court of India, Civil appellate Jurisdiction
Civil appeal No. 8185 of 2009

Alagammal & Ors          ……………. Appellants
Vs
Ganesan & Anr              ………………Respondents

In January 2024, the Hon’ble Supreme Court set aside a Madras High Court Judgement and upheld the Judgment passed by the Trial Court on a matter pertaining to execution of sale deed within a stipulated time as contained in the sale agreement. A summary of the case.

Facts

1. Alagammal, Palaniammal and Mariammal (sellers) entered into a registered sale agreement on 20th November 1990 to sell the property to Ganesan and Magudeeswari (buyers) for a sum of Rs. 21,000. Of the total amount, a sum of Rs. 3,000 was paid as advance by Ganesan to Alagammal. Further, 6 months’ time was fixed for the completion of the transaction.
2. On 5th November 1997, Alagammal and others executed a sale deed pertaining to the same property with a third party, Thangam. Sale consideration was fixed at Rs. 22,000.
3. On 18th November 1997, Ganesan sent a notice to Alagammal calling upon them to execute the sale deed in their favour. Further a suit was filed in the District Court, Dindigul for the specific performance of the Agreement along with damages. In September 2000, the District Court, Dindigul dismissed the suit.
4. Aggrieved, Ganesan filed an appeal which allowed by the first appellate Court and Madurai Bench, Madras HC which set aside the order passed by the District Court in April 2009.
5. Aggrieved, Alagammal and others preferred an appeal in the Supreme Court.

Issue 

Whether time is essence of the contract if a registered sale agreement stipulates time frame for completion of payment and execution of sale deed.

Contentions
Ganesan & Ors (Buyers)

1. A total sum of Rs. 20,425 was paid by Ganesan to Alagammal of which a sum of Rs. 7,000 was paid within time of 6 months. Alagammal accepted the remaining payment periodically after the expiry of 6 months. This was evidenced by the thumb impression aff
2. Alagammal filed a case against her husband and her family to get the physical possession of the property. Such possession came to her only in April 1996. Therefore, limitation period would also commence thereafter.
3. The issue of time being the essence of a contract would depend upon the conduct of the seller. In this case, after receiving Rs. 3,000 initially and Rs. 4,000 wihtin 6 months’ time, Alagammal accepted the balance payments periodically after the expiry of the 6 months’ time. Therefore, it is interpreted that the Agreements’ validity could not expire after 6 months, as by accepting the money, the time indicated for completing the transaction has been relaxed. The judgment in the case of Godhra Electricity Company Limited v State of Gujarat, (1975) 1 SCC 199 was relied upon in this regard

Alagammal & Ors (Seller)

1. The balance consideration amount of Rs. 18,000 was not paid by Ganesan within the stipulated time of 6 months as contained in the registered agreement.
   
2. The claim of Ganesan of having paid Rs. 20,425/- was false as there was no reason or justification for paying Rs. 425/- more than what was agreed.
3. A forensic examination concluded that there was a mismatch of the thumb impression of Alagammal. The impression on the document did not match with the original thumb impression of Alagammal. This amounted to claim being based on a fraudulent document.
4. The agreement stipulated that in the event of default on the part of buyers (Ganesan), the advance paid would be forfeited and entitlement for obtaining sale deed and getting possession free from encumbrances would also end.
5. As buyers, Ganesan and others had to prove willingness and readiness under the ambit of the Specific Relief Act 1963. He was obliged to procure stamp paper and draw up sale deed along with payment of consideration to complete execution of the sale. There was no indication that Ganesan took steps to this effect.
6. In the K.S Vidyanadam vs. Vairavan 3 SCC 1 case, the Court held that in the case of agreement to sell relating to immovable property, time is not essence of the contract unless specifically provided to that effect. Also, the limitation period for filing a suit is 3 years. Therefore, the suit filed by Ganesan is barred by Limitation.

Analysis & Judgment  

1. The Agreement to sell dated 20th November 1990 contained a stipulation for the payment to be made within 6 months i.e, on or before 21st May 1991. It is observed that only a sum of Rs. 7,000 /- was paid within the said time of 6 months.
2. The buyer had a duty to purchase stamp paper at their expense. The seller had to execute the sale deed in the buyers favour after receipt of balance payment. In the event the seller failed to register the sale deed, the buyer had the right to deposit the balance sale consideration in the court and get the sale / possession of property through the Court.
3. The onus of paying the balance within 6 months as stipulated in the agreement to sell was on the buyer (Ganesan). However, it was noted that Ganesan had not even offered to pay the balance amount within the 6-month period. Hence the buyer (Ganesan) did not comply or fulfil his obligation within the 6 months.
4. If Alagammal had accepted the payment from Ganesan after the expiry of  6 months, Ganesan had the legal remedy to recover the money along with interest and damages, but a suit for specific performance of the suit to execute a sale deed would not be available.
5. Though the K S Vidyanandam case held that time was not the essence of the contract in case of sale of immovable properties, the Court noted decision of the Constitution Bench in the case of Chand Rani Vs Kamal Rani 1 SCC 519. In the case it was held that though time is not essence of contract in case of sale of immovable properties, Court should consider all relevant circumstances such as terms and conditions, nature and objective of the contract including time limits specified in agreements. Accordingly, Court may grant specific performance at its discretion.
6. In the present case, the Court noted that even the delayed payments were done by the buyer (Ganesan) with large intervals of time, the  buyers did not show any intention or willingness to complete the sale by procuring stamp papers and giving notice to sellers to complete the sale. In this case the High Court did not judge the conduct of the parties especially the seller. Hence time would not remain the essence of the contract.

Based on the above, the Supreme Court set aside the Judgment of the High Court, the first appellate court and restored the order of the Trial Court.