FERRODOUS ESTATES (PVT.) LTD. versus P. GOPIRATHNAM (DEAD) & ORS. on 12 October 2020

[2020] 13 S.C.R. 673

FERRODOUS ESTATES (PVT.) LTD.

v.

P. GOPIRATHNAM (DEAD) & ORS.

(Civil Appeal No. 13516 of 2015)

OCTOBER 12, 2020

[R. F. NARIMAN AND NAVIN SINHA, JJ.]

Specific Relief Act, 1963 – Agreement to sell entered intobetween appellant and defendants (represented by respondents) in1980 – Necessary permissions from the competent authority underthe 1978 Act (later repealed by 1999 Repeal Act) not obtained bythe defendants – Appellant filed suit for specific performance –Decreed by Single Judge – In first appeal, Division Bench referredthe matter to a Full Bench on various questions – Full Bench interalia holding that s.6, 1978 Act prohibited even agreements to sell,declared law inter-parties and the matter went back to DivisionBench – Division Bench remanded the matter to Single Judge whointer alia recorded a finding that the suit property stood as excesslands within the meaning of the 1978 Act before it was repealed –Matter returned to the Division Bench, which by applying the FullBench decision relating to the matter inter-parties vide the impugnedjudgment has reversed the judgment of the Single Judge – Onappeal, held: Agreement contained a specific clause in which itwas for the vendor to obtain permission from the competent authorityunder the 1978 Act – Thus, the agreement cannot be said to be hitby the decision of Full Bench judgment as the Full Bench itselfrecognised that there may be agreements with such clauses, in whichcase it is the Court’s duty to enforce such clause – Agreement to sellcannot be said to be void ab initio, as a result of which the basis ofthe Division Bench judgment under appeal goes – Further, on thedate on which the appellate decree was passed, the 1978 Act havingbeen repealed would not stand in the way of a decree for specificperformance – There is no vested right under the 1978 Act in favourof the respondents – Division Bench incorrect in stating that sincethe court process took 27 years to decide the specific performancesuit, it being a discretionary relief ought not to be granted – A suitfor specific performance filed within limitation cannot be dismissedon the sole ground of delay or laches – Appellant was ready and

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Awilling throughout to perform its part of the bargain – Defendantstook up dishonest pleas and were in breach of a solemn agreementin which they were to obtain the Urban Land Ceiling permissionwhich, if not obtained, would, under the agreement itself, not standin the way of specific performance of the agreement between theparties – Division Bench judgment set aside – Decree passed byBSingle Judge restored – Tamil Nadu Urban Land (Ceiling &Regulation) Act, 1978 – ss.4, 5(3), 6 – Tamil Nadu Urban Land(Ceiling & Regulation) Repeal Act, 1999.

Specific Relief Act, 1963 – s.20 – Scope of – Held: s.20 priorto its substitution by the 2018 Amendment Act makes it clear thatCthe jurisdiction to decree specific performance is discretionary –This discretion is not arbitrary but has to be exercised soundly andreasonably, guided by judicial principles, and capable of correctionby a court of appeal – Specific Relief (Amendment) Act, 2018.

Allowing the appeal, the CourtD

HELD: 1.1 It is not open to the appellant to go behind theFull Bench judgment as it is inter-parties, as a result of which thelaw laid down by the Full Bench judgment must apply to the parties,res judicata clearly attaching even to issues of law based on thesame cause of action. This being the case, it is important now toEanalyse what was held by the Full Bench. The Full Benchjudgment, while stating that section 6 of the Tamil Nadu UrbanLand Ceiling Act prohibited even agreements to sell, as a resultof which there would be no transaction at all in the eyes of law, ,was careful thereafter to point out:

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“40. …… While considering suit for specific performance,Court is only concerned whether purchaser has come toCourt for enforcing the agreement in terms thereof.Asking vendor to get exemption and then to execute theagreement will be deviating from the terms of contract andthe Court will not enforce such a contract. That will meanGthat purchaser is not willing to purchase the land as peragreement, but only with deviation, i.e., vendor must getexemption and execute the sale deed.”

In paragraph 41, the Full Bench also went on to state thatit is possible to obtain exemption under the Tamil Nadu UrbanLand Ceiling Act, over which the Court has no control, but despitethat, the relief of specific performance is not usuallygranted as itwould be going beyond the contract. Equally, after holding thatsection 6 prohibits a proposed transfer, the Full Bench went onto hold that a decree for specific performance cannot be grantedconditionally upon the vendor satisfying certain conditions if it isnot part of the agreement. [Paras 14-16][696-A-F]

Mathura Prasad Bajoo Jaiswal v. Dossibai N.B.Jeejeebhoy (1970) 3 SCR 830 – relied on.

1.2 When these portions of the Full Bench judgment areapplied to the agreement in question, it is clear that the agreementitself contains a specific clause, namely, clause 4, in which it is forthe vendor to obtain permission from the competent authorityunder the Tamil Nadu Urban Land Ceiling Act. This agreement,therefore, cannot be said to be hit by the decision of the FullBench judgment as the Full Bench itself recognises that theremay be agreements with such clauses, in which case it is theCourt’s duty to enforce such clause. That is all that the learnedSingle Judge has done in the facts of this case – he has correctlyheld that it was for the defendants to obtain exemption from theauthorities under the Tamil Nadu Urban Land Ceiling Act whichthey did not, as a result of which they were in breach of theagreement. Viewed slightly differently, it is clear that the FullBench judgment cannot stand in the way of the appellant foranother reason. There can be no doubt that the suit property,admeasuring roughly 2002 sq. metres, was part of a largerproperty of 30 grounds, and that the defendants, being four innumber, were entitled to retain 2000 sq. metres of the land ownedby them. It was for this reason that it was incumbent upon thedefendants to have obtained the Urban Land Ceiling permissionto sell the land that was within their ceiling limit, which they failedto do. It is clear, therefore, that the agreement to sell cannot besaid to be void ab initio, as a result of which the basis of theDivision Bench judgment under appeal goes. Resultantly, thejudgments in Jacques v. Withy, 1 H. Bl. 65, Hitchcock v. Way, A

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A(1837) 6 A & E 943 : 112 ER 360, and Ram Kristo Mandal v.Dhankisto Mandal, (1969) 1 SCR 342 (at p. 349) cited in supportof the proposition that the repeal of a statute which makes voidan agreement cannot revive such void agreement have noapplication on the facts of this case. In view of this, it isunnecessary to go into whether section 5(3) of the Tamil NaduBUrban Land Ceiling Act, together with its proviso, applies to thefacts of this case. [Paras 17-19][696-F-H; 697-A-C; 698-G-H]

Jacques v. Withy 1 H. Bl. 65; Hitchcock v. Way (1837)6 A & E 943 : 112 ER 360; Ram Kristo Mandal v.Dhankisto Mandal (1969) 1 SCR 342 - heldCinapplicable.

1.3 However, the other contention on behalf of therespondents is that even if this were so, the appellant was notentitled to more than 500 sq. metres, which was the ceiling limitso far as the appellant was concerned. This being the case, noDdecree for specific performance could be made in favour of theappellant. That conditional decrees for specific performance havebeen passed and upheld by this Court cannot be denied. [Paras20, 21][699-B-C]

1.4 Even otherwise, the Repeal Act makes it clear that theETamil Nadu Urban Land Ceiling Act is repealed. As no stepswhatsoever were taken under the Tamil Nadu Urban Land CeilingAct, the savings clause will not apply. [Para 22][701-F; 702-C-D]

1.5 It is settled law that an appeal is a continuation of a suit,as a result of which a change in law will become applicable on theFdate of the appellate decree, provided that no vested right istaken away thereby. This being the case, on the date on whichthe appellate decree was passed, in any case, the Tamil NaduUrban Land Ceiling Act having been repealed would not stand inthe way of a decree for specific performance. It must beGremembered that there is no vested right under the Tamil NaduUrban Land Ceiling Act in favour of the respondents. Any right,if at all, is in favour of the State Government, which, like PontiusPilate, has washed its hands off this matter by a report submittedto this Court on 17.08.2015. The Division Bench judgment is H

also wholly incorrect in stating that for no fault of the appellant,since the court process has taken 27 years to decide the specificperformance suit, specific performance being a discretionary reliefought not to be granted. Section 20 of the Specific Relief Act,1963, prior to its substitution by the Specific Relief (Amendment)Act, 2018, as it then stood, makes it clear that the jurisdiction todecree specific performance is discretionary; but that thisdiscretion is not arbitrary but has to be exercised soundly andreasonably, guided by judicial principles, and capable of correctionby a court of appeal – see section 20(1). Section 20(2) speaks ofcases in which the court may properly exercise discretion nottodecree specific performance. Significantly, under clause (a) of sub-section (2), what is to be seen is the terms of the contract or theconduct of the parties at the time of entering into the contract.Even “other circumstances under which the contract was enteredinto” refers only to circumstances that prevailed at the time ofentering into the contract. It is only then that this exception kicksin – and this is when the plaintiff gets an unfair advantage overthe defendant. Equally, under clause (b) of sub-section (2), thehardship involved is again at the time of entering into the contractwhich is clear from the expression “which he did not foresee”.This is made clear beyond doubt by Explanation II of section 20which states that the only exception to the hardship principlecontained in clause (b) of sub-section (2) is where hardship resultsfrom an act of the plaintiff subsequent to the contract. In thiscase also, the act cannot be an act of a third party or of the court– the act must only be the act of the plaintiff. Clause (c) of sub-section (2) again refers to the defendant entering into the contractunder circumstances which makes it inequitable to enforcespecific performance. Here again, the point of time at which thisis to be judged is the time of entering into the contract. [Paras24, 27, 28][703-G-H; 710-D-F; 711-G-H; 712-A-D]

1.6 Given section 20, the courts have uniformly held thatthe mere escalation of land prices after the date of the filing ofthe suit cannot be the sole ground to deny specific performance.It is settled law that mere delay by itself, without more, cannotbe the sole factor to deny specific performance – See Mademsetty AB

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ASatyanarayana v. G. Yelloji Rao, (1965) 2 SCR 221 at pp. 229-230.Thus, in K.S. Vidyanadam v. Vairavan, (1997) 3 SCC 1, this Courtmade it clear that if property prices have risen dramatically withina period of two and a half years before filing of the suit for specificperformance, and it is coupled with violation of the agreement bythe plaintiff, specific performance will not be decreed. Likewise,Bthis Court, in Saradamani Kandappan v. S. Rajalakshmi, (2011)12 SCC 18, made it clear that given the steep rise in urban landprices, it may not be correct now to say that time is not of essencein performance of a contract of sale of immovable property. Thus,where time can be said to be of the essence in the facts of a givenCcase, and the purchaser does not take steps to complete the salewithin the stipulated period and the vendor is not responsible forany delay, the steep rise in price within the stipulated time wouldbe a circumstance which would make it inequitable to grant therelief of specific performance. [Paras 29, 30][712-D-E; 722-G;725-F-H]D

Nirmala Anand v. Advent Corporation (P) Ltd. (2002)8 SCC 146: [2002] 2 Suppl. SCR 706; MademsettySatyanarayana v. G. Yelloji Rao (1965) 2 SCR 221;K.S. Vidyanadam v. Vairavan (1997) 3 SCC 1: [ 1997]1 SCR 993; Saradamani Kandappan v. S. RajalakshmiE(2011) 12 SCC 18: [2011] 8 SCR 874 – relied on.

1.7 The resultant position in law is that a suit for specificperformance filed within limitation cannot be dismissed on thesole ground of delay or laches. However, an exception to thisrule is where immovable property is to be sold within a certainFperiod, time being of the essence, and it is found that owing tosome default on the part of the plaintiff, the sale could not takeplace within the stipulated time. Once a suit for specificperformance has been filed, any delay as a result of the courtprocess cannot be put against the plaintiff as a matter of law inGdecreeing specific performance. However, it is within thediscretion of the Court, regard being had to the facts of eachcase, as to whether some additional amount ought or ought notto be paid by the plaintiff once a decree of specific performanceis passed in its favour, even at the appellate stage. Fervent appeal

P. GOPIRATHNAM (DEAD)

on behalf of the respondents that this Court should not exerciseits discretionary jurisdiction under Article 136, given the fact thatRs.2 crores plus interest is to be paid almost by way of solatiumto the appellant, has also to be rejected. As has been found earlierin this judgment, the defendants were held to have taken updishonest pleas and also held to have been in breach of a solemnagreement in which they were to obtain the Urban Land Ceilingpermission which, if not obtained, would, under the agreementitself, not stand in the way of the specific performance of theagreement between the parties. He who asks for equity must doequity. Given the conduct of the defendants in this case, ascontrasted with the conduct of the appellant who is ready andwilling throughout to perform its part of the bargain, this is a fitcase in which the Division Bench judgment should be setaside. As a result, the decree passed by the Single Judge isrestored. Since the appellant itself offered a sum of Rs.1.25 croresto the Division Bench, it must be made to pay this amount to therespondents within a period of eight weeks from the date of thisjudgment. [Paras 31, 32][730-E-H; 731-A-C]

Keshavan Madhava Menon v. State of Bombay 1951SCR 228 – distinguished.

Immani Appa Rao v. Gollapalli Ramalingamurthi (1962)3 SCR 739; Narayanamma v. Govindappa 2019 SCCOnLine SC 1260 – held inapplicable.

Vishwa Nath Sharma v. Shyam Shanker Goela (2007)10 SCC 595: [2007] 3 SCR 268; Van VibhagKaramchari Griha Nirman Sahkari Sanstha Maryaditv. Ramesh Chander (2010) 14 SCC 596: [2010 12 SCR 1045; Gajraj Singh v. State Transport AppellateTribunal (1997) 1 SCC 650; Rameshwar v. Jot Ram(1976) 1 SCR 847; Dayawati v. Inderjit (1966) 3 SCR275; Amarjit Kaur v. Pritam Singh (1974) 2 SCC 363;Lakshmi Narayan Guin v. Niranjan Modak (1985) 1SCC 270; P. D’Souza v. Shondrilo Naidu (2004) 6 SCC649:[2004] 3 Suppl. SCR 186; P.S. Ranakrishna Reddyv. M.K. Bhagyalakshmi (2007) 10 SCC 231: [2007] 2SCR 876; Narinderjit Singh v. North Star EstatePromoters Ltd. (2012) 5 SCC 712; Satya Jain v. Anis A

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AAhmed Rushdie (2013) 8 SCC 131:[ 2013] 3 SCR 319;K. Prakash v. B.R. Sampath Kumar (2015) 1 SCC 597: [2014] 13 SCR 702; Zarina Siddiqui v. A. Ramalingam(2015) 1 SCC 705: [2014] 14 SCR 456; Ramathal v.Maruthathal (2018) 18 SCC 303: [2017] 8 SCR 613;Sunkara Lakshminarasamma v. Sagi Subba Raju (2019)B11 SCC 787: [2018] 14 SCR 222; Nanjappan v.Ramasamy (2015) 14 SCC 341: [2015] 2 SCR 606 –relied on.

Sushila v. Nihalchand Nahata AIR 2004 Mad 18 –referred to.

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Lachmeshwar Prasad Shukul v. Keshwar Lal ChaudhuriAIR 1941 FC 5; John Lemm v. Thomas AlexanderMitchell [1912] A.C. 400; Kay v. Goodwin 130 E.R.1403 [1830] – referred to.

Case Law Reference

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CIVIL APPELLATE JURISDICTION: Civil Appeal No. 13516of 2015.

From the Judgment and Order dated 29.01.2007 of the High Courtof Madras in O.S.A. No. 93 Of 1991.

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Balaji Srinivasan, AAG, Guru Krishnakumar, V. Giri, Sr. Adv., P.R.Kovilan Poongkuntran, Mrs. Geetha Kovilan, A.J. Jawad, Kannan, VijayAnand, Vikas Mehta, Ms. Anushree Menon, M. Gireesh Kumar, VijayKumar, T. R. B. Sivakumar, Advs. for the appearing parties.

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The Judgment of the Court was delivered by

R. F. NARIMAN, J.

1. This appeal arises from a suit for specific performance thatwas filed by the appellant against four defendants who are todayrepresented by the respondents. By an agreement to sell dated 12.06.1980entered into between the appellant company and P. Nagarathina Mudaliar,P. Gopirathnam, P. Lavakumar, and P. Basantkumar, the agreementrecites:

“Whereas the property more particularly described in the Schedulehereunder and hereinafter referred to as the said property, originallybelonged to the Hindu Undivided Family consisting of Sri P.Nagarathina Mudaliar and his father Sri P. Thiruvengada Mudaliar; Whereas there was a partial partition in the said family as a resultof which, the first vendor has become the owner of the saidproperty, said deed of partition having been registered with theSub-Registrar, Madras-Chingleput, as Document No. 1268 of 1944; G

Whereas the vendors have mortgaged the said property alongwith the other properties owned by them at Haddows Road,Madras-1, for a sum of Rs.5,65,000/- (Rupees Five Lakh Sixty-Five Thousand Only) by way of a deed of mortgage registered H

with the Sub-Registrar, T. Nagar, Madras, as Document No. 3429of 1967; A

Whereas the vendors have offered to sell the said property to thepurchasers, free from all encumbrances, including the mortgagecreated in favour of Syndicate Bank, Madras-1; B

Whereas the vendors are making necessary arrangements fordischarging the said loan due to Syndicate Bank, Madras-1, andalso to get a letter from Syndicate Bank, releasing their interest, ifany, in the said property offered to be sold; xxx xxx xxx”C

The material clauses of the agreement are as follows:

“3. It is agreed that the sale consideration should be paid as follows:

(a) A sum of Rs.1,00,000/- (Rupees One Lakh Only) depositedby the purchasers with M/s Venkataraman & Co. on behalf ofthe vendors as advance for the said sale consideration; D

(b) The purchasers hereby agree to pay the balance of theprice of Rs.4,40,000/- (Rupees Four Lakhs And Forty ThousandOnly) to Syndicate Bank in discharge of the loan borrowed bythe vendors on the mortgage of the said property subject to thebankers giving the certificate of discharge in respect of thesaid property.

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4. The vendor shall arrange to secure (a) Income-tax ClearanceCertificate, (b) Permission from the Competent Authority underthe Urban Land Ceiling Act, and (c) such other orders of permitsand the like as may be necessary for completing the saleFtransaction at the cost of the vendors.

5. The purchaser shall complete the transaction within six monthsfrom the date of this agreement. This period shall be subject tothe vendors obtaining the necessary clearance certificate fromthe appropriate authorities as stated above and giving vacantGpossession of the said property.”

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“8. The vendors hereby confirm that the said property is subjectto a mortgage loan taken by them from Syndicate Bank, ArmenianStreet, Madras-1, and that necessary provision has been made to H

discharge the loan, in the sale agreement itself and excepting theabove, the said property to be conveyed is not subject to anyclaim, attachment, lien, charge, mortgage, lis pendens or any otherencumbrance, whatsoever.

9. The vendors undertake to deliver vacant possession of theproperty, before the execution of the sale deed.

10. In the event of the vendors commit default or acts in breachof this agreement the purchasers shall be entitled without prejudiceto the right of specific performance, to the refund of the advanceof Rs.1,00,000/- (Rupees One Lakh Only) and damages.”

The suit property admeasured 8 grounds and 2354 sq. feet.

2. Given the fact that the necessary permissions were not obtainedby the defendants, in particular, the permission from the competentauthority under the Tamil Nadu Urban Land (Ceiling & Regulation) Act,1978 [“Tamil Nadu Urban Land Ceiling Act”], the appellant filed asuit for specific performance on 24.02.1981, in which it was specificallypleaded as follows:

“5. The plaintiff which is a private limited company has agreed topurchase the schedule mentioned property with a view to constructthe multi-storeyed building and the plaintiffs are always readyand willing to perform their part of the obligation under theagreement for completion of the sale transaction. Further theplaintiffs are ready and willing to deposit the balance of the saleprice agreed to be paid under the agreement in question beforethis Hon’ble Court to show their bonafide in purchasing theproperty and to show their readiness to perform their part of thecontract in accordance with the agreement. The plaintiff submitsthat the defendants are bound to secure income tax clearancecertificate and permission from the competent authority etc. whichare prerequisite for the completion of the sale transaction and tocomplete the transactions within 6 months from the date of theagreement.

6. The plaintiff submits that the defendants have not so fararranged to get income tax clearance certificate and permissionfrom the competent authority and such other formalities to the beobserved for the completion of the sale transaction and they havenot shown any interest in concluding the transactions. In the A

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Acircumstances the plaintiff submits that they are willing to performtheir part of the contract and it is the defendants who are evadingto completing the sale transactions within the agreed time. Theplaintiff understands and believes the same to be true that thedefendants are not willing to complete the sale transaction andthey reliably understand that the defendants are trying to alienateBthe property to third parties for higher price taking advantage ofthe rise in price of the landed properties ignoring the agreement tosell. The plaintiff submits that the conduct and attitude of thedefendants in evading and postponing the execution of the saledeed is unjust and wanton and it is only with a view to get higherCprice for the property ignoring the lawful claims of the plaintiffunder the agreement, the defendants do not show any inclinationto complete the sale transaction.”

A written statement filed by P. Nagarathina Mudaliar and his twosons, namely, P. Gopirathnam and P. Lavakumar, who were defendantsDno.1, 2, and 3 respectively, denied that the total consideration for theagreement was Rs.5,40,000/- as is stated therein. Apart from other denialsmade on the merits of the case, it is important to note that no defencewas taken on any plea that the Tamil Nadu Urban Land Ceiling Actwould be infracted if the suit for specific performance were to be decreed.This was only done, almost by way of an afterthought, by an additionalEwritten statement filed by the self-same defendants on 16.07.1986, inwhich it was pleaded:

“2. In any event, these defendants submit that the plaintiff is notentitled to any decree since the plaintiff is not entitled to purchasemore than the prescribed limit of 500 sq. metres under the provisionsFof Tamil Nadu Urban Land Ceiling Act and hence the agreementis void as violating the provisions of statues.”

3. As many as eight issues were framed in the suit. Issue no. 5reads as follows:

G“5. Whether the plaintiff is not entitled to purchase more than 500sq. metres under the Tamil Nadu Urban Land Ceiling Act andwhether the suit agreement is void on that account?”

4. By a judgment dated 15.03.1991, delivered by a learned SingleJudge of the Madras High Court, the learned Single Judge held that thefixation of the sale price of Rs.1,02,000/- per ground was because theH

land was low-lying and requires to be levelled. It was also held that alayout plan had been sanctioned for the purpose of putting up flats in thesuit property. The Single Judge further held that there were circumstancesto show that there was necessity on the part of the defendants to sell thesuit property, given that a loan from Syndicate Bank was taken bymortgaging a larger piece of land of 30 grounds, and that money wasrequired for the defendant no.1’s son’s marriage, which was celebratedon 23.06.1980. It was further found that M/s Venkataraman & Co., theauditor of the defendants, negotiated the sale of the suit property, thefirst defendant admitting that a sum of Rs.65,000/- was received by himfor the marriage of his son out of the advance money of Rs.1,00,000/-paid to the aforesaid auditor, M/s Venkataraman & Co. It was also heldthat the first defendant was the karta and manager of the joint family,and that even though the fourth defendant was not present at the time ofexecution of the sale agreement and did not actually sign the saleagreement, the fourth defendant had given a letter of authorisation,authorising the first defendant to sell the property on his behalf. It wasfurther held:

“Having signed Ex.P.2 and received Rs.65,000/- as per Ex.P.4, itwould not be fair on the part of the first defendant to come forwardand surprise the plaintiff during trial that he does not know thecontents thereof. The inconsistent stand taken by the first defendantduring the trial, quite different from the plea in the writtenstatement, would lead to presume the lack of truth in his version.”

5. Importantly, so far as obtaining of permission from the UrbanLand Ceiling authorities was concerned, it was held that the defendantsdid not comply with this condition, as a result of which there would be nolegal obstacles standing in the way of the plaintiff suing for specificperformance, given the fact that the defendants were in breach of theagreement. Insofar as the plea in the additional written statement wasconcerned, issue no. 5 was answered by the learned Single Judge asfollows:

“The plea of the defendants in their additional written statementthat they will not be competent to sell anything beyond 500 sq.metres prescribed as ceiling under the Urban Land Ceiling Actand that because Ex.P.2 envisages the sale of 8 grounds and 2354sq. ft. exceeding the ceiling area, Ex.P.2 must be deemed to beinvalid and unenforceable, is not sound. There is no term in Ex.P.2

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Athat the agreement of sale is subject to the grant of permission bythe competent authority under the Urban Land Ceiling Act andthat in the event of refusal of the permission by the competentauthority, the agreement of sale shall fail. It has to be pointed outhere, that even if there is a clause in Ex.P.2 stating that thedefendant should arrange for securing the permission of theBcompetent authority and if the same has not been obtained by thedefendants, it cannot be a ground for the defendants to refuse thesale of the suit property. It is open to the plaintiff (the purchaser)to get a sale of the entire suit property measuring 8 grounds and2354 sq.ft. even if it exceeds 500 sq. metres. The plaintiff mayCget the sale with that risk.”

6. Thereafter, the appellant-plaintiff established that it had beenready and willing to perform its part of the contract continuously, thebalance sum of Rs.4,40,000/- being deposited in the Court on thedirections of the Court. The result, therefore, was as follows:D“23. From the foregoing discussions, my findings on the issuesare that the suit agreement of sale dated 12.06.1980 is true, validand enforceable, that it does not suffer from any material alteration,that it is a concluded contract, that the agreement of sale is bindingon the 4th defendant, that the defendants have committed breachEof the agreement, that the plaintiff is entitled to purchase the suitproperty and to get a decree for specific performance of theagreement as prayed for.

24. In the result, the suit is decreed directing defendants 2 to 6 toexecute the sale deed in respect of the suit property in favour ofFthe plaintiff within a period of two months, in default the sale deedshall be executed by Court and got registered.”

7. A first appeal was filed to a Division Bench of the High Court,which then referred the matter to a Full Bench on various questions thatwere submitted by it. The Full Bench, by a judgment dated 03.03.1999,Gset out the reference order as follows:

“Section 4 of the Act states that no person shall be entitled to holdvacant land in excess of the ceiling limit, except as otherwiseprovided in the Act. Section 7 of the Act makes it obligatory onthe person holding excess land to file statement. Under section 11Hof the Act, excess land could be acquired.

Section 17 of the Act places ceiling limit on future acquisition byinheritance, bequest or by the sale in execution of decrees etc.Section 19 of the Act provides for penalty for concealment etc.,of particulars of vacant land. Even under section 6 of the Act,there is a prohibition to transfer the excess vacant land unlesssuch person has filed a statement, and notification regarding theexcess vacant land held by him has been published under sub-section (1) of section 11 of the Act. The said section furtherdeclares that any transfer made in contravention of the provisionsof the Act, shall be deemed to be null and void. As can be seenfrom the various provisions contained in the Act, section 21 dealswith power of exemption. A plain reading of section 6 goes toshow that what is prohibited is a transfer of excess vacant landand the consequence of such transfer in contravention of theprovision contained in the said section viz., such transfer shall bedeemed to be null and void. In other words, it speaks of a completedtransaction of transfer. It does not refer to the agreements at all.We are not able to read any prohibition in the said provisionprohibiting the parties from entering into agreement of sale. In thedecision of the Division Bench of this Court aforementioned, aview is taken that courts in passing a decree for specificperformance, cannot lend support to the parties to enforce theagreement so as to defeat the provisions of the Act, in particularsection 6 of the Act. We are unable to agree with this view. Theremay be a decree for specific performance subject to certainconditions, to be complied with provisions of section 6 itself orsubject to grant of exemption and in the light of the judgment ofthe Supreme Court in the case of Jambu Rao Satappa Kocheriv. Neminath Appayya Hanamannayyar, AIR 1968 SC 1358 :[1968] 3 SCR 706, it cannot be said that such an agreement is hitby section 23 of the Act. Under the circumstances, we are of theview that this question is required to be decided by a larger Bench.Hence we refer this case for hearing and disposal by a largerBench including the question as we have stated above.”

The Full Bench then referred to the Tamil Nadu Urban Land(Ceiling & Regulation) Act, 1978, which came into force w.e.f.03.08.1976. After referring to a number of decisions, the Full Benchthen concluded:

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A“24. From these decisions, it is clear that even if the contract byitself may not be illegal but its enforcement if violates any lawthat will be a ground to hold that the agreement cannot be enforced.We have already extracted preamble of state Act and also thedecision reported in AIR 1979 SC 1415 : [1979] 3 SCR 802 , whythe Act was enacted. It is to prevent concentration of Urban LandBin the hands of few persons and speculation in profiteering therein.It is to implement this provision of the Act, this provision undersection 6 and 11(4) of the Act are enacted. If the seller is havingland in excess than the ceiling limits and if it is ultimately foundthat the Act also applies permitting such persons to execute saleCdeed pursuant to the agreement of sale, it will be defeating orcircumventing the provisions of the Act. Equitable distribution ofland, which is contemplated under the provisions may not bepossible if the sale is allowed to take place. The intention is alsovery clear that third party right should not be created, which islikely to affect him also. If by enforcement of contract, if it amountsDto subvert or circumvent law, court cannot be party to suchenforcement, Court will have to discountenance the practice andit will have to safeguard the foundation of Society.

25. The question whether only completed transactions arecontemplated under section 6 of the Act and therefore enforcementEof agreement for sale is not a bar is also an argument without anymerit. It is true that under the Act, no person is entitled to holdmore than the ceiling limit as prescribed under section 4 of theAct. Argument is that purchaser is not holding any land on thebasis of an agreement unless he gets some title. It still continuesFonly with vendor. Therefore, there is no prohibition in enforcementof contract. Section 6 prohibits transfer by a person holding landin excess of ceiling limits. The matter will have to be consideredtaking into consideration the rights of seller and if that personholds more land than prescribed under section 5, such transfershall be deemed to be null and void. The prohibition under sectionG6 is for transferring the land and consequently declares that anyviolation of law shall be deemed to be null and void. Section 6contemplates both proposed transfer and completed transfer. Anagreement of sale is also affected by section 6 of the Act.”

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“38. It is true that the Act is a self-contained Code with regard tourban lands and ceiling provisions. It is also true that there areauthorities to decide as to whether transaction is valid or invalid.Question of valid or invalid transaction will apply only regardingcompleted transaction. When section 6 prohibits even proposedtransfer, question of considering validity or invalidity does not ariseand the consequences are also already declared by the Act asnull and void. It takes as if there is no transaction at all in the eyeof law.

39. In the decision reported in Shah Jitendra Nanalal v. PatelLallubhai Ishverbhai, AIR 1984 Guj 145 (FB), one of thequestions that was raised before the Full Bench was whether adecree for specific performance could be given condition. Whatis the effect of section 5(3) read with section 20 of the CentralAct in the agreement of transfer was the matter in issue. Once itis held that section 6 is an absolute bar, question of grantingconditional decree also will not arise. The said argument pre-supposes that agreement and sale are valid and is invalid only asagainst Government.

40. We do not think that the decision therein could be applied sofar as Tamil Nadu Act is concerned. Exemption under section 21can be applied only by vendor and it is for him exemption is granted.While considering suit for specific performance, Court is onlyconcerned whether purchaser has come to Court for enforcingthe agreement in terms thereof. Asking vendor to get exemptionand then to execute the agreement will be deviating from theterms of contract and the Court will not enforce such a contract.That will mean that purchaser is not willing to purchase the landas per agreement, but only with deviation, i.e., Vendor must getexemption and execute the sale deed.

41. In paragraph 11 of the Full Bench judgment, it is said that, “So long as provision declaring the transfer under s. 5(3) asvoid is subject to the right to move for exemption, obtainexemption and transfer the property, the power of an owner isvacant land in excess of the ceiling limit to “alienate” suchland is dormant in him and such power could be exercised byhim in case he seeks exemption, satisfies the Government thatthe grounds for exemption exist and obtains such exemption.

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That being the case, a decree cannot be defeated on the groundthat “transfer” inter-parties would not be possible...”

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We cannot subscribe the said view, for, granting decree for specificperformance of contract itself being discretionary. Apart fromthe sale, when a transaction is only after obtaining exemption orpermission from another authority, over which Court has no control,the relief of specific performance usually is not granted. Whilegiving such direction, it will be going beyond contract and ifultimately exemption is refused, in effect, the decree will becomewaste paper. While exercising discretion, the Court will have tosee whether it could pass executable decree and while exercisingdiscretion, these factors are also considered for granting relief.The decision reported in Shoba Viswanathan v. D.P. Kinggley,1996 (1) LW 721 of the judgment supports the view, which wehave taken.

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42. Therefore, we answer the reference as follows:

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Since provisions of Bombay Tenancy and Agricultural Lands Actare entirely different from that of Tamil Nadu Urban Land (Ceilingand Regulation) Act, 1978, various Bench decisions of this Court,wherein it was held that a decree for specific performance ofcontract cannot be granted, if it violates section 6 of Tamil NaduEUrban Land (Ceiling and Regulation) Act, 1978 do not requirereconsideration.

We also hold that section 6 of the Act not only prohibits acompleted transfer but also a proposed transfer.

We also hold that a decree for specific performance of contractcannot be granted conditionally upon vendor satisfying certainconditions, if it is not part of the agreement.”

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8. Given this declaration of law inter-parties, the matter went backto the Division Bench. The Division Bench then referred to paragraph22 of the judgment of the learned Single Judge and remanded the matterGto the learned Single Judge to record a finding as follows:

“4. We have, therefore, felt it necessary to direct the learned trialJudge to record a finding on the question as to whether the extentof 8 grounds and 2354 sq.ft. which is the subject matter of theagreement to sell was held by the defendants in excess of theHceiling limit applicable to them, and as to whether that extent could

have been sold if at all only with the permission of the authoritiesunder the Act.”

9. The learned Single Judge, by a judgment dated 30.09.2003,ultimately recorded:

“9. However, I am to point out that the material questions whetherthe plaintiff is entitled to claim the relief of specific performanceor not and the question, whether sub-section 3 of section 5 andproviso to section 5(3) and section 6 are applicable to this case ornot, whether after repeal of the Tamil Nadu Urban Land (Ceilingand Regulation) Act the claim of the defendants under the repealedAct is no longer available or not, whether permission wasnecessary to effect alienation in pursuance of agreement of saleinvolved in this case and like matters can be decided only by theDivision Bench of this court which has called for the finding asindicated above.

10. However, the finding is recorded to the effect that the subjectmatter of the suit viz., 8 grounds and 2354 sq.ft. factually standsas excess lands within the meaning of the Tamil Nadu UrbanLand (Ceiling and Regulation) Act before it was repealed.Accordingly, the finding is submitted to that effect for kindconsideration of the Hon’ble Division Bench of this Court.”

10. The matter then returned to the Division Bench, which by theimpugned judgment dated 29.01.2007, reversed the judgment of thelearned Single Judge by applying the Full Bench decision relating to thematter inter-parties. Dealing with section 5(3) and its proviso of theTamil Nadu Urban Land Ceiling Act, the Division Bench first held:

“28. In the present case, the land proposed to be transferred underthe agreement is 8 grounds and 2354 sq.ft. The entire land isadmittedly a vacant land. For the purpose of this case it is assumedthat the plaintiff did not have any dwelling unit or any vacant land.If, instead of the agreement, the sale itself could have been affectedin respect of 8 grounds 2354 sq.ft., the plaintiff would have becomethe owner of the said vacant land. In other words, the landtransferred would have exceeded the ceiling limit of the transferee.The main provision contained in section 5(3) enables the personholding land in excess to continue to hold such land because thesanctioned layout is available. However, the proviso indicates that A

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Ahe cannot sell such land if ultimately the lands in the hands of thetransferee would exceed the ceiling limit of such transferee. Itdoes not mean that wherever transferee is without any dwellingunit or does not own any vacant land, any extent of land could besold to such person. The clear intention is that the person intendingto purchase such property should not in the process acquire landBin excess of his own ceiling limit. Any other interpretation wouldobviously defeat the very purpose of the proviso.

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29. Therefore, in our opinion, even assuming that the intendedpurchaser did not have dwelling unit or vacant land, since theagreement of sale was in respect of vacant land, which wouldChave in the aggregate exceeded the ceiling limit of the proposedtransferee, the embargo contained in section 5(3) proviso readwith section 6 was equally applicable.”

11. Referring to the argument of the appellant that the Tamil NaduUrban Land Ceiling Act had been repealed vide the Tamil Nadu UrbanDLand (Ceiling & Regulation) Repeal Act, 1999 [“Repeal Act”] w.e.f.16.06.1999, the Division Bench then held:

“31. We have already extracted in extenso the differentobservations made by the Full Bench, which is the opinionrendered in a matter arising out of the present dispute. In suchEFull Bench decision, the earlier views expressed by several DivisionBench decisions of this Court holding the agreement incontravention of the provisions of the Act to be invalid is obviouslybinding on us. At several places it has been indicated that suchagreement is void. If the agreement was void at the inception, theFsubsequent repeal of the Act possibly may not have the effect ofreviving such void agreement. Since such agreement has beenconsidered to be against the Public Policy and void by the FullBench, which opinion is obviously binding on us and also on theparties at least for the time being, we are unable to hold otherwise.”

GThus holding, the Division Bench then found:

“34. If this contention is accepted it would mean that duringduration of the Act, i.e., till 1999, the agreement was notenforceable and such agreement could be specifically performedafter 1999, when the Act was repealed. In other words, the courtwould be called upon to enforce the agreement after 19 years onH

the basis of a consideration which was fixed almost two decadesback. It is of course true that there are many instances wheresuch matters are pending before the Court for a long period andthereafter the Court passes a decree at trial stage or appellatestage for enforcement of the contract. But, such a position cannotbe compared to the present case, wherein as per the opinion ofthe Full Bench such agreement was contrary to the Public Policyunder section 23 of the Indian Contract Act and was notenforceable, if not void. To enforce such an agreement after longlapse of time because of the subsequent event, namely, repeal ofthe Act, would not be equitable.

35. In this context, it would be more appropriate to indicate thatduring course of hearing, the learned Senior Counsel on the basisof the specific instructions of and in the presence of counsel onrecord had submitted that apart from Rs.4,40,000/-, which hasbeen deposited in court and which has been invested in fixeddeposit earning interest, the plaintiff/respondent is prepared to paya further sum of Rs.1.25 Crore for completing the transaction.On the other hand, the learned Senior Counsel appearing for thedefendants/appellants submitted that since the agreement itselfcontemplated payment of compensation/damages in case ofdefault by the defendants, the court should instead of specificallyenforcing the agreement, direct payment of compensation/damagesto the plaintiff. Learned Senior Counsel on the basis of specificinstructions and in the presence of counsel on record made asubmission that the defendants/appellants are prepared to pay aconsolidated compensation/damages of Rs. 2 crores.

36. It may be that the plaintiff, if permitted to purchase the property,it would develop the same and earn more profit than Rs.2 croresoffered by the defendants/appellants. However, keeping in viewthe fact that the defendants are the original owners and weighingboth the options, we feel interest of justice would be served bydirecting the defendants/appellants, on the basis of concession ofthe counsels that the defendants/appellants shall be liable to pay aconsolidated sum of Rs. 2 crores as compensation/damages tothe plaintiff, which would discharge their liability in full.

37. In view of the above conclusions, it is not necessary for us togo into other questions raised by the appellants to the effect that AB

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Athe plaintiff was not ready and willing to perform its part of thecontract.

38. In the result, the appeal is allowed in part. The judgment anddecree of the learned single Judge is modified and instead of decreefor specific performance of the agreement, we direct that theBdefendants/appellants shall be liable to pay a sum of Rs.2 croresto the plaintiff, in discharge of their entire liability. Such amountshould be paid or deposited in court on or before 31.3.2007, failingwhich such amount shall carry interest at the rate of 10% perannum thereafter. The amount deposited by the plaintiff is permittedto be withdrawn by the plaintiff along with the accrued interest.CThe parties shall bear their own costs throughout.”

12. Shri Guru Krishnakumar, learned Senior Advocate appearingon behalf of the appellant, has argued that every single factual findingfound by the learned Single Judge, including findings as to the dishonestyof the defendants, had not been reversed by the Division Bench in appeal.DHe argued that on a wrong application of the Full Bench judgment, thebar contained in section 6 of the Tamil Nadu Urban Land Ceiling Actwas applied against the appellant, as a result of which the agreementwould have to be held to be void ab initio, which was incorrect, giventhe fact that in this agreement, it was the defendants who were to obtainEpermission from the competent authority under the Tamil Nadu UrbanLand Ceiling Act, which permission could have been obtained. Hereferred to the Repeal Act and said that in any case, given the fact thata first appeal is in the nature of a rehearing of a suit, on the date that theDivision Bench passed its decree, the Tamil Nadu Urban Land CeilingAct stood repealed, as a result of which none of its provisions could beFused in order to hit the agreement in the present case. He then referredto section 5(3) and its proviso, and cited judgments to show that theDivision Bench’s construction of the proviso would render the main partof section 5(3) redundant. He argued that on balance, it was found thatthe appellant-plaintiff had been ready and willing throughout to performGits part of the agreement, whereas the defendants were correctly foundto be in breach, neither of which findings has been set aside by theDivision Bench. To, therefore, arrive at the conclusion that the agreementis null and void ab initio, as a result of which specific performancecannot be decreed, is wholly incorrect in the facts of the present case.He also stressed the fact that it was open to the defendants to haveH

applied for exemption of the suit property out of the larger property thatwas owned by them, and had they done so, the suit property, being withinthe ceiling limit of the original four defendants in the suit, the suit forspecific performance was correctly decreed in the appellant’s favour.The fact that the appellant, in turn, could only purchase up to 500 sq.metres, the same being the ceiling limit, would not render the agreementnull and void ab initio, but on the contrary, would be at the risk of theappellant, as correctly held by the learned Single Judge. In any case, theTamil Nadu Urban Land Ceiling Act having been repealed in 1999, bythe time the Division Bench passed its judgment, there was no impedimentin decreeing specific performance of the suit property, consequent uponthe repeal of the said Act. He cited a number of judgments to buttresshis submissions. He also attacked the Division Bench judgment statingthat the fact that litigation took 27 years by the time the Division Benchpassed its judgment could not be put against the appellant, as has beenheld by a series of judgments of this Court.

13. Shri V. Giri, learned Senior Advocate appearing on behalf ofthe respondents, argued that the Full Bench judgment was inter-partiesand bound the parties. Being res judicata between the parties, it is notnow possible to reopen what was held therein, the appellant not havingappealed from the said Full Bench judgment which, therefore, becamefinal between the parties. If the Full Bench judgment is to be seen, theDivision Bench was absolutely correct in its conclusion that the agreementbeing void ab initio, and therefore stillborn, could not be resuscitated atany future point of time, given the repeal of the Tamil Nadu Urban LandCeiling Act. Further, he cited judgments to show that where a vestedright accrues on the date of the filing of the suit, that cannot be takenaway later, and the suit must be decided as on the date the plaint is filedand not on the date of the state of the law when the appellate decree ispassed. He also argued that in any event, this Court should not interfereunder Article 136 as the judgment under appeal is equitable – the appellanthas been awarded Rs.2 crores with interest, which would come to asum of over Rs.3 crores today, despite the fact that specific performancecould not be granted of a void agreement. He also added that the DivisionBench was right in stating that after so many years, grant of specificperformance, being discretionary, was correctly refused.

14. Having heard learned counsel for the parties, it is first importantto deal with Shri Giri’s basic contention that the Full Bench judgment A

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Astands as a roadblock to the decreeing of a suit for specific performancein the present case. Shri Giri is right in arguing that it is not open to theappellant to go behind the Full Bench judgment as it is inter-parties, as aresult of which the law laid down by the Full Bench judgment must applyto the parties, res judicata clearly attaching even to issues of law basedon the same cause of action – see Mathura Prasad Bajoo Jaiswal v.BDossibai N.B. Jeejeebhoy, (1970) 3 SCR 830 at p. 836. This beingthe case, it is important now to analyse what was held by the Full Bench.

15. The Full Bench judgment, while stating that section 6 of theTamil Nadu Urban Land Ceiling Act prohibited even agreements to sell,as a result of which there would be no transaction at all in the eyes ofClaw, was careful thereafter to point out:

“40. …… While considering suit for specific performance, Courtis only concerned whether purchaser has come to Court forenforcing the agreement in terms thereof. Asking vendor to getexemption and then to execute the agreement will be deviatingDfrom the terms of contract and the Court will not enforce such acontract. That will mean that purchaser is not willing to purchasethe land as per agreement, but only with deviation, i.e., vendormust get exemption and execute the sale deed.”

16. In paragraph 41, the Full Bench also went on to state that it isEpossible to obtain exemption under the Tamil Nadu Urban Land CeilingAct, over which the Court has no control, but despite that, the relief ofspecific performance is not usually granted as it would be going beyondthe contract. Equally, after holding that section 6 prohibits a proposedtransfer, the Full Bench went on to hold that a decree for specificFperformance cannot be granted conditionally upon the vendor satisfyingcertain conditions if it is not part of the agreement.

17. When these portions of the Full Bench judgment are appliedto the agreement in question, it is clear that the agreement itself containsa specific clause, namely, clause 4, in which it is for the vendor to obtainGpermission from the competent authority under the Tamil Nadu UrbanLand Ceiling Act. This agreement, therefore, cannot be said to be hit bythe decision of the Full Bench judgment as the Full Bench itself recognisesthat there may be agreements with such clauses, in which case it is theCourt’s duty to enforce such clause. That is all that the learned SingleJudge has done in the facts of this case – he has correctly held that itH

was for the defendants to obtain exemption from the authorities underthe Tamil Nadu Urban Land Ceiling Act which they did not, as a resultof which they were in breach of the agreement.

18. Viewed slightly differently, it is clear that the Full Benchjudgment cannot stand in the way of the appellant for another reason.There can be no doubt that the suit property, admeasuring roughly 2002sq. metres, was part of a larger property of 30 grounds, and that thedefendants, being four in number, were entitled to retain 2000 sq. metresof the land owned by them. It was for this reason that it was incumbentupon the defendants to have obtained the Urban Land Ceiling permissionto sell the land that was within their ceiling limit, which they failed to do.As a matter of fact, a later Single Judge of the Madras High Court, inSushila v. Nihalchand Nahata, AIR 2004 Mad 18, understood the FullBench judgment of his own High Court as follows:

“11. With respect to the ratio laid down in the decision of the FullBench of this Court, (1999) 2 CTC 181, cited supra and the decisionof the Division Bench of this Court, (2003) 1 Mad LW 696, citedsupra, there cannot be any dispute. The ratio decidendi in both thedecisions is that any transfer by a person holding land in excess ofceiling limit is invalid. Even proposed transfers of excess land isinvalid. The agreement for sale of excess land also is null andvoid and therefore, no suit for specific performance would lie toenforce an agreement for sale of “excess land”. That is, what isprohibited or what is illegal and hence null and void is, an agreementto sell any “excess land” under the Urban Land Ceiling Act. Ifthe agreement is with respect to the “exempted” land or withreference to the land that is likely to be exempted, such anagreement is not invalid; such agreements are valid andenforceable by a suit for specific performance.

12. Learned counsel for the plaintiff submitted that the agreementitself is only for sale of the land after getting exemption from theappropriate authorities. The terms of the agreement make it clearthat the parties never intended to sell or purchase the land inpossession of the defendant in excess of ceiling limit, unlessexemption is granted by the authorities. Therefore, the agreementis not in contravention of the provisions of the Urban Land CeilingAct. Therefore, the decisions relied upon by the counsel for thedefendant is not applicable to the facts of this case. There is no AB

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intention among the parties to violate the provisions of the UrbanLand Ceiling Act. Therefore, the agreement is valid and can bespecifically enforced.

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13. This argument of the counsel for the plaintiff is acceptable.The decisions relied upon by the counsel for the defendant areBwith respect to agreements of intended transaction of excess land,whereas this agreement Ex.P. 5 had been entered specifically totransfer the land only after getting exemption. When the Act itselfprovides for grant of exemption, any person can reasonably expectthat he may get the exemption, as provided under the Act. Whenit is possible and permissible for the authorities to grant exemptionCunder the Urban Land Ceiling Act, nothing prohibits a person fromentering into a contract for sale of such land after getting exemption.Such an agreement is not intended to violate the provisions of theAct. It is only in accordance with the provisions of the Act andtherefore, such an agreement cannot be said to be invalid or voidDab initio. Therefore, such an agreement is valid and enforceablein a suit for specific performance of the agreement.

14. A perusal of Ex.P. 5 shows that what is agreed by thepetitioner is that land shall be sold/purchased after getting exemptionfrom the Urban Land Ceiling Authority. That is, this agreement isEnot for sale/purchase of the “excess” land under the Land CeilingAct, but only after getting exemption under the Urban Land CeilingAct. Nowhere in the agreement is it stated that the parties intendedto purchase or sell the land without getting exemption under theAct. Therefore, the judgments relied on by the defendants are notapplicable to the facts of the present case and hence, this agreementFcannot be said to be invalid as it does not contemplate either partiesto act in a manner contrary to the Urban Land Ceiling Act.Therefore, the agreement is not invalid and hence, it is valid andenforceable. Issue No. 1 is answered in favour of the plaintiff.”

19. It is clear, therefore, that the agreement to sell cannot be saidGto be void ab initio, as a result of which the basis of the Division Benchjudgment under appeal goes. Resultantly, the judgments in Jacques v.Withy, 1 H. Bl. 65, Hitchcock v. Way, (1837) 6 A & E 943 : 112 ER360, and Ram Kristo Mandal v. Dhankisto Mandal, (1969) 1 SCR342 (at p. 349) cited by Shri Giri in support of the proposition that theHrepeal of a statute which makes void an agreement cannot revive such void agreement have no application on the facts of this case. In view ofthis, it is unnecessary to go into whether section 5(3) of the Tamil NaduUrban Land Ceiling Act, together with its proviso, applies to the facts ofthis case.

20. However, the other contention on behalf of the respondents isthat even if this were so, the appellant was not entitled to more than 500sq. metres, which was the ceiling limit so far as the appellant wasconcerned. This being the case, no decree for specific performancecould be made in favour of the appellant.

21. That conditional decrees for specific performance have beenpassed and upheld by this Court cannot be denied. Thus, in VishwaNath Sharma v. Shyam Shanker Goela, (2007) 10 SCC 595 [“VishwaNath Sharma”], this Court held:

“12. The Privy Council in Motilal v. Nanhelal [(1929-30) 57 IA333 : AIR 1930 PC 287] laid down that if the vendor had agreedto sell the property which can be transferred only with the sanctionof some government authority, the court has jurisdiction to orderthe vendor to apply to the authority within a specified period, andif the sanction is forthcoming, to convey to the purchaser within acertain time. This proposition of law was followed in ChandneeWidya Vati Madden v. Dr. C.L. Katial [AIR 1964 SC 978] andR.C. Chandiok v. Chuni Lal Sabharwal [(1970) 3 SCC 140 :AIR 1971 SC 1238]. The Privy Council in Motilal case [(1929-30) 57 IA 333 : AIR 1930 PC 287] also laid down that there isalways an implied covenant on the part of the vendor to do allthings necessary to effect transfer of the property regarding whichhe has agreed to sell the same to the vendee. Permission from theLand and Development Officer is not a condition precedent forgrant of decree for specific performance. The High Court reliedupon the decisions in Chandnee Widya Vati Madden v. Dr. C.L.Katial [AIR 1964 SC 978] and Bhim Singhji v. Union ofIndia [(1981) 1 SCC 166 : AIR 1981 SC 234] to substantiate theconclusion. In Chandnee Widya [AIR 1964 SC 978] this Courtconfirmed the decision of the Punjab and Haryana High Courtholding that if the Chief Commissioner ultimately refused to grantthe sanction to the sale, the plaintiff may not be able to enforcethe decree for specific performance of the contract but that wasnot a bar to the court passing a decree for that relief. The same is A

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the position in the recent case. If after the grant of the decree ofspecific performance of the contract, the Land and DevelopmentOfficer refused to grant permission for sale, the decree-holdermay not be in a position to enforce the decree but it cannot beheld that such a permission is a condition precedent for passing adecree for specific performance of the contract.

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13. In R.C. Chandiok v. Chuni Lal Sabharwal [(1970) 3 SCC140 : AIR 1971 SC 1238] it was held that proper form of decreein a case like the instant one would be to direct specificperformance of the contract between the defendant and theplaintiff and to direct the subsequent transferee to join in theCconveyance so as to pass on the title residing in him. This isbecause Defendant 2, son of Defendant 1 cannot take the standthat he was a transferee without notice. Admittedly, he is the sonof Defendant 1. The view in R.C. Chandiok [(1970) 3 SCC 140: AIR 1971 SC 1238] was a reiteration of earlier view in DurgaDPrasad v. Deep Chand [AIR 1954 SC 75] . This Court hasrepeatedly held that the decree can be passed and the sanctioncan be obtained for transfer of immovable property and the decreein such a case would be in the way the High Court has directed.(See Motilal Jain v. Ramdasi Devi [(2000) 6 SCC 420], NirmalaAnand v. Advent Corpn. (P) Ltd. [(2002) 5 SCC 481], HPAEInternational v. Bhagwandas Fateh Chand Daswani [(2004)6 SCC 537] and Aniglase Yohannan v. Ramlatha [(2005) 7 SCC534].)”

In Van Vibhag Karamchari Griha Nirman Sahkari SansthaMaryadit v. Ramesh Chander, (2010) 14 SCC 596 [“Van Vibhag”],Fthis Court referred to a suit in which specific performance was notclaimed on the ground that in view of the Urban Land (Ceiling &Regulation) Act, 1976, the appellant could not have made such claim.This was turned down specifically by this Court, stating:

“26. The appellant, on noticing the same, filed a suit on 11-2-1991Gbut he did not include the plea of specific performance. Theappellant wanted to defend this action by referring to two facts(i) there was an acquisition proceeding over the said land underthe Land Acquisition Act, and (ii) in view of the provisions of theCeiling Act, the appellant could not have made the prayer forHspecific performance.

27. The aforesaid purported justification of the appellant is nottenable in law. If the alleged statutory bar referred to by theappellant stood in its way to file a suit for specific performance,the same would also be a bar to the suit which it had filed claimingdeclaration of title and injunction. In fact, a suit for specificperformance could have been easily filed subject to the provisionof section 20 of the Ceiling Act.

28. Similar questions came up for consideration before a Full Benchof the Gujarat High Court in Shah Jitendra Nanalal v. PatelLallubhai Ishverbhai [AIR 1984 Guj 145]. The Full Bench heldthat a suit for specific performance could be filed despite theprovisions of the Ceiling Act. A suit for specific performance inrespect of vacant land in excess of ceiling limit can be filed and aconditional decree can be passed for specific performance, subjectto exemption being obtained under section 20 of the Act (AIRparas 11-13).

29. We are in respectful agreement with the views of the FullBench in the abovementioned decision and the principles decidedtherein are attracted here.”

The judgments of Immani Appa Rao v. GollapalliRamalingamurthi, (1962) 3 SCR 739 and Narayanamma v.Govindappa, 2019 SCC OnLine SC 1260 cited by Shri Giri in supportof the proposition that no court will lend its aid to a man who founds hiscause of action upon an illegal act has no application in a situation coveredby the judgments contained in Vishwa Nath Sharma (supra) and VanVibhag (supra).

22. Even otherwise, the Repeal Act makes it clear that the TamilNadu Urban Land Ceiling Act is repealed as follows:

“2. Repeal of Tamil Nadu Act 24 of 1978.–The Tamil NaduUrban Land (Ceiling and Regulation) Act, 1978 (Tamil Nadu Act24 of 1978) (hereinafter referred to as the principal Act), is herebyrepealed.

3. Savings.–(1) The repeal of the principal Act shall not affect–

(a) the vesting of any vacant land under sub-section (3) ofsection 11, possession of which has been taken over by theState Government or any person duly authorised by the StateGovernment in this behalf or by the competent authority; AB

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(b) the validity of any order granting exemption under sub-section (1) of section 21 or any action taken thereunder.

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(a) any land is deemed to have vested in the State Governmentunder sub-section (3) of section 11 of the principal Act butBpossession of which has not been taken over by the StateGovernment or any person duly authorised by the StateGovernment in this behalf or by the competent authority; and (b) any amount has been paid by the State Government withrespect to such land, C

then, such land shall not be restored unless the amount paid, ifany, has been refunded to the State Government.”

It is clear that as no steps whatsoever were taken under the TamilNadu Urban Land Ceiling Act, the savings clause will not apply.

D23. In Gajraj Singh v. State Transport Appellate Tribunal,(1997) 1 SCC 650, this Court spoke of the effect of an Act that is repealedas follows:

“22. Whenever an Act is repealed it must be considered, exceptas to transactions past and closed, as if it had never existed. TheEeffect thereof is to obliterate the Act completely from the recordof Parliament as if it had never been passed; it never existedexcept for the purpose of those actions which were commenced,prosecuted and concluded while it was an existing law. Legalfiction is one which is not an actual reality and which the lawrecognises and the court accepts as a reality. Therefore, in caseFof legal fiction the court believes something to exist which in reality E

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does not exist. It is nothing but a presumption of the existence ofthe state of affairs which in actuality is non-existent. The effectof such a legal fiction is that a position which otherwise would notobtain is deemed to obtain under the circumstances. Therefore,Gwhen Section 217(1) of the Act repealed Act 4 of 1939 w.e.f. 1-7-1989, the law in Act 4 of 1939 in effect came to be non-existentexcept as regards the transactions, past and closed or saved.

23. In Crawford’s Interpretation of Law (1989) at p. 626, it isstated that:

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“[A]n express repeal will operate to abrogate an existing law,unless there is some indication to the contrary, such as a savingclause. Even existing rights and pending litigation, both civiland criminal, may be affected although it is not an uncommonpractice to use the saving clause in order to preserve existingrights and to exempt pending litigation.”

At p. 627, it is stated that:

“[M]oreover, where a repealing clause expressly refers to aportion of a prior Act, the remainder of such Act will not usuallybe repealed, as a presumption is raised that no further repeal isnecessary, unless there is irreconcilable inconsistency betweenthem. In like manner, if the repealing clause is by its termsconfined to a particular Act, quoted by title, it will not be extendedto an act upon a different subject.”

Section 6 of the GC Act enumerates, inter alia, that where theAct repeals any enactment, unless a different intention appears,the repeal shall not (a) revive anything not in force or existing atthe time at which the repeal takes effect; or (b) affect the previousoperation of any enactment so repealed or anything duly done orsuffered thereunder; or (c) affect any right, privilege, obligationor liability acquired, accrued or incurred under any enactment sorepealed, and any such investigation, legal proceeding or remedymay be instituted, continued or enforced. In India Tobacco Co.Ltd. v. CTO [(1975) 3 SCC 512 : 1975 SCC (Tax) 49] (SCC at p.517) in paras 6 and 11, a Bench of three Judges had held thatrepeal connotes abrogation and obliteration of one statute byanother from the statute-book as completely as if it had neverbeen passed. When an Act is repealed, it must be considered,except as to transactions past and closed, as if it had never existed.Repeal is not a matter of mere form but is of substance, dependingon the intention of the legislature. If the intention indicated eitherexpressly or by necessary implication in the subsequent statutewas to abrogate or wipe off the former enactment wholly or inpart, then it would be a case of total or pro tanto repeal.”

24. It is settled law that an appeal is a continuation of a suit, as aresult of which a change in law will become applicable on the date of theappellate decree, provided that no vested right is taken away thereby.

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AThis was felicitously put in Rameshwar v. Jot Ram, (1976) 1 SCR 847as follows:

“In P. Venkateswarlu v. Motor & General Traders [(1975) 1SCC 770, 772 : AIR 1975 SC 1409, 1410] this Court dealt with theadjectival activism relating to post-institution circumstances. Twopropositions were laid down. Firstly, it was held that ‘it is basic toour processual jurisprudence that the right to relief must be judgedto exist as on the date a suitor institutes the legal proceeding.’This is an emphatic statement that the right of a party isdetermined by the facts as they exist on the date the action isinstituted. Granting the presence of such facts, then he is entitledto its enforcement. Later developments cannot defeat his rightbecause, as explained earlier, had the court found his facts to betrue the day he sued he would have got his decree. The Court’sprocedural delays cannot deprive him of legal justice or rightcrystallised in the initial cause of action. This position finds supportin Bhajan Lal v. State of Punjab [(1971) 1 SCC 34].

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(emphasis in original)

The impact of subsequent happenings may now be spelt out. First,its bearing on the right of action, second, on the nature ofthe relief and third, on its impotence to create or destroy substantiverights. Where the nature of the relief, as originally sought, hasbecome obsolete or unserviceable or a new form of relief will bemore efficacious on account of developments subsequent to thesuit or even during the appellate stage, it is but fair that the reliefis moulded, varied or reshaped in the light of updated facts.Patterson [Patterson v. State of Alabama, (1934) 294 US 600,607] illustrates this position. It is important that the party claimingthe relief or change of relief must have the same right from whicheither the first or the modified remedy may flow. Subsequent eventsin the course of the case cannot be constitutive of substantiverights enforceable in that very litigation except in a narrowcategory (later spelt out) but may influence the equitable jurisdictionto mould reliefs. Conversely, where rights have already vested ina party, they cannot be nullified or negated by subsequent eventssave where there is a change in the law and it is made applicableat any stage. Lachmeshwar Prasad Shukul v. Keshwar LalChaudhuri [1940 FCR 84 : AIR 1941 FC 5] falls in this category.Courts of justice may, when the compelling equities of a case E

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oblige them, shape reliefs — cannot deny rights — to make themjustly relevant in the updated circumstances. Where the relief isdiscretionary, courts may exercise this jurisdiction to avoid injustice.Likewise, where the right to the remedy depends, under the statuteitself, on the presence or absence of certain basic facts at thetime the relief is to be ultimately granted, the Court, even inappeal, can take note of such supervening facts with fundamentalimpact. Venkateswarlu [P. Venkateswarlu v. Motor & GeneralTraders, (1975) 1 SCC 770 : AIR 1975 SC 1409], read in itsstatutory setting, falls in this category. Where a cause of action isdeficient but later events have made up the deficiency, the Courtmay, in order to avoid multiplicity of litigation, permit amendmentand continue the proceeding, provided no prejudice is caused tothe other side. All these are done only in exceptional situationsand just cannot be done if the statute, on which the legal proceedingis based, inhibits, by its scheme or otherwise, such change in causeof action or relief. The primary concern of the Court is toimplement the justice of the legislation. Rights vested by virtue ofa statute cannot be divested by this equitable doctrine(See Chokalingam Chetty [54 MLJ 88 (PC)]). The law statedin Ramji Lal v. State of Punjab [AIR 1966 Punj 374 : ILR (1966)2 Punj 125] is sound:

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“Courts, do very often take notice of events that happensubsequent to the filing of suits and at times even those thathave occurred during the appellate stage and permit pleadingsto be amended for including a prayer for relief on the basis ofsuch events but this is ordinarily done to avoid multiplicity ofproceedings or when the original relief claimed has, by reasonof change in the circumstances, become inappropriate and notwhen the plaintiff’s suit would be wholly displaced by theproposed amendment (see Steward v. North MetropolitanTramways Company [(1885) 16 QBD 178] ) and a fresh suitby him would be so barred by limitation.”

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One may as well add that while taking cautious judicial cognisanceof “post-natal” events, even for the limited and exceptionalpurposes explained earlier, no court will countenance a partyaltering, by his own manipulation, a change in situation and pleadfor relief on the altered basis.”

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(emphasis in original)(at pp. 851-852)H

25. This judgment follows the hallowed principle that an appellateproceeding is in continuation of an original proceeding, as laid down inLachmeshwar Prasad Shukul v. Keshwar Lal Chaudhuri, AIR 1941FC 5, also followed in later judgments of this Court. In Dayawati v.Inderjit, (1966) 3 SCR 275, this Court held:

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“Now as a general proposition, it may be admitted thatordinarily a court of appeal cannot take into account a new law,brought into existence after the judgment appealed from has beenrendered, because the rights of the litigants in an appeal aredetermined under the law in force at the date of the suit. Evenbefore the days of Coke, whose maxim — a new law ought to beprospective, not retrospective in its operation — is oft-quoted,courts have looked with disfavour upon laws which take awayvested rights or affect pending cases. Matters of procedure are,however, different and the law affecting procedure is alwaysretrospective. But it does not mean that there is an absolute ruleof inviolability of substantive rights. If the new law speaks in B

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language, which, expressly or by clear intendment, takes in evenpending matters, the court of trial as well as the court of appealmust have regard to an intention so expressed, and the court ofappeal may give effect to such a law even after the judgment ofthe court of first instance. The distinction between laws affecting E

procedure and those affecting vested rights does not matter whenthe court is invited by law to take away from a successful plaintiff,what he has obtained under judgment. See Quilter v. Maple son[(1882) 9 QBD 672] and Stovin v. Fairbrass [(1919) 88 LJ KB1004] which are instances of new laws being applied. In the formerFthe vested rights of the landlord to recover possession and in thelatter the vested right of the statutory tenant to remain in possessionwere taken away after judgment. See also Maxwell’sInterpretation of Statutes (11th Edn. pp. 211 and 213,and Mukerjee (K.C.) v. Mst. Ramaraton [63 IA 47] where nosaving in respect of pending suits was implied when Section 26(N)Gand (O) of the Bihar Tenancy Act (as amended by Bihar TenancyAmendment Act, 1934) were clearly applicable to all cases withoutexception.

Section 6 of the Relief of Indebtedness Act is clearlyretrospective. Indeed, the heading of the section shows that itlays down the retrospective effect. This being so, the core of the H

problem really is whether the suit could be said to be pending onJune 8, 1956 when only an appeal from the judgment in the suitwas pending. This requires the consideration whether the word‘suit’ includes an appeal from the judgment in the suit. An appealhas been said to be “the right of entering a superior court, andinvoking its aid and interposition to redress the error of the courtbelow”. (Per Lord Westbury in Attorney-General v. Sillem [11ER 1200 at 1209]. The only difference between a suit and anappeal is this that an appeal “only reviews and corrects theproceedings in a cause already constituted but does not createthe cause”. As it is intended to interfere in the cause by its means,it is a part of it, and in connection with some matters and somestatutes it is said that an appeal is a continuation of a suit. In thepresent Act the intention is to give relief in respect of excessiveinterest in a suit which is pending and a preliminary decree in asuit of this kind does not terminate the suit. The appeal is a part ofthe cause because the preliminary decree which emerges fromthe appeal will be the decree, which can become a final decree.Such an appeal cannot have an independent existence. If this benot accepted for the purpose of the application of Section 3 of theUsurious Loans Act (as amended) curious results will follow. Theappeal court in the appeal is not able to resort to the section but ifthe suit were remanded the trial court would be compelled toapply it. For although, in the appeal proper, that judgment must berendered which could be rendered by the court of trial, but if thesuit is to be reheard, then the judgment must be given on theexisting state of the law and that must include Section 5 by reasonof Section 6 of the Punjab Relief of Indebtedness Act. It is hardlyto be suggested that this obvious anomaly was allowed to exist. Itwould, therefore, appear that in speaking of a pending suit, thelegislature was thinking not only in terms of the suit proper butalso of those stages in the life of the suit which ordinarily takeplace before a final executable document comes into existence.The words of the section we are concerned with, speak of a suitpending on the commencement of the Act and it means a live suitwhether in the court of first instance or in an appeal court wherethe judgment of the court of first instance is being considered. Itonly excludes those suits in which nothing further needs to bedone in relation to the rights or claims litigated, because anexecutable decree which may not be reopened is already in A

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existence. The decision of the High Court was right in applyingSection 3 of the Usurious Loans Act (as amended) to the case.”

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(at pp. 281-283)

Similarly, in Amarjit Kaur v. Pritam Singh, (1974) 2 SCC 363,this Court held:

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“4. In Lachmeshwar Prasad Shukul v. Keshwar LalChaudhuri [1940 FCR 84] it was held that once the decree passedby a court had been appealed against, the matter became sub-judice again and thereafter the appellate court has seisin of thewhole case, though for certain purposes, e.g., execution, the decreewas regarded as final and the courts below retained jurisdiction.The Court further said that it has been a principle of legislation inBritish India at least from 1861 that a court of appeal shall havethe same powers and shall perform as nearly as may be the sameduties as are conferred and imposed by the Civil Procedure Codeon courts of original jurisdiction, that even before the enactmentof that Code, the position was explained by Bhashyam Iyengar, J.in Kristnama Chariar v. Mangammal [ILR (1903) 26 Mad 91,at p. 95-96.] in language which makes it clear that the hearing ofan appeal is under the processual law of this country in the natureof a re-hearing, and that it is on the theory of an appeal being inthe nature of a re-hearing that the courts in this country have innumerous cases recognized that in moulding the relief to be grantedin a case on appeal, the court of appeal is entitled to take intoaccount even facts and events which have come into existenceafter the decree appealed against.

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5. As an appeal is a re-hearing, it would follow that if the HighCourt were to dismiss the appeal, it would be passing a decree ina suit for pre-emption. Therefore, the only course open to theHigh Court was to allow the appeal and that is what the HighCourt has done. In other words, if the High Court were to confirmGthe decree allowing the suit for pre-emption, it would be passing adecree in a suit for pre-emption, for, when the appellate courtconfirms a decree, it passes a decree of its own, and therefore,the High Court was right in allowing the appeal.”

In Lakshmi Narayan Guin v. Niranjan Modak, (1985) 1 SCC270, this Court held:

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“9. That a change in the law during the pendency of an appealhas to be taken into account and will govern the rights of theparties was laid down by this Court in RamSwarup v. Munshi [AIR 1963 SC 553 : (1963) 3 SCR 858] whichwas followed by this Court in Mula v. Godhu [(1969) 2 SCC 653: AIR 1971 SC 89 : (1970) 2 SCR 129]. We may point out thatin Dayawati v. Inderjit [AIR 1966 SC 1423 : (1966) 3 SCR 275: (1966) 2 SCJ 784] this Court observed:

“If the new law speaks in language, which, expressly or byclear intendment, takes in even pending matters, the Court oftrial as well as the Court of appeal must have regard to anintention so expressed, and the Court of appeal may give effectto such a law even after the judgment of the Court of firstinstance.”

Reference may also be made to the decision of this Courtin Amarjit Kaur v. Pritam Singh [(1974) 2 SCC 363 : AIR 1974SC 2068 : (1975) 1 SCR 605] where effect was given to a changein the law during the pendency of an appeal, relying on theproposition formulated as long ago as KristnamaChariar v. Mangammal [ILR (1902) 26 Mad 91 (FB)] byBhashyam Ayyangar, J., that the hearing of an appeal was, underthe processual law of this country, in the nature of a re-hearing ofthe suit. In Amarjit Kaur [(1974) 2 SCC 363 : AIR 1974 SC 2068: (1975) 1 SCR 605] this Court referred also to LachmeshwarPrasad Shukul v. Keshwar Lal Chaudhuri [AIR 1941 FC 5 :1940 FCR 84 : 191 1C 659] in which the Federal Court had laiddown that once a decree passed by a court had been appealedagainst the matter became sub judice again and thereafter theappellate court acquired seisin of the whole case, except that forcertain purposes, for example, execution, the decree was regardedas final and the court below retained jurisdiction.”

26. However, Shri Giri referred to the judgment in KeshavanMadhava Menon v. State of Bombay, 1951 SCR 228 in order tobuttress the proposition that a repealing Act cannot be retrospectivelyapplied so as to destroy a fundamental right. For this purpose, he reliedupon Mahajan J.’s concurring judgment at pp. 249-250. This judgment iswholly distinguishable given the fact that there is no fundamental rightinvolved of the defendants in the present case and the fact that no vested A

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Aright of the defendants has been affected by the Repeal Act. Equally,the judgment in John Lemm v. Thomas Alexander Mitchell, [1912]A.C. 400 correctly lays down the principle stated by Tindal, C.J. in Kayv. Goodwin, 130 E.R. 1403 [1830] as follows:

“I take the effect of repealing a statute to be to obliterate it asBcompletely from the records of the Parliament as if it had neverbeen passed; and it must be considered as a law that never existed,except for the purpose of those actions which were commenced,prosecuted, and concluded whilst it was an existing law.”

(at p. 406)

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In that case, since it was held on facts that persons had vestedrights acquired by them in actions duly determined under the repealedlaw, these could not be affected. This is wholly distinguishable from thefact situation in the present case.

27. This being the case, on the date on which the appellate decreeDwas passed, in any case, the Tamil Nadu Urban Land Ceiling Act havingbeen repealed would not stand in the way of a decree for specificperformance. It must be remembered that there is no vested right underthe Tamil Nadu Urban Land Ceiling Act in favour of the respondents.Any right, if at all, is in favour of the State Government, which, likeEPontius Pilate, has washed its hands off this matter by a report submittedto this Court on 17.08.2015.

28. The Division Bench judgment is also wholly incorrect in statingthat for no fault of the appellant, since the court process has taken 27years to decide the specific performance suit, specific performance beingFa discretionary relief ought not to be granted. Section 20 of the SpecificRelief Act, 1963, prior to its substitution by the Specific Relief(Amendment) Act, 2018, read as follows:

“20. Discretion as to decreeing specific performance.—(1)The jurisdiction to decree specific performance is discretionary,and the court is not bound to grant such relief merely because it isGlawful to do so; but the discretion of the court is not arbitrary butsound and reasonable, guided by judicial principles and capable ofcorrection by a court of appeal.

(2) The following are cases in which the court may properlyexercise discretion not to decree specific performance—

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(a) where the terms of the contract or the conduct of the partiesat the time of entering into the contract or the othercircumstances under which the contract was entered into aresuch that the contract, though not voidable, gives the plaintiffan unfair advantage over the defendant; or (b) where the performance of the contract would involve somehardship on the defendant which he did not foresee, whereasits non-performance would involve no such hardship on theplaintiff; or

(c) where the defendant entered into the contract undercircumstances which though not rendering the contract voidable,makes it inequitable to enforce specific performance.

Explanation I.—Mere inadequacy of consideration, or the merefact that the contract is onerous to the defendant or improvidentin its nature, shall not be deemed to constitute an unfair advantagewithin the meaning of clause (a) or hardship within the meaningof clause (b).

Explanation II.—The question whether the performance of acontract would involve hardship on the defendant within themeaning of clause (b) shall, except in cases where the hardshiphas resulted from any act of the plaintiff, subsequent to thecontract, be determined with reference to the circumstancesexisting at the time of the contract.

(3) The court may properly exercise discretion to decree specificperformance in any case where the plaintiff has done substantialacts or suffered losses in consequence of a contract capable ofspecific performance.

(4) The court shall not refuse to any party specific performanceof a contract merely on the ground that the contract is notenforceable at the instance of the other party.”

Section 20, as it then stood, makes it clear that the jurisdiction todecree specific performance is discretionary; but that this discretion isnot arbitrary but has to be exercised soundly and reasonably, guided byjudicial principles, and capable of correction by a court of appeal – seesection 20(1). Section 20(2) speaks of cases in which the court mayproperly exercise discretion not to decree specific performance.

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ASignificantly, under clause (a) of sub-section (2), what is to be seen isthe terms of the contract or the conduct of the parties at the time ofentering into the contract. Even “other circumstances under which thecontract was entered into” refers only to circumstances that prevailedat the time of entering into the contract. It is only then that this exceptionkicks in – and this is when the plaintiff gets an unfair advantage over theBdefendant. Equally, under clause (b) of sub-section (2), the hardshipinvolved is again at the time of entering into the contract which is clearfrom the expression “which he did not foresee”. This is made clearbeyond doubt by Explanation II of section 20 which states that the onlyexception to the hardship principle contained in clause (b) of sub-sectionC(2) is where hardship results from an act of the plaintiff subsequent tothe contract. In this case also, the act cannot be an act of a third party orof the court – the act must only be the act of the plaintiff. Clause (c) ofsub-section (2) again refers to the defendant entering into the contractunder circumstances which makes it inequitable to enforce specific performance. Here again, the point of time at which this is to be judgedDis the time of entering into the contract.

29. Given section 20, the courts have uniformly held that themere escalation of land prices after the date of the filing of the suitcannot be the sole ground to deny specific performance. Thus, in NirmalaAnand v. Advent Corporation (P) Ltd., (2002) 8 SCC 146, a three-EJudge bench of this Court held:

“3. The appeal was heard by a two-Judge Bench. The learnedJudges have concurred that the appellant is entitled to specificperformance of the agreement dated 8-9-1966. There has,however, been difference of opinion between learned Judges onFthe condition in respect of additional amount that may be paid bythe appellant to Respondents 1 and 2 and, therefore, the matterhas been placed before this three-Judge Bench. The opinions ofthe learned Judges are reported in Nirmala Anand v. AdventCorpn. (P) Ltd. [(2002) 5 SCC 481] In the opinion expressed byGBrother Justice Doraiswamy Raju, the appellant has been directedto pay a sum of Rs 40,00,000 in addition to the sum already paid toRespondents 1 and 2 and in the view of Brother Justice AshokBhan, it would be unfair to impose the condition of payment of Rs40,00,000 and the appellant is entitled to specific performance ofagreement to sell on the price mentioned in the agreement.”

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“5. The appellant is prepared and willing to take possession of theincomplete flat without claiming any reduction in the purchaseprice and would not hold Respondents 1 and 2 responsible foranything incomplete in the building. It has been concurrently heldthat she did not commit breach of the agreement to sell. She hasalways been ready and willing to perform her part of theagreement. The appellant is ready and willing to pay toRespondents 1 and 2 interest on the sum of Rs 25,000. The breachwas committed by Respondents 1 and 2 as noticed hereinbefore.It is evident that the appellant is ready to take incomplete flat andpay further sum as noticed, most likely on account of phenomenalincrease in the market price of the flat during the pendency of thislitigation for over three decades. We see no reason why theappellant cannot be allowed to have, for her alone, the entire benefitof manifold mega increase of the value of real estate property inthe locality. In our view, it would not be unreasonable andinequitable to make the appellant the sole beneficiary of theescalation of real estate prices and the enhanced value of the flatin question. There is no reason why the appellant, who is not adefaulting party, should not be allowed to reap to herself the fruitsof increase in value.

6. It is true that grant of decree of specific performance lies inthe discretion of the court and it is also well settled that it is notalways necessary to grant specific performance simply for thereason that it is legal to do so. It is further well settled that thecourt in its discretion can impose any reasonable condition includingpayment of an additional amount by one party to the other whilegranting or refusing decree of specific performance. Whetherthe purchaser shall be directed to pay an additional amount to theseller or converse would depend upon the facts and circumstancesof a case. Ordinarily, the plaintiff is not to be denied the relief ofspecific performance only on account of the phenomenal increaseof price during the pendency of litigation. That may be, in a givencase, one of the considerations besides many others to be takeninto consideration for refusing the decree of specific performance.As a general rule, it cannot be held that ordinarily the plaintiffcannot be allowed to have, for her alone, the entire benefit ofphenomenal increase of the value of the property during the A

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pendency of the litigation. While balancing the equities, one of theconsiderations to be kept in view is as to who is the defaultingparty. It is also to be borne in mind whether a party is trying totake undue advantage over the other as also the hardship thatmay be caused to the defendant by directing specific performance.There may be other circumstances on which parties may not haveany control. The totality of the circumstances is required to beseen.”

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“8. Having regard to the totality of the circumstances, we woulddirect the appellant to pay to Respondents 1 and 2 a sum of Rs6,25,000 instead of Rs 25,000. The amount of Rs 40,00,000wherever it appears in the opinion of Justice Doraiswamy Raju,would be read as Rs 6,25,000. All other conditions will remain.”

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“39. It is not a case where the defendant did not foresee thehardship. It is furthermore not a case that non-performance ofthe agreement would not cause any hardship to the plaintiff. Thedefendant was the landlord of the plaintiff. He had accepted part-Epayments from the plaintiff from time to time without any demurwhatsoever. He redeemed the mortgage only upon receipt ofrequisite payment from the plaintiff. Even in August 1981 i.e. justtwo months prior to the institution of suit, he had accepted Rs20,000 from the plaintiff. It is, therefore, too late for the appellantnow to suggest that having regard to the escalation in price, theFrespondent should be denied the benefit of the decree passed inhis favour. Explanation I appended to Section 20 clearly stipulatesthat merely inadequacy of consideration, or the mere fact that thecontract is onerous to the defendant or improvident in its naturewould not constitute an unfair advantage within the meaning ofsub-section (2) of Section 20.

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40. The decision of this Court in Nirmala Anand [(2002) 5 SCC481] may be considered in the aforementioned context.

41. Raju, J. in the facts and circumstances of the matter obtainingtherein held that it would not only be unreasonable but tooinequitable for courts to make the appellant the sole beneficiary H

of the escalation of real estate prices and the enhanced value ofthe flat in question, preserved all along by Respondents 1 and 2 bykeeping alive the issues pending with the authorities of theGovernment and the municipal body. It was in the facts andcircumstances of the case held: (SCC p. 501, para 23)

“23. … Specific performance being an equitable relief, balanceof equities have also to be struck taking into account all theserelevant aspects of the matter, including the lapses whichoccurred and parties respectively responsible therefor. Beforedecreeing specific performance, it is obligatory for courts toconsider whether by doing so any unfair advantage would resultfor the plaintiff over the defendant, the extent of hardship thatmay be caused to the defendant and if it would render suchenforcement inequitable, besides taking into (sic consideration)the totality of circumstances of each case.”

43. Bhan, J., however, while expressing his dissension in partobserved: (SCC pp. 506 & 507, paras 38 & 40)

“38. It is well settled that in cases of contract for sale ofimmovable property the grant of relief of specific performanceis a rule and its refusal an exception based on valid and cogentgrounds. Further, the defendant cannot take advantage of hisown wrong and then plead that decree for specific performancewould be an unfair advantage to the plaintiff.

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40. Escalation of price during the period may be a relevantconsideration under certain circumstances for either refusingto grant the decree of specific performance or for decreeingthe specific performance with a direction to the plaintiff to payan additional amount to the defendant and compensate him. Itwould depend on the facts and circumstances of each case.”

44. The learned Judge further observed that delay in performanceof the contract due to pendency of proceedings in court cannot byitself be a ground to refuse relief of specific performance inabsence of any compelling circumstances to take a contrary view.

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A45. The said decision cannot be said to constitute a bindingprecedent to the effect that in all cases where there had been anescalation of prices, the court should either refuse to pass a decreeon specific performance of contract or direct the plaintiff to pay ahigher sum. No law in absolute terms to that effect has been laiddown by this Court nor is discernible from the aforementionedBdecision.”

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In P.S. Ranakrishna Reddy v. M.K. Bhagyalakshmi, (2007)10 SCC 231, this Court held:

“19. Submission of Mr Chandrashekhar to the effect that havingCregard to the rise in price of an immovable property in Bangalore,the Court ought not to have exercised its discretionary jurisdictionunder Section 20 of the Specific Relief Act is stated to be rejected.We have noticed hereinbefore that the appellant had entered intoan agreement for sale with others also. He had, even after 11-5-1979, received a sum of Rs 5000 from the respondent. He with aDview to defeat the lawful claim of Respondent 1 had raised a pleaof having executed a prior agreement for sale in respect of self-same property in favour of his son-in-law who had never claimedany right thereunder or filed a suit for specific performance ofcontract. The courts below have categorically arrived at a findingEthat the said contention of the appellant was not acceptable. Risein the price of an immovable property by itself is not a ground forrefusal to enforce a lawful agreement of sale. (See P.D’Souza [(2004) 6 SCC 649] and Jai NarainParasrampuria [(2006) 7 SCC 756].)”

In Narinderjit Singh v. North Star Estate Promoters Ltd.,(2012) 5 SCC 712, this Court held:

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“25. We are also inclined to agree with the lower appellate courtthat escalation in the price of the land cannot, by itself, be a groundfor denying relief of specific performance. In K. Narendra v.GRiviera Apartments (P) Ltd. [(1999) 5 SCC 77] this Courtinterpreted Section 20 of the Act and laid down the followingpropositions: (SCC p. 91, para 29)

“29. Section 20 of the Specific Relief Act, 1963 provides thatthe jurisdiction to decree specific performance is discretionaryand the court is not bound to grant such relief merely becauseit is lawful to do so; the discretion of the court is not arbitrary H

but sound and reasonable, guided by judicial principles andcapable of correction by a court of appeal. Performance ofthe contract involving some hardship on the defendant whichhe did not foresee while non-performance involving no suchhardship on the plaintiff, is one of the circumstances in whichthe court may properly exercise discretion not to decree specificperformance. The doctrine of comparative hardship has beenthus statutorily recognised in India. However, mere inadequacyof consideration or the mere fact that the contract is onerousto the defendant or improvident in its nature, shall notconstitute an unfair advantage to the plaintiff over thedefendant or unforeseeable hardship on the defendant.”

26. In the present case, the appellant had neither pleaded hardshipnor produced any evidence to show that it will be inequitable toorder specific performance of the agreement. Rather, the importantplea taken by the appellant was that the agreement was fictitiousand fabricated and his father had neither executed the same norreceived the earnest money and, as mentioned above, all the courtshave found this plea to be wholly untenable.

27. In the result, the appeals are dismissed and the followingdirections are given:

(i) Within three months from today the respondent shall payRs 5 crores to the appellant. This direction is being given keepingin view the statement made by Shri Dushyant Dave, learnedSenior Counsel for the respondent on 3-5-2012 that his clientwould be willing to pay Rs 5 crores in all to the appellant as theprice of the land.

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In Satya Jain v. Anis Ahmed Rushdie, (2013) 8 SCC 131, thisCourt held:

“40. The discretion to direct specific performance of an agreementand that too after elapse of a long period of time, undoubtedly, hasto be exercised on sound, reasonable, rational and acceptableprinciples. The parameters for the exercise of discretion vestedby Section 20 of the Specific Relief Act, 1963 cannot be entrappedwithin any precise expression of language and the contours thereof AB

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will always depend on the facts and circumstances of each case.The ultimate guiding test would be the principles of fairness andreasonableness as may be dictated by the peculiar facts of anygiven case, which features the experienced judicial mind canperceive without any real difficulty. It must however be emphasisedthat efflux of time and escalation of price of property, by itself,cannot be a valid ground to deny the relief of specific performance.Such a view has been consistently adopted by this Court. By wayof illustration opinions rendered in P.S. RanakrishnaReddy v. M.K. Bhagyalakshmi [(2007) 10 SCC 231] and morerecently in Narinderjit Singh v. North Star Estate PromotersLtd. [(2012) 5 SCC 712 : (2012) 3 SCC (Civ) 379] may be usefullyrecapitulated.

41. The twin inhibiting factors identified above if are to be readas a bar to the grant of a decree of specific performance wouldamount to penalising the plaintiffs for no fault on their part; todeny them the real fruits of a protracted litigation wherein theissues arising are being answered in their favour. From anotherperspective it may also indicate the inadequacies of the law todeal with the long delays that, at times, occur while rendering thefinal verdict in a given case. The aforesaid two features, at best,may justify award of additional compensation to the vendor bygrant of a price higher than what had been stipulated in theagreement which price, in a given case, may even be the marketprice as on date of the order of the final court.

42. Having given our anxious consideration to all the relevantaspects of the case we are of the view that the ends of justicewould require this Court to intervene and set aside the findingsand conclusions recorded by the High Court of Delhi in AnisAhmed Rushdie v. Bhiku Ram Jain [Anis Ahmed Rushdie v.Bhiku Ram Jain, RFA (OS) No. 11 of 1984, decided on 31-10-2011 (Del)] and to decree the suit of the plaintiffs for specificperformance of the agreement dated 22-12-1970. We are of thefurther view that the sale deed that will now have to be executedby the defendants in favour of the plaintiffs will be for the marketprice of the suit property as on the date of the present order. Asno material, whatsoever is available to enable us to make a correctassessment of the market value of the suit property as on date werequest the learned trial Judge of the High Court of Delhi to

undertake the said exercise with such expedition as may be possiblein the prevailing facts and circumstances.”

In K. Prakash v. B.R. Sampath Kumar, (2015) 1 SCC 597, thisCourt held:

“18. Subsequent rise in the price will not be treated as a hardshipentailing refusal of the decree for specific performance. Rise inprice is a normal change of circumstances and, therefore, on thatground a decree for specific performance cannot be reversed.

19. However, the court may take notice of the fact that there hasbeen an increase in the price of the property and considering theother facts and circumstances of the case, this Court while grantingdecree for specific performance can impose such condition whichmay to some extent compensate the defendant owner of theproperty. This aspect of the matter is considered by a three-JudgeBench of this Court in Nirmala Anand v. Advent Corpn. (P)Ltd. [(2002) 8 SCC 146], wherein this Court held: (SCC p. 150,para 6)

“6. It is true that grant of decree of specific performance liesin the discretion of the court and it is also well settled that it isnot always necessary to grant specific performance simplyfor the reason that it is legal to do so. It is further well settledthat the court in its discretion can impose any reasonablecondition including payment of an additional amount by oneparty to the other while granting or refusing decree of specificperformance. Whether the purchaser shall be directed to payan additional amount to the seller or converse would dependupon the facts and circumstances of a case. Ordinarily, theplaintiff is not to be denied the relief of specific performanceonly on account of the phenomenal increase of price duringthe pendency of litigation. That may be, in a given case, one ofthe considerations besides many others to be taken intoconsideration for refusing the decree of specific performance.As a general rule, it cannot be held that ordinarily the plaintiffcannot be allowed to have, for her alone, the entire benefit ofphenomenal increase of the value of the property during thependency of the litigation. While balancing the equities, one ofthe considerations to be kept in view is as to who is the defaultingparty. It is also to be borne in mind whether a party is trying to A

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take undue advantage over the other as also the hardship thatmay be caused to the defendant by directing specificperformance. There may be other circumstances on whichparties may not have any control. The totality of thecircumstances is required to be seen.”

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20. As discussed above the agreement was entered into betweenthe parties in 2003 for sale of the property for a total considerationof Rs 16,10,000. Ten years have passed by and now the price ofthe property in that area where it situates has increased by notless than five times. Keeping in mind the factual position we areof the view that the appellant should pay a total consideration ofRs 25 lakhs, being the price for the said property.”

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In Zarina Siddiqui v. A. Ramalingam, (2015) 1 SCC 705, thisCourt held:

“33. The equitable discretion to grant or not to grant a relief forspecific performance also depends upon the conduct of the parties.The necessary ingredient has to be proved and established by theplaintiff so that discretion would be exercised judiciously in favourof the plaintiff. At the same time, if the defendant does not comewith clean hands and suppresses material facts and evidence andmisleads the court then such discretion should not be exercisedby refusing to grant specific performance.”

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“36. As held by this Court time and again, efflux of time andescalation of price of the property by itself cannot be a valid groundto deny the relief of specific performance. But the Court in itsdiscretion may impose reasonable conditions including paymentof additional amount to the vendor. It is equally well settled thatthe plaintiff is not to be denied specific performance only on accountof phenomenal increase of price during the pendency of litigation.”

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“38. … [I]n the facts and circumstances of the case andconsidering the phenomenal increase in price during the periodthe matter remained pending in different courts, we are of theconsidered opinion that the impugned order [A. Ramalingam v. H.Siddiqui, RFA No. 265 of 1999, decided on 1-3-2012 (KAR)]under appeal be set aside but with a condition imposed upon the H

FERRODOUS ESTATES (PVT.) LTD. v.

P. GOPIRATHNAM (DEAD) [R.F. NARIMAN, J.]

appellant-plaintiff to pay a sum of Rs 15,00,000 (Rupees fifteenlakhs) in addition to the amount already paid by the appellant tothe respondent.”

In Ramathal v. Maruthathal, (2018) 18 SCC 303, this Court held:

“22. The buyer has taken prompt steps to file a suit for specificperformance as soon as the execution of the sale was stalled bythe seller. From this discussion, it is clear that the buyer has alwaysbeen ready and willing to perform his part of the contract at allstages. Moreover, it is the seller who had always been trying towriggle out of the contract. Now the seller cannot take advantageof their own wrong and then plead that the grant of decree ofspecific performance would be inequitable. Escalation of pricescannot be a ground for denying the relief of specific performance.Specific performance is an equitable relief and granting the reliefis the discretion of the court. The discretion has to be exercisedby the court judicially and within the settled principles of law.Absolutely there is no illegality or infirmity in the judgments of thecourts below, which has judicially exercised its discretion and theHigh Court ought not to have interfered with the same. ……”

In Sunkara Lakshminarasamma v. Sagi Subba Raju, (2019)11 SCC 787, this Court held:

“9. Shri A. Subba Rao, learned counsel for the appellants washowever forceful in his arguments, insofar as the suit for specificperformance is concerned. According to him, the appellants herein(defendants in the suit for specific performance) would be put tohardship if the decree for specific performance is confirmed,inasmuch as there has been a huge escalation in the price of theproperties since the agreement of sale. Such plea of escalation inprice cannot be accepted in view of the fact that the appellants inthe first instance do not have the right to question the agreementof sale. As mentioned supra, since Veeraswamy was the absoluteowner of the properties including the property involved in the suitfor specific performance, he had the right to enter into anagreement of sale also. This property was bequeathed toVeeraswamy under Ext. B-4 will by Padmanabhudu. Hence,Veeraswamy was the sole owner of the property. Consequently,he had entered into an agreement of sale with Sagi Subba Raju, A

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as far back as on 19-9-1974. The suit was filed in the year 1978,which was later transferred to another court and the same wasre-numbered as OS No. 72 of 1983. Since 1978, this litigation isbeing fought by the prospective vendee. The property of aboutthree-and-a-half acres was agreed to be sold by Veeraswamy infavour of the prospective vendee in the year 1974 for a sum of Rs51,000. Such price was agreed to between the vendor as well asthe prospective vendee.

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10. This Court cannot imagine the value of the property as it stoodin the year 1974 in the said area i.e. at Bhimavaram Village inAndhra Pradesh. Be that as it may, we find that hardship wasneither pleaded nor proved by the appellants herein before thetrial court. No issue was raised relating to hardship before thetrial court. A plea which was not urged before the trial court cannotbe allowed to be raised for the first time before the appellatecourts. Moreover, mere escalation of price is no ground forinterference at this stage (see the judgment of this Court inNarinderjit Singh v. North Star Estate Promoters Ltd.[Narinderjit Singh v. North Star Estate Promoters Ltd., (2012)5 SCC 712 : (2012) 3 SCC (Civ) 379]). Added to it, as mentionedsupra, the appellants do not have the locus standi to question thejudgment of the Division Bench since they are not the owners of C

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the property. As a matter of fact, Veeraswamy, the vendor of theproperties, had entered the witness box before the trial court andsupported all his alienations in favour of the defendants. Therefore,in our considered opinion, the Division Bench has rightly concludedin favour of Sagi Subba Raju and against the appellants and grantedFthe decree for specific performance.”

30. It is settled law that mere delay by itself, without more, cannotbe the sole factor to deny specific performance – See MademsettySatyanarayana v. G. Yelloji Rao, (1965) 2 SCR 221 at pp. 229-230.Thus, in K.S. Vidyanadam v. Vairavan, (1997) 3 SCC 1, this CourtGmade it clear that if property prices have risen dramatically within aperiod of two and a half years before filing of the suit for specificperformance, and it is coupled with violation of the agreement by theplaintiff, specific performance will not be decreed. The Court held:

“10. … In other words, the court should look at all the relevantcircumstances including the time-limit(s) specified in the agreement H

and determine whether its discretion to grant specific performanceshould be exercised. Now in the case of urban properties in India,it is well-known that their prices have been going up sharply overthe last few decades — particularly after 1973 [It is a well-knownfact that the steep rise in the price of oil following the 1973 Arab-Israeli war set in inflationary trends all over the world. Particularlyaffected were countries like who import bulk of their requirementof oil]. In this case, the suit property is the house property situatedin Madurai, which is one of the major cities of Tamil Nadu. Thesuit agreement was in December 1978 and the six months’ periodspecified therein for completing the sale expired with 15-6-1979.The suit notice was issued by the plaintiff only on 11-7-1981, i.e.,more than two years after the expiry of six months’ period. Thequestion is what was the plaintiff doing in this interval of morethan two years? … The defendants’ consistent refrain has beenthat the prices of house properties in Madurai have been risingfast, that within the said interval of 2 1/2 years, the prices went upthree times and that only because of the said circumstance hasthe plaintiff (who had earlier abandoned any idea of going forwardwith the purchase of the suit property) turned round and demandedspecific performance. Having regard to the above circumstancesand the oral evidence of the parties, we are inclined to accept thecase put forward by Defendants 1 to 3. We reject the story putforward by the plaintiff that during the said period of 2 1/2 years,he has been repeatedly asking the defendants to get the tenantvacated and execute the sale deed and that they were asking fortime on the ground that tenant was not vacating. The above findingmeans that from 15-12-1978 till 11-7-1981, i.e., for a period ofmore than 2 1/2 years, the plaintiff was sitting quiet without takingany steps to perform his part of the contract under the agreementthough the agreement specified a period of six months within whichhe was expected to purchase stamp papers, tender the balanceamount and call upon the defendants to execute the sale deed anddeliver possession of the property. We are inclined to accept thedefendants’ case that the values of the house property in Maduraitown were rising fast and this must have induced the plaintiff towake up after 2 1/2 years and demand specific performance.11. Shri Sivasubramaniam cited the decision of the Madras HighCourt in S.V. Sankaralinga Nadar v. P.T.S. Ratnaswami Nadar AB

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[AIR 1952 Mad 389 : (1952) 1 MLJ 44] holding that mere rise inprices is no ground for denying the specific performance. Withgreat respect, we are unable to agree if the said decision isunderstood as saying that the said factor is not at all to be takeninto account while exercising the discretion vested in the court bylaw. We cannot be oblivious to the reality — and the reality isconstant and continuous rise in the values of urban properties —fuelled by large-scale migration of people from rural areas to urbancentres and by inflation. Take this very case. The plaintiff hadagreed to pay the balance consideration, purchase the stamp papersand ask for the execution of sale deed and delivery of possessionwithin six months. He did nothing of the sort. The agreementexpressly provides that if the plaintiff fails in performing his partof the contract, the defendants are entitled to forfeit the earnestmoney of Rs 5000 and that if the defendants fail to perform theirpart of the contract, they are liable to pay double the said amount.Except paying the small amount of Rs 5000 (as against the totalconsideration of Rs 60,000) the plaintiff did nothing until he issuedthe suit notice 2 1/2 years after the agreement. Indeed, we areinclined to think that the rigor of the rule evolved by courts thattime is not of the essence of the contract in the case of immovableproperties — evolved in times when prices and values were stableand inflation was unknown — requires to be relaxed, if notmodified, particularly in the case of urban immovable properties.It is high time, we do so. The learned counsel for the plaintiff saysthat when the parties entered into the contract, they knew thatprices are rising; hence, he says, rise in prices cannot be a groundfor denying specific performance. May be, the parties knew ofthe said circumstance but they have also specified six months asthe period within which the transaction should be completed. Thesaid time-limit may not amount to making time the essence of thecontract but it must yet have some meaning. Not for nothing couldsuch time-limit would have been prescribed. Can it be stated as arule of law or rule of prudence that where time is not made theessence of the contract, all stipulations of time provided in thecontract have no significance or meaning or that they are as goodas non-existent? All this only means that while exercising itsdiscretion, the court should also bear in mind that when the partiesprescribe certain time-limit(s) for taking steps by one or the other

party, it must have some significance and that the said time-limit(s)cannot be ignored altogether on the ground that time has not beenmade the essence of the contract (relating to immovableproperties).”

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“13. In the case before us, it is not mere delay. It is a case of totalinaction on the part of the plaintiff for 2 1/2 years in clear violationof the terms of agreement which required him to pay the balance,purchase the stamp papers and then ask for execution of saledeed within six months. Further, the delay is coupled with substantialrise in prices — according to the defendants, three times —between the date of agreement and the date of suit notice. Thedelay has brought about a situation where it would be inequitableto give the relief of specific performance to the plaintiff.

14. Shri Sivasubramaniam then relied upon the decision in JiwanLal (Dr) v. Brij Mohan Mehra [(1972) 2 SCC 757 : (1973) 2SCR 230] to show that the delay of two years is not a ground todeny specific performance. But a perusal of the judgment showsthat there were good reasons for the plaintiff to wait in that casebecause of the pendency of an appeal against the order ofrequisition of the suit property. We may reiterate that the trueprinciple is the one stated by the Constitution Bench in ChandRani [(1993) 1 SCC 519]. Even where time is not of the essenceof the contract, the plaintiffs must perform his part of the contractwithin a reasonable time and reasonable time should be determinedby looking at all the surrounding circumstances including theexpress terms of the contract and the nature of the property.”

Likewise, this Court, in Saradamani Kandappan v. S.Rajalakshmi, (2011) 12 SCC 18, made it clear that given the steep risein urban land prices, it may not be correct now to say that time is not ofessence in performance of a contract of sale of immovable property.Thus, where time can be said to be of the essence in the facts of a givencase, and the purchaser does not take steps to complete the sale withinthe stipulated period and the vendor is not responsible for any delay, thesteep rise in price within the stipulated time would be a circumstancewhich would make it inequitable to grant the relief of specificperformance. This Court held:

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“36. The principle that time is not of the essence of contractsrelating to immovable properties took shape in an era when marketvalues of immovable properties were stable and did not undergoany marked change even over a few years (followed mechanically,even when value ceased to be stable). As a consequence, timefor performance, stipulated in the agreement was assumed to benot material, or at all events considered as merely indicating thereasonable period within which contract should be performed.The assumption was that grant of specific performance wouldnot prejudice the vendor defendant financially as there would notbe much difference in the market value of the property even ifthe contract was performed after a few months. This principlemade sense during the first half of the twentieth century, whenthere was comparatively very little inflation, in India. The thirdquarter of the twentieth century saw a very slow but steadyincrease in prices. But a drastic change occurred from the beginningof the last quarter of the twentieth century. There has been agalloping inflation and prices of immovable properties haveincreased steeply, by leaps and bounds. Market values of propertiesare no longer stable or steady. We can take judicial notice of thecomparative purchase power of a rupee in the year 1975 andnow, as also the steep increase in the value of the immovableproperties between then and now. It is no exaggeration to saythat properties in cities, worth a lakh or so in or about 1975 to1980, may cost a crore or more now.

37. The reality arising from this economic change cannot continueto be ignored in deciding cases relating to specific performance.The steep increase in prices is a circumstance which makes itinequitable to grant the relief of specific performance where thepurchaser does not take steps to complete the sale within theagreed period, and the vendor has not been responsible for anydelay or non-performance. A purchaser can no longer take shelterunder the principle that time is not of essence in performance ofcontracts relating to immovable property, to cover his delays,laches, breaches and “non-readiness”. The precedents from anera, when high inflation was unknown, holding that time is not ofthe essence of the contract in regard to immovable properties,may no longer apply, not because the principle laid down thereinis unsound or erroneous, but the circumstances that existed whenthe said principle was evolved, no longer exist. In these days of

galloping increases in prices of immovable properties, to hold thata vendor who took an earnest money of say about 10% of thesale price and agreed for three months or four months as theperiod for performance, did not intend that time should be theessence, will be a cruel joke on him, and will result in injustice.Adding to the misery is the delay in disposal of cases relating tospecific performance, as suits and appeals therefrom routinelytake two to three decades to attain finality. As a result, an owneragreeing to sell a property for rupees one lakh and received rupeesten thousand as advance may be required to execute a sale deeda quarter century later by receiving the remaining rupees ninetythousand, when the property value has risen to a crore of rupees.

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41. A correct perspective relating to the question whether time isnot of the essence of the contract in contracts relating to immovableproperty, is given by this Court in K.S. Vidyanadam v. Vairavan[(1997) 3 SCC 1] (by Jeevan Reddy, J. who incidentally was amember of the Constitution Bench in Chand Rani [(1993) 1 SCC519] ). This Court observed: (SCC pp. 7 & 9, paras 10-11)

“10. It has been consistently held by the courts in India, followingcertain early English decisions, that in the case of agreementof sale relating to immovable property, time is not of the essenceof the contract unless specifically provided to that effect. … inthe case of urban properties in India, it is well-known thattheir prices have been going up sharply over the last fewdecades—particularly after 1973. …

11. … We cannot be oblivious to the reality—and the realityis constant and continuous rise in the values of urbanproperties—fuelled by large-scale migration of people fromrural areas to urban centres and by inflation. … Indeed,we are inclined to think that the rigor of the rule evolvedby courts that time is not of the essence of the contract inthe case of immovable properties—evolved in times whenprices and values were stable and inflation was unknown—requires to be relaxed, if not modified, particularly in thecase of urban immovable properties. It is high time, we doso.”

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42. Therefore there is an urgent need to revisit the principle thattime is not of the essence in contracts relating to immovableproperties and also explain the current position of law with regardto contracts relating to immovable property made after 1975, inview of the changed circumstances arising from inflation and steepincrease in prices. We do not propose to undertake that exercisein this case, nor referring the matter to a larger Bench as we haveheld on facts in this case that time is the essence of the contract,even with reference to the principles in Chand Rani [(1993) 1SCC 519] and other cases. Be that as it may.

43. Till the issue is considered in an appropriate case, we canonly reiterate what has been suggested in K.S.Vidyanadam [(1997) 3 SCC 1]:

(i) The courts, while exercising discretion in suits for specificperformance, should bear in mind that when the partiesprescribe a time/period, for taking certain steps or for completionof the transaction, that must have some significance andtherefore time/period prescribed cannot be ignored.

(ii) The courts will apply greater scrutiny and strictness whenconsidering whether the purchaser was “ready and willing” toperform his part of the contract.

(iii) Every suit for specific performance need not be decreedmerely because it is filed within the period of limitation byignoring the time-limits stipulated in the agreement. The courtswill also “frown” upon suits which are not filed immediatelyafter the breach/refusal. The fact that limitation is three yearsdoes not mean that a purchaser can wait for 1 or 2 years to filea suit and obtain specific performance. The three-year periodis intended to assist the purchasers in special cases, as forexample, where the major part of the consideration has beenpaid to the vendor and possession has been delivered in part-performance, where equity shifts in favour of the purchaser.”

In Nanjappan v. Ramasamy, (2015) 14 SCC 341, the suit forspecific performance was filed many years after the agreement dated30.09.1987, which agreement was extended by three years twice andthereafter, by another two years. It was only after these extensions andexchange of legal notices between the parties that the respondents filed

a suit for specific performance. It was in this factual background thatthe Court held:

“10. In a suit for specific performance, the plaintiff has to averand prove with satisfactory evidence that he was always readyand willing to perform his part of contract at all material time asmandatorily required under Section 16(c) of the Specific ReliefAct, 1963. The first appellate court and the High Court recordedfindings that the plaintiff was always ready and willing to performhis part of the contract. By a careful reading of the recitals in theagreement, the concurrent findings so recorded do not seem toreflect the conduct of the parties. As per recitals in Ext. P-1agreement dated 30-9-1987, an amount of Rs 25,000 was paid bythe respondent-plaintiffs to the appellant-defendant. Balanceamount of Rs 20,000 was to be paid within 2½ years thereafterand get the sale executed. In the second agreement of sale (Ext.P-2 dated 21-3-1990) it is stated that the plaintiffs were unable topay the balance amount within the stipulated period and get thesale deed executed and therefore the second sale agreement wasexecuted extending the period for execution of sale deed for afurther period of three years. As could be seen from the recitalsfrom Ext. P-2, the respondents were unable to pay the balancesale consideration and get the sale deed executed. It is pertinentto note that the time for performance of contract was extendedagain and again totalling period of eight years. Even though thefirst appellate court and the High Court recorded findings that therespondent-plaintiffs were ready and willing to perform their partof contract, the fact that time was extended for eight years is tobe kept in view while considering the question whether discretionis to be exercised in favour of the respondent-plaintiffs.”

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“13. The first sale agreement was executed on 30-9-1987 abouttwenty-seven years ago. The property is situated in CoimbatoreCity and over these years, value of property in Coimbatore Citywould have considerably increased. In SaradamaniKandappan v. S. Rajalakshmi [(2011) 12 SCC 18 : (2012) 2 SCC(Civ) 104] , this Court has held that the value of the propertyescalates in the urban areas very fast and it would not be equitableto grant specific performance after a lapse of long period of time.

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14. Considering the totality and the facts and circumstances, inour view, it is not appropriate to grant discretionary relief of specificperformance to the respondent-plaintiffs for more than one reason.Admittedly, the suit property is the only property of the appellant-defendant and the appellant is said to have constructed a houseCand where he is currently residing with the family. As comparedto the respondents, the appellant will suffer significant hardship ifa decree for specific performance is granted against the appellant.Considering the circumstances, such as the construction of theresidential house over the suit property, sale consideration, passageDof time and hardship caused to the appellant, makes it inequitableto exercise the discretionary relief of specific performance andthe concurrent finding of the first appellate court and the HighCourt decreeing the suit for specific performance is to be setaside.”

E31. The resultant position in law is that a suit for specificperformance filed within limitation cannot be dismissed on the sole groundof delay or laches. However, an exception to this rule is where immovableproperty is to be sold within a certain period, time being of the essence,and it is found that owing to some default on the part of the plaintiff, thesale could not take place within the stipulated time. Once a suit forFspecific performance has been filed, any delay as a result of the courtprocess cannot be put against the plaintiff as a matter of law in decreeingspecific performance. However, it is within the discretion of the Court,regard being had to the facts of each case, as to whether some additionalamount ought or ought not to be paid by the plaintiff once a decree ofGspecific performance is passed in its favour, even at the appellate stage.

32. Shri Giri’s fervent appeal that we should not exercise ourdiscretionary jurisdiction under Article 136, given the fact that Rs.2 croresplus interest is to be paid almost by way of solatium to the appellant, hasalso to be rejected. As has been found earlier in this judgment, theHdefendants were held to have taken up dishonest pleas and also held to have been in breach of a solemn agreement in which they were to obtainthe Urban Land Ceiling permission which, if not obtained, would, underthe agreement itself, not stand in the way of the specific performance ofthe agreement between the parties. He who asks for equity must doequity. Given the conduct of the defendants in this case, as contrastedwith the conduct of the appellant who is ready and willing throughout toperform its part of the bargain, we think this is a fit case in which theDivision Bench judgment should be set aside. As a result, the decreepassed by the Single Judge is restored. Since the appellant itself offereda sum of Rs.1.25 crores to the Division Bench, it must be made to paythis amount to the respondents within a period of eight weeks from thedate of this judgment.

33. The Civil Appeal is allowed in the aforesaid terms with noorder as to costs.

Divya Pandey

Appeal allowed

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