Chandra Estates Ltd. vs Tej Properties Pvt. Ltd. and Others

S. Ravindra Bhat, J.—By this suit a decree for specific performance of the Agreement to Sell dated 1.1.1983 as well as mandatory injunction compelling first defendant to obtain necessary permission and to pay dues of Defendant No. 3 to secure its title deeds and execute the Sale Deed have been sought. Correspondingly a mandatory injunction against third defendant to handover title deeds to the property on payment of Rs. 20 lacs is claimed. In the alternative the plaintiff has sought a decree for Conveyance of the suit property in its favour subject to the third defendant''s liability and for damages equivalent to the amount payable to the third defendant to get the title deeds of the property released less Rs. 20 lacs being a balance consideration.

The suit averments are that the plaintiff is an incorporated Company represented through Shri Mohan Lal, its Director; the Defendant No. 1 is a Limited company engaged in the business of construction, sale and purchase of immovable property. The 4th Defendant, Union of India has been made a party since the plaintiff had sought quashing of an order then made u/s 269UD of the Income Tax Act, compulsorily seeking to purchase the property in question. It is averred that negotiations for purchase of the property i.e. being Plot No. 23, Block 172, Jor Bagh New Delhi measuring 1236 sq.yds had started in 1982 with the Defendants 1 and 2. It is claimed that at the defendant''s request a sum of Rs. 6 lakhs was issued by M/s William Jacks and Co., New Delhi on 2.9.1982 and another sum of Rs. 5 lakhs was issued by the said M/s William Jacs and Co.; as earnest money. The plaintiff also avers that M/s William Jacks and Co. were to be given possession of the premises by it (the plaintiff) and, therefore, the latter had made payments. It is also alleged that possession of the property was later given by the plaintiffs to the said M/s William Jacks and Co.

The plaintiff avers to entering into an Agreement to Sell on 1.1.1983 in respect of the said property (hereafter called the ''suit property'') for a consideration of Rs. 41.50 lakhs. The plaintiff has set out the terms of the Agreement which mentioned about the payment of Rs. 11 lakhs as part payment and a further sum of Rs. 50,000/- and the plaintiff undertaking to pay the balance Rs. 30 lakhs. The Defendants were to deliver peaceful and vacant possession of the property to the plaintiff as well as original documents of title, possession or power concerning the suit property. According to Clause 4 the Defendants (Vendor) were to obtain necessary permission for purchase from the Land and Development Officer and clearance u/s 269-AB of the Income Tax Act, 1961 and other such clearances. Clause 10 recorded that the sale would be completed as soon as necessary permissions/sanctions and certificates etc were obtained by the Defendants/Vendors which was also to pay the entire unearned increase of the land. The plaintiff was to bear expenses of the sale deed, stamp duty, registration charges etc.

The suit property was mortgaged to the third Defendant; Clause 12, therefore, recorded that the Defendants/Vendor authorized the plaintiff to deduct, out of the consideration money and make payments on behalf of the Defendant to the third Defendant for clearing its dues. The Defendant/Vendor authorized the plaintiff to take delivery of the original title deeds in respect of the suit property and retain possession of it. The Defendant agreed to issue a separate letter of authority to the Bank permitting the plaintiff to take delivery of the original title deeds without any lien or authority after the Bank was paid its dues by the plaintiff.

The plaintiff alleges that subsequent to entering into Agreement to Sell seven other documents were given by the second Defendant on behalf of the first Defendant, including Special Power of Attorney, possession letter, letter authorizing the plaintiff to get title deeds from the Bank, original letter from the Chief Architect, NDMC along with original sanctioned plans for the building of the suit property; perpetual lease executed on 23.12.1970 between the President of India and one Shri Kundan Khushi Ram Nathani duly certified by the Office of the LandDO; Photostat copy of the Sale Deed between the said lessee between said Sh. Kundan Khushi Ram Nathati and M/s Tej Properties Pvt. Ltd. and lastly the receipt. It is claimed that physical possession of the suit property was handed over to the plaintiff on 1.1.1983 as well as the Letter of Possession. The plaintiff further alleges that S. Tejwant Singh, second Defendant also executed a transfer irrevocable Deed of Guarantee in its favour guaranteeing due performance of the Agreement and stating that in the event the first Defendant did not adhere to the terms, he would ensure that Agreement to Sell would be complied with.

The plaintiff claims that on 1.2.1983 the second Defendant approached it stating that the third Defendant-Vendor was present for payment of its dues and pending permissions which had to be secured under Clauses 4 and 8 of the Agreement requested for a payment of Rs. 5 lacs. The plaintiff accordingly paid Rs. 5 lacs through cheque dated 1.2.1983. It is claimed that other similar payment for Rs. 2.50 lacs was made through cheque dated 10.2.1983. The plaintiff claims to have issued a legal notice (Ex.PW1/15) calling upon the first defendant to perform its part of the Contract, on 26.5.1983 in obtaining a necessary sanctions and permissions. The Defendnat No. 2 in reply, through letter dated 30.6.1983 (PW1/16) requested for more time to get the necessary permission. It is claimed that despite requests and reminders the plaintiff did not obtain the necessary permission and, on the other hand, the defendants sought extension of time from the plaintiff to discharge their obligation and conclude the sale transaction. The plaintiff was constrained to agree for extension through supplementary Agreements dated 7.7.1983 (PW1/17), 17.11.1983(PW1/18), 6.2.1984(PW1/19), 16.4.1984 (PW1/20), 30.9.1984(PW1/21), 28.12.1984 (PW1/22) and 31.3.1985 (PW1/23).

The plaintiff further states that Defendant again approached it and requested for another payment of Rs. 5 lacs on 18.7.1985 towards discharging the liabilities of the Defendants to the Bank. The plaintiff, therefore, paid Rs. 2.5 lakhs directly to Defendant No. 3 Bank. With this the total amount paid for as part payment towards sale consideration was Rs. 21.5 lacs. The plaintiffs avers to further supplementary agreements dated 24.9.1985, 28.3.1986 and 26.9.1986 finally extending the date of purchase of the Agreement to Sell dated 30.9.1987 (these were exhibited during the course of evidence as Ext.PW1/24, PW1/25 and Ex.PW1/26).

The plaintiff alleges that despite extension of time the Defendants 1 and 2 failed and defaulted to obtain necessary permission for completing the sale transaction. The property was in the meanwhile equitably mortgaged to Punjab and Sind Bank through Defendant as security for payment of debt owning to the said Defendant. The Defendant No. 1 was liable to pay the mortgage money and get the title deeds released, even though the plaintiff could get them released independently after making payment of the mortgaged amount. The plaintiff alleges that second defendant kept falsely representing that he would sort out his affairs with the third defendant. The plaintiff avers that it was informed about a further charge by the first defendant in collusion with third defendant, in October, 1985 for securing the further amount running into lakhs of rupees. The plaintiff alleges that it discovered that the property in dispute was thus charged to the amount of over Rs. 50 lakhs which was not disclosed to it by the first two defendants even in the supplementary agreements.

The plaintiff states that it has been in possession of the property after the original Agreement to Sell dated 1.1.1983 (PW1/2) was entered into. It claims to be ready and willing to perform its part of the contract to pay the balance sale consideration of Rs. 20 lacs to Defendant No. 1. It also avers to calling upon both Defendants 1 and 2 repeatedly to perform their part of the contract but to no avail. The plaintiff further alleges that the third defendant is not ready and willing to release the suit property from the mortgage and handover title deeds even on receipt of 20 lacs. It was also allegedly unwilling to disclose the exact amounts payable towards the mortgage security as liabilities of the first two defendants. The plaintiff, therefore, claims that cause of action arose in his favour on 1.10.1987, when the first defendant on expiry of the lease extension of time felt to obtain the redemption of mortgage and defaulted in the execution of the sale deed. It also arose on expiry of the period mentioned on 24.5.1988. The plaintiff also claims that the cause of action for damage arose in 1988 when it became aware about increase of the liabilities of the first two defendants to further charge on the property.

The fourth Defendant-Union of India against which no decree was sought by its written statement, alleged that the suit was not maintainable because the competent authority had acquired the suit property through an order dated 23.1.1987 passed u/s 269-UD(1) of the Act. It was claimed that this extinguished the title of the Defendants to the suit property.

The third Defendant '' Bank in its written statement alleges that the transaction between the plaintiff and Defendants 1 and 2 is void as it is collusive. It claims that the Agreement to Sell was solely with the intention of defeat or delay the rights of creditors of the Vendor (Defendants 1 and 2) such as the Bank. It alleges that the property could not have been subject of any Agreement to Sell when the Defendant vender merely had an equity of redemption. The plaintiff, it claims was fully aware of the pre-existing liabilities of the Defendants 1 and 2 and was party to the attempt to defeat them. The vendor also objected to maintainability of the suit in view of the order made by the Competent Authority under Chapter 20-C of the Income Tax Act which had divested title of the first and second defendant.

The bank further claims that the plaintiff and Defendants 1 and 2 have acted in pari delicto and no decree for specific performance or any other equitable relief can be granted. It is claimed that plaintiff has no independent right of the third defendant''s claim since the suit was instituted after vesting of property in September, 1990. It could not assert any failure or enforceable legal right. The defendant further adverts to two suit against the first defendant being Suit Nos.21284/1988 and 1204/1989 whether it has claimed in aggregate a sum of Rs. 1.3 crores with interest.

The bank alleges that the plaintiff is not a bonafide purchaser without notice. The title deeds were not in possession of Defendants 1 and 2 on 1.1.1983 when Ext.PW1/2 was entered into. It claims that the transaction has injured its interest. The bank further additionally alleges that condition of having to secure permissions have been rendered impossible and, therefore, incapable of performance. Moreover the effect of acquisition is to vest the property free from all encumbrances, which has defeated the plaintiff''s claim. The Defendant avers that the claim in its two suit against Defendants 1 and 2 are for the sum of Rs. 99,61,034/- with interest and Rs. 57,19,134/- with interest. The equitable mortgage of the property had been created on 30.11.1978 by deposit of title deeds with the Bank. The Defendant Bank also alludes to issuance of a Certificate of Charge under provisions of Sections 125 and 132 of the Companies Act which disclosed the Bank''s interest over the property. It is alleged that the property was acquired/compulsorily purchased because of under valuation of the property, by the competent authority under the Income Tax Act exercising its powers. The Bank disputes the authority of the plaintiff to take delivery of the title deeds. It alleges that such delivery would have extinguished the equitable rights of the bank in the property and the mortgage. It, therefore, contests any liability to the plaintiff to return the title deeds or to accept any sum from the plaintiff in discharge of the liabilities of Defendants 1 and 2. The Defendant Bank further contests that the Agreement to Sell was performed in part. It also disputes that amounts were paid to the Defendants 1 and 2 ever by the plaintiff or by M/s William Jacks and Co. on behalf of the plaintiff.

The Defendant Bank claims that the suit is barred by time and also contests that the Agreement dated 1.1.1983 could have frozen the value of the mortgage without its redemption. In these circumstances it seeks dismissal of the suit.

Though Defendants 1 and 2 were served, they were unrepresented in the proceedings and no attempt to enter any plea was made on their behalf. They were, therefore, set down ex parte on 15.`10.1992.

After admission and denial of documents on 17.4.2001 issues were framed in the suit. Later by order dated 17.2.2005 the Court appointed a Local Commissioner for recording the evidence of parties. The oral testimony of witnesses on behalf of the parties was concluded on 4.7.2007. The matter was, therefore, placed later before Court for arguments.

At the time of hearing of the suit with consent of parties the issues originally framed were modified. The issues re-cast on 3.1.2008 are as follows:

ISSUES:

Whether the suit is barred by limitation'' OPD

Whether plaintiff can claim any relief in view of the mortgage subsisting in favour of the third defendant on the date of the agreement to sell'' OPP

Whether the plaintiff is entitled to a decre for specific performance or any other relief'' OPP

ISSUES NO.1:

This issue concerns maintainability of the suit; it was framed in view of Preliminary Objection No. 15 of the third defendant/Bank that the action is time barred.

The plaintiff contends that the suit was filed within period of prescribed limitation. It relies on Article 54 of Schedule I to the Limitation Act, to say that such suits are to be filed within three years from the date agreed for performance or when the plaintiff first had notice of refusal of performance. It is contended that though the agreement to sell was entered into by parties on 1-1-1983, the time for its performance was extended, through mutual written agreements, all of which are produced and exhibited in these proceedings. The plaintiff relies on the said supplemental agreements, being Ex.PW-1/17 to Ext. PW-1/26. It is urged that according to the last agreement, Ex.PW-1/26, (dated 26-9-1986) the last date by which performance could be done was 30-9-1987. The defendants did not comply with the terms; they were also asked to complete the sale transaction through registered legal notice dated 24.5.1988(Ex.PW-1/27). In the circumstances, the suit, was filed within time. Learned Counsel also contended that though the Bank has objected to the suit on the ground of limitation, no serious cross-examination of the plaintiff''s witnesses took place on that score.

Learned Counsel for the defendant bank urged that the Court should examine the issue of limitation carefully, in view of Section 3 of the Limitation Act, and particularly since the first two defendants chose to be set down ex parte. He submitted that though in an agreement to sell Immovable property time is not deemed of the essence, that did not mean that parties could postpone its performance indefinitely, at will and at the same time claim relief. Counsel submitted that the supplementary agreements are bogus documents, which should not be given credence.

The agreement to sell (Ex.PW-1/2) was entered into on 1-1-1983 the plaintiff has relied on ten supplementary agreements (Ex.PW-1/17 to Ex.PW-1/26). Ex.PW-1/26 is the tenth supplementary agreement, executed on 26-9-1986. According to its terms, the defendants were to complete the sale transactions on or before 30th September 1987. It is not disputed that the first two defendants did not take steps towards honouring the agreement; a legal notice was issued on them by the plaintiff on 24-5-1988 (Ex.PW-1/27). The suit, though dated 29-4- 1990, was filed on 6-10-1990. The earliest official stamp of the Court is of that date; the plaint also discloses a filing number for 6-10-1990.

Upon a consideration of the plaintiff''s contentions, if the supplementary agreements Ex.PW-1/17 to Ex.PW-1/26 are to be given effect '' since nothing substantial to the contrary was urged by the Defendant Bank, the cause of action, or the right to sue occurred first on expiry of the time indicated, ie 30-9-1987. The plaintiff, therefore, had to file the suit within three years of that date, or by 29-9-1990.

In this case, the plaintiff filed the suit on 6-10-1990. The suit was therefore clearly time barred and, is, therefore not maintainable. ISSUES NOS. 2 and 3:

Common and overlapping questions of fact and law are involved in relation to these issues. They are, therefore, considered together.

Learned Counsel for plaintiff submitted that decree for specific performance had to follow in this case, and the third defendant''s objections were really a non-sequitor. The claimed that all the elements necessary for grant of such relief, namely:

1) Extension of agreement;

2) Payment of advances;

3) plaintiff''s readiness and willingness to perform its par of the bargain;

4) Extension of the obligation, through mutual negotiation, evidenced by Ex.PW-1/17 to Ex.PW-1/26;

5) Willingness of the plaintiff to even clear the defendants'' dues to the Bank were clearly established by oral and documentary evidence. The plaintiff also proved that possession of the suit property had been handed to it, by the defendants 1 and 2. If these circumstances were weighed alongside the reality of skyrocketing real estate prices, the claim for decree of specific performance as the only just relief this Court should grant, would be evident.

Learned Counsel contended that a prior mortgage nowhere constituted a bar to granting a decree for specific performance. He submitted that being an encumbrance, such a mortgage would attach itself and the mortgagee creditor''s options can never be limited or diminished. The mortgagees right to foreclosure would be as regards the property, not the debtor. There was no legal bar, or any principle in equity Constituting a vendor mortgagor''s right to enter into agreements, to sell such mortgaged property.

Learned Counsel relied upon the decision of this Court reported as Raghunath Rai and Another Vs. Jageshwar Prashad Sharma and Another, ; R. Velammal Vs. R. Daivasigamani and others, in support of his contention that mere prior mortgage or encumbrance could not deprive the vendee of a right to decree for specific performance and that such mortgage only became a liability or encumbrance to the property which the subsequent purchaser has to satisfy.

Learned Counsel next submitted that no bar, legal or contractual could be inferred merely because the agreement to sell stipulated that the vendor had to obtain permission from authorities or administrative or clearances. He relied upon the judgments of the Supreme Court reported as Mrs. Chandni Widyavati Maddan v. Dr. C.L. Katial AIR 1960 (9) SC 978; R.C. Chandiok and Another Vs. Chuni Lal Sabharwal and Others, and Ramji Bhai Dahya v. Jani Narottam Dass Lallu Bhai air 1986 SC 1912 in support of the submission that the requirement of having to secure permission from statutory and other authorities did not constitute a legal impediment for decree of specific performance.

It was next contended that in the written statement filed in 1990 a sum of Rs. 2 corers was payable under the equitable mortgage of the suit property for which two suits were filed. The plaintiff contends that even though the third defendant claims to be an equitable mortgagor holding the title deeds crucially it elected to sue only for a simple money decree, thus electing against its option to enforce the mortgage. In these circumstances it cannot be heard to say that the plaintiff is disentitled to a decree of specific performance since all the material averments have been proved by it in that regard.

The plaintiff disputes the third defendant''s right to oppose the decree of specific performance and contends that as regards such relief, only defendants 1 and 2 have the locus standi to resist these proceedings. They were set down ex parte long ago. It is contended that no collusion or malafides on behalf of the plaintiff have been averred or established in the course of these proceedings. So long as the third defendants'' rights are not affected or prejudiced, it cannot legitimately oppose a decree for specific performance of the agreement in relation to the suit property provided all the legal requirements for such reliefs are proved. It is submitted that though by virtue of Section 20 of the Specific Performance, it is a discretionary relief yet such discretion should be exercised judicially and reasonably. It was urged that there was no material on the record to show that the plaintiff''s conduct was suspect or that it, in any manner sought to defeat third party rights or had colluded with the first defendant. The plaintiff had, even during the pendency of the suit made attempts to settle the liabilities of the first two defendants with the third defendant Bank. Yet the latter refused to entertain the plaintiff claiming that it had no right or locus as regards the suit property. Counsel contended that u/s 20(2) discretion has to be exercised only in regard to the purchaser to the agreement '' in this case the plaintiff and defendants 1 and 2 and none else.

Learned Counsel submitted that in suits of the present kind where necessary ingredients have been proved, a decree for specific performance is the rule; it should be declined or only when the circumstances show that damages constitutes adequate relief. He relied upon the judgment reported as Prakash Chandra Vs. Angadlal and Others, . Similarly, it was contended that unless the vendor is able to bring his case within the exceptions specified in Section 20(2) of the Act, the Court should ordinarily not decline exercise of discretion and should decree the suit. He relied upon the judgment reported as Pradeep Bhargav Vs. Ram Pyari etc., . He also relied upon the decision reported as Prithvi Raj Singh Vs. Dalip Kulkarni and Others, and Frank Finn Aviation Services v. B.C. Gupta 2007 IX AD(Del) 449.

Mr. Rajeev Dutta, learned Counsel for the third defendant (the Bank) submitted that no relief should be granted in the circumstances of the case. According to him, the plaintiff and first two defendants entered into the agreement, with the intention to defeat the bank''s rights. The bank had a prior, subsisting mortgage right from 1978. The defendant Nos 1 and 2 with mala fide intention sought to defeat and diminish its rights, and entered into the agreement to sell in 1983. The ostensible consideration was admittedly inadequate. As a result, the property was acquired through order of the competent authority, under (the then existing) Chapter XX-C of the Income Tax Act. Learned Counsel contended that though the plaintiff was aware about the subsistence of the order, it did not reveal it, in the suit. As on the date of filing the suit, the defendant Nos 1 and 2 did not possess any right title or interest in the property, which could have been conveyed to the plaintiff. The plaintiff''s conduct in not disclosing these essential and material facts, in the suit, disentitles it to any discretionary relief.

It was next submitted that the plaintiff''s witnesses in their cross examination showed awareness of the Bank''s prior entitlement, as well as the pending suits against the first defendant. These, it was submitted, established that the sole object of the agreement to sell was to defeat the contract between the bank and the first defendant. It was also submitted that in any case, an agreement to sell property did not create any interest in the property, unlike a mortgage or charge, as in the Bank''s case.

Counsel submitted that the first two defendants were conveniently set down ex-parte, to facilitate the plaintiff''s design in seeking a decree for specific performance. According to him, the agreement was unenforceable, since the surrounding circumstances revealed that it was a dubious and sham transaction, meant to defeat the bank''s rights to realize the mortgage security. Counsel submitted that mere existence of an agreement to sell did not entitle a potential purchaser any interest in land; such agreement also did not result in any lien or charge, which could defeat a valid mortgage or security of a genuine creditor, such as the bank in this case.

Learned Counsel submitted that the defendant vendor''s being set down exparte is also suspect and dubious, having regard to the background of its Directors. It was submitted that S. Tejwant Singh and his family members had been indicted by the Supreme Court, in other proceedings; the court had directed attachment of their properties, as well as their associates.

Mr. Rajeev Dutta relied on the order of the Supreme Court, dated 29-1- 1991, to say that all properties of Shri Tejwant Singh were attached. It was urged that the subsequent order of the Supreme Court, dated 6-5-1996, in Delhi Development Authority Vs. Skiper Construction Company (P) Ltd. and another, pierced the veil of M/s Tej Properties (P) Ltd, and held it to be that of S. Tejwant Singh, all of whose properties were attached. Pursuant to those orders, a commissioner has, it is submitted, been continuously monitoring the affairs; the suit property is also one of the assets which is subject to attachment. Counsel therefore, contended that these circumstances and facts intercede to prevent any decree for specific performance, as it would not be equitable to do so. Counsel also contended that the court should take into consideration other circumstances that the bank''s suits were decreed by the Debt Recovery Tribunal, as a result of which the defendant vendor has to discharge huge liabilities. The plaintiffs, it is contended, sought to have themselves impleaded in those proceedings, but unsuccessfully. They even approached the Supreme Court, which dismissed their petition. It was lastly urged that the Commissioner appointed in the Skipper case, by the Supreme Court, has filed reports, which indicate that even the suit property is subject to attachment, and orders of the Supreme Court.

It was submitted that even if the plaintiff were held to have proved other facts which would lead the court to grant the decree, the present case is not one where the court should exercise its discretion, as it would be injudicious to do so, u/s 20(2) of the Act. It was submitted that the circumstances in which the contract was entered into, particularly the alleged initial consideration paid, the repeated extensions given by the vendor, the intervening order of vesting under the Income Tax Act, (which had, during its currency, the effect of effacing any obligations under the contract), despite which the agreement was extended, the time lag between the initial contract and the filing of the suit, as well as the bank''s rights to proceed against the suit property, are all material considerations which would bar the entitlement to decree for specific performance.

FINDINGS

The Agreement to Sell on 1.1.1983 here was for a consideration of Rs. 41.50 lakhs. The agreement mentions about payment of Rs. 11 lakhs as part payment and a further sum of Rs. 50,000/- and the plaintiff undertaking to pay the balance Rs. 30 lakhs. The Defendant was to deliver peaceful and vacant possession of the property to the plaintiff as well as original documents of title, possession or power concerning the suit property. According to Clause 4 the Defendants (Vendor) was to obtain necessary permission for purchase from the Land and Development Officer and clearance u/s 269-AB of the Income Tax Act, 1961 and other such clearances. Clause 10 recorded that the sale would be completed as soon as necessary permissions/sanctions and certificates etc were obtained by the Defendants/Vendors which was also to pay the entire unearned increase of the land. The plaintiff was to bear expenses of the sale deed, stamp duty, registration charges etc.

The documentary evidence shows that though the Agreement (Ex. PW-1/2) is dated 1-1-1983, the vendor and the plaintiff executed no less than eleven extension of time for performance documents (Ex. PW-1/17 to Ex. PW-1/27 series). These documents are also relied on by the plaintiff to claim that the is filed within the period of limitation. It cannot be denied that a suit for specific performance of a contract for sale of immovable property has to be filed within 3 years from accrual of cause of action. The suit would have been barred, but for these documents, which are sought to be set up as acknowledgements or fresh agreements.

A careful scrutiny of the extension agreements, if one may so term them, reveals that their sole purpose was to extend the time for performance, by the defendant vendors. They otherwise incorporate the same terms and conditions, as originally agreed. Yet, interestingly sometime during the interregnum, the Central Government had undeniably issued an order under Chapter XX-C, Income Tax Act. That the plaintiff filed a writ petition, questioning that order is a matter of record. Yet, neither the plaintiff avers, nor does it show through any documentary evidence, how such agreements, embodied in extensions could have at all been entered into by the parties, when the vendor had been divested of the title. It is an established proposition of law that even void statutory orders are deemed to have effect, till declared to be so, or set aside in appropriate proceedings. This was so held in State of Punjab and Others Vs. Gurdev Singh, that an order:

has at least a de facto operation unless and until it is declared to be void or nullity by a competent body or court. In Smith v. East Elloe Rural District Council 6 Lord Radcliffe observed: (All ER p. 871)

An order, even if not made in good faith, is still an act capable of legal consequences. It bears no brand of invalidity on its forehead. Unless the necessary proceedings are taken at law to establish the cause of invalidity and to get it quashed or otherwise upset, it will remain as effective for its ostensible purpose as the most impeccable of orders.

Here, in this case, neither the plaintiff, nor the defendant Nos. