KALAWATI (D) THROUGH LRS. & ORS. versus RAKESH KUMAR & ORS. on 16 February 2018

SUPREME COURT REPORTS

[2018] 1 S.C.R.

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KALAWATI (D) THROUGH LRS. & ORS.

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RAKESH KUMAR & ORS.

(Civil Appeal No. 2244 of 2018)

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FEBRUARY 16, 2018

[MADAN B. LOKUR AND DEEPAK GUPTA, JJ.]

Specific Performance – Specific performance of contract –Agreement to sell land between the appellant-vendor andrespondent-vendee – Part payment towards the sale price paid byCrespondent but appellant failed to carry out their obligations ofobtaining ‘no objection certificate’ from the appropriate authority– Suit for specific performance of the agreement by the respondent– Application also filed for injunction against alienation of the landin dispute – Grant of interim injunction subject to deposit of theDbalance sale consideration – However, balance sale considerationnot deposited by the respondent – During pendency of the suit,appellant transferred the land to defendant – Thereafter, dismissalof the suit since respondent not ready and willing to perform hispart of the contract – However, the High Court passed the decreefor specific performance in favour of the respondent – On appeal,Eheld: Material on record indicates that the respondent did not havethe necessary funds to pay the balance consideration – Thoughrespondent took loan but that was for his business and not forpayment of balance consideration – Respondent could not pay theloan amount as also the balance consideration – Trial court rightlyFheld that by necessary implication respondent was neither readynor willing to perform his part of the agreement – Further, the natureand the purpose of no objection certificate that vendors wererequired to obtain and the authorities from whom it was to be obtainednot clear – Also not clear about the nature of income tax clearancecertificate required and for what purpose – Thus, the judgment andGdecree passed by the High Court is set aside.

Allowing the appeal, the Court

HELD: 1.1 In the instant appeal, the material on recordclearly indicates that the respondent did not have the necessaryHfunds available with him to pay the balance consideration. His

low income and low bank balance indicated his incapacity to makethe balance payment. As far as his capacity to arrange for funds isconcerned, it has come on record that the respondent did take aloan from his cousin but that was only for his business and not forpaying the balance consideration for the land in dispute. There isnothing on record to indicate that the respondent could have notonly repaid the loan taken from his cousin, but additionally, couldhave arranged sufficient funds to pay the balance consideration.It is very doubtful, and it is easy and reasonable to infer this, thatthe respondent was incapable of meeting both liabilities. [Para21][489-D-E]

1.2 On the facts the trial judge was right in coming to theconclusion that the respondent was not in a position to pay thebalance consideration to the appellant and the other vendors,and by necessary implication, it must be held that he was neitherready nor willing to perform his part of the agreement. [Para22][489-F]

1.3 The agreement to sell is seen and the relevant clauseof the contract is remarkably vague, that the vendors would obtainthe no objection certificate from the authorities concerned andwould inform the vendee by registered post after getting theincome tax clearance certificate. There is nothing to indicate thenature of the “no objection certificate” that the vendors wererequired to obtain and who were the authorities from whom the“no objection certificate” was required, nor is there any indicationof the purpose for which the “no objection certificate” wasrequired. Similarly, there is no indication about the nature of theincome tax clearance certificate required and for what purpose.This clause appears to have been inserted in the agreement tosell without any application of mind and it is quite possible, asalleged by the vendors that the agreement to sell was ante-datedafter the introduction of Section 260-UC in the Income Tax Act,1961. However, it is not possibile in view of the vague nature ofthe clause. [Paras 23, 24][489-G-H; 490-B-C]

1.4 On an overall consideration of the facts and in thecircumstances of the case, the High Court was in error in settingaside the judgment and decree of the trial judge. Thus, thejudgment and decree passed by the High Court is set aside. [Para25][490-D]

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AHis Holiness Acharya Swami Ganesh Dassji v. Sita RamThapar (1996) 4 SCC 526 : [1996] 2 Suppl. SCR 111;I.S. Sikandar (Dead) by Lrs. v. K. Subramani &Ors.(2013) 15 SCC 27 : [2013] 17 SCR 24 – referred to.

Case Law Reference

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 2244of 2018.

CFrom the Judgment and Order dated 10.12.2013 of the HighCourt of Delhi at New Delhi in R.F.A. No.521 of 2004.

Rakesh Khanna, Sr. Adv., Dr. K.P.S. Dalal, S. Rohan, Shree PalSingh, Praveen Swarup, Advs. for the Appellants.

Sumit Bansal, Ateev Mathur, Ritesh Khatri, Lalit Kumar, PankajDKumar Singh, Raj Singh Rana, Advs. for the Respondents.

The Judgment of the Court was delivered by MADAN B. LOKUR, J. 1. Leave granted.

2. “Ease of business” and “enforcement of contract” are the twoEnew buzzwords and rightly so. For ease of doing business insofar asjustice delivery is concerned, it is time to introspect and introduce casemanagement programmes to streamline the system so that suits andappeals can be decided more efficiently. The present appeal exemplifiesthe need for case management system.

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3. The subject matter of the appeal is an agreement to sell dated29[th] May, 1986. A suit was filed by the plaintiff (Rakesh Kumar) in theDelhi High Court being Suit No.1193 of 1987 for specific performanceof the agreement to sell. It appears that due to a change in pecuniaryjurisdiction, the suit was transferred to the District Courts and was re-Gnumbered as Suit No.642 of 2001. A disturbing feature of the appeal isthat even about 31 years later, the parties are not quite sure about thefate of the agreement to sell entered into in 1986. The period is extremelylong and such a lapse of time for the enforcement (or otherwise) of acontract is good reason to re-think the procedures.

4. The appellants (Kalawati and others) are aggrieved by thejudgment and decree dated 10[th] December, 2013 passed by a learnedSingle Judge of the Delhi High Court in R.F.A. No.521 of 2004.

5. In the plaint filed by the respondent (Rakesh Kumar), it wasaverred that he had entered into an agreement to sell on 29[th] May, 1986in respect of land in Rectangle No.81, Killa Nos.21/1 (1-2), 22/1 (4-5),19/2 (4-0), 19/1 (0-12), 20/2 (1-2) in all measuring 11 bighas and 1 biswasituated in Village Mehrauli, Tehsil Mehrauli, New Delhi. A part of theland was under the absolute ownership/bhumidari of Kalawati while therest of the land was in the absolute ownership/bhumidari of defendantNos.2 to 4 (Bishan Prakash, Om Prakash and Ved Prakash).

6. As per the agreement to sell, the sale price of the land in disputewas Rs.1,32,000/- per acre. An amount of Rs.30,000/- was paid byRakesh Kumar to the defendants as advance payment and part paymenttowards the sale price for which a receipt was given to him.

7. According to Rakesh Kumar, the defendants were obliged toobtain a certain ‘no objection certificate’ from the appropriate authorityfor sale of the disputed land and also permissions and clearances butthey failed to take any interest in this regard. Accordingly, Rakesh Kumarissued a lawyer’s notice dated 16[th] May, 1987 to the defendants to carryout their obligations but they failed to do so.

8. Faced with this situation, Rakesh Kumar filed a suit before theHigh Court being Suit No. 1193 of 1987. As mentioned above, the suitwas transferred to the District Courts and renumbered as Suit No.642of 2001. The prayer in the suit was for specific performance for theagreement to sell dated 29[th] May, 1986 and for possession of the land indispute. Along with the plaint, an application was filed by Rakesh Kumarunder Order XXXIX of the Code of Civil Procedure for an injunctionagainst alienation of the land in dispute, in which notice was issued to thedefendants therein. Rakesh Kumar was granted an interim injunctionsubject to his depositing the balance sale consideration for restrainingthe defendants from alienating the land in dispute. It has come on recordthat Rakesh Kumar did not deposit the balance sale consideration.

9. At this stage, it may be mentioned that during the pendency ofthe suit, the defendants transferred the land in dispute in 1995 to defendantNos.5, 6 and 7 and that is why the purchasers were impleaded asdefendants in the suit.

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A10. The parties filed their written statements to the plaint and thestand taken by the defendants was that the sale consideration ofRs.1,32,000/- per acre was ridiculously low and illusory. Additionally,Rakesh Kumar himself was not ready and willing to perform his part ofagreement and therefore no relief could be granted to him. It was alsoaverred that Rakesh Kumar did not have the necessary finances to payBthe consideration amount and so was not prepared to have the sale deedexecuted in his favour.

11. On the pleadings before him, the Trial Judge framed severalissues but we are only concerned with the issue whether the plaintiff(Rakesh Kumar) was at all times ready and willing to perform his partCof the agreement. This issue was answered in the negative by the TrialJudge and against Rakesh Kumar resulting in the dismissal of the suit.Among the reasons given by the Trial Judge for coming to the conclusionthat Rakesh Kumar was not ready and willing to execute the contract,at all times, was that at the time of grant of interim injunction prayed forDby Rakesh Kumar in an application under Order XXXIX of Code ofCivil Procedure while the suit was pending in the High Court, he wasrequired to deposit the balance consideration as a pre-condition forrestraining the defendants from selling, mortgaging, alienating or otherwiseparting with possession with the land in dispute. The balance saleconsideration was not deposited by Rakesh Kumar and therefore, theEinterim injunction prayed for by him was not granted. In the absence ofany injunction against alienating the land in dispute, the defendantstransferred it to defendant Nos.5, 6 and 7 in 1995.

12. The Trial Judge also noted that from his cross-examination itwas evident that Rakesh Kumar did not have the resources and sufficientFmoney to purchase the disputed land. He was in possession of only onetruck and was earning Rs.10,000/- per month. He was not assessed toincome tax and he filed his income tax return for the first time in 1994.Earlier in 1988-89, he had opened a bank account but never had a balanceof more than Rs.52,000/- in his bank account. Sometime in July, 2002GRakesh Kumar took a loan of Rs.3.15 lakhs for the purpose of hisbusiness from his cousin but the loan was not taken for the purpose ofbuying the land in dispute. Taking all these factors into consideration, theTrial Judge held that Rakesh Kumar did not have the means to pay thebalance consideration and was not ready and willing to perform his partof the contract at all times.H

13. Feeling aggrieved, Rakesh Kumar preferred a Regular FirstAppeal before the Delhi High Court. The High Court addressed itselfonly to the question whether Rakesh Kumar was ready and willing toexecute his part of the agreement to sell, at all times. The High Courttook the view that rather than Rakesh Kumar, it was the defendantswho were not willing to execute the sale deed. The High Court came tothis conclusion on the basis of the requirement in terms of the agreementto sell that the defendants were obliged to obtain a ‘no objectioncertificate’ for executing the sale deed but they had not taken any stepsin that regard. The High Court also relied on the affidavit by way ofevidence filed by Rakesh Kumar about his capacity to pay the balancesale consideration. It was also noted by the High Court that the lawyer’snotice sent by him on 16[th] May, 1987 had not been responded to by thedefendants. On a consideration of these factors, it was clear that thedefendants were not interested in executing the sale deed.

14. On the other hand, as far as Rakesh Kumar’s readiness andwillingness to execute the sale deed is concerned, the High Court notedthat in his cross-examination recorded on 4[th] October, 2002 he explainedthat just prior to the date of entering into the agreement to sell, he haddisposed of his house. Thus, he had sufficient funds available for investingand on this basis, he had agreed to purchase the land in dispute.

15. The High Court noted that even though Rakesh Kumar didnot deposit the balance consideration for the grant of injunction in hisfavour, that was of no consequence and could not be held against him.We agree with the High Court only to this limited extent.

16. Taking all these factors into consideration, the High Courtreversed the view of the Trial Judge and concluded that Rakesh Kumarwas entitled to a decree for specific performance of the agreement tosell dated 29[th] May, 1986 and for delivery of vacant, peaceful and physicalpossession of the land in dispute.

17. Having heard learned counsel for the parties, we are not infavour of the view expressed by the High Court but subscribe to theview of the Trial Judge.

18. The law on the subject of specific performance of contractsis quite clear and it is not necessary to cite the dozens of judgmentsdelivered by this Court on the issue. However, it is necessary to refer A

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Ato two decisions which are quite apposite to the facts of the case beforeus.

19. In His Holiness Acharya Swami Ganesh Dassji v. SitaRam Thapar[1]this Court drew a distinction between readiness to performthe contract and willingness to perform the contract. It was observedBthat by readiness it may be meant the capacity of the plaintiff to performthe contract which would include the financial position to pay the purchaseprice. As far as the willingness to perform the contract is concerned,the conduct of the plaintiff has to be properly scrutinised along withattendant circumstances. On the facts available, the Court may inferwhether or not the plaintiff was always ready and willing to perform hisCpart of the contract. It was held in paragraph 2 of the Report:

“There is a distinction between readiness to perform the contractand willingness to perform the contract. By readiness may bemeant the capacity of the plaintiff to perform the contract whichincludes his financial position to pay the purchase price. ForDdetermining his willingness to perform his part of the contract, theconduct has to be properly scrutinised…... The factum ofreadiness and willingness to perform plaintiff’s part of the contractis to be adjudged with reference to the conduct of the party andthe attending circumstances. The court may infer from the factsand circumstances whether the plaintiff was ready and was alwaysEready and willing to perform his part of the contract. The facts ofthis case would amply demonstrate that the petitioner/plaintiff wasnot ready nor had the capacity to perform his part of the contractas he had no financial capacity to pay the consideration in cash ascontracted and intended to bide for the time which disentitles himFas time is of the essence of the contract.”

20. In I.S. Sikandar (Dead) by Lrs. v. K. Subramani &Ors.[2]this Court noted that the plaintiff is required to prove that from the dateof execution of the agreement of sale till the date of the decree, he wasalways ready and willing to perform his part of the contract. In this case,Glooking the attendant facts and circumstances, the Court upheld the viewof the Trial Judge that the plaintiff had no money to pay the balance saleconsideration and was apparently not capable of making necessaryarrangements for payment of the balance consideration. It was held inparagraph 45 and paragraph 47 of the Report:

1 (1996) 4 SCC 526H2 (2013) 15 SCC 27

“45.……..Further, the plaintiff is required to prove the fact thatright from the date of execution of the agreement of sale till thedate of passing the decree he must prove that he is ready and hasalways been willing to perform his part of the contract as per theagreement……”

“47. Further, there is nothing on record to show that the plaintiffcould have made arrangement for payment of the balanceconsideration amount to them. But, on the other hand the trialcourt has recorded the finding of fact to the effect that thecorrespondence between the parties and other circumstanceswould establish the fact that the plaintiff had no money for paymentof balance sale consideration…….”

21. In so far as the present appeal is concerned, the material onrecord clearly indicates that Rakesh Kumar did not have the necessaryfunds available with him to pay the balance consideration. His low incomeand low bank balance indicated his incapacity to make the balancepayment. As far as his capacity to arrange for funds is concerned, it hascome on record that Rakesh Kumar did take a loan from his cousin butthat was only for his business and not for paying the balance considerationfor the land in dispute. There is nothing on record to indicate that RakeshKumar could have not only repaid the loan taken from his cousin, butadditionally, could have arranged sufficient funds to pay the balanceconsideration. It is very doubtful, and it is easy and reasonable to inferthis, that Rakesh Kumar was incapable of meeting both liabilities.

22. On the facts placed before us, we are satisfied that the TrialJudge was right in coming to the conclusion that Rakesh Kumar was notin a position to pay the balance consideration to Kalawati and the othervendors, and by necessary implication, it must be held that he was neitherready nor willing to perform his part of the agreement.

23. It was submitted that Kalawati and the other vendors did notperform their part of the agreement despite Rakesh Kumar requestingthem to do so. The contention of Rakesh Kumar was that the vendorsdid not obtain a “no objection certificate” from the authorities concerned.We have gone through the agreement to sell dated 29[th] May, 1986 andthe relevant clause of the contract is remarkably vague and reads asfollows:

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490SUPREME COURT REPORTS

A“That the vendors will obtain the no objection certificate from theauthorities concerned and will inform the vendee by registeredpost after getting the income tax clearance certificate.”

24. There is nothing to indicate the nature of the “no objectioncertificate” that the vendors were required to obtain and who were theBauthorities from whom the “no objection certificate” was required, noris there any indication of the purpose for which the “no objectioncertificate” was required. Similarly, there is no indication about the natureof the income tax clearance certificate required and for what purpose.This clause appears to have been inserted in the agreement to sell withoutany application of mind and it is quite possible, as alleged by the vendorsCthat the agreement to sell was ante-dated after the introduction of Section260-UC in the Income Tax Act, 1961. However, we need not go intothis possibility in view of the vague nature of the clause.

25. On an overall consideration of the facts and in thecircumstances of the case, in our opinion, the High Court was in error inDsetting aside the judgment and decree of the Trial Judge. Accordingly,the appeal is allowed and the judgment and decree passed by the HighCourt is set aside. No costs.

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Nidhi Jain

Appeal allowed.

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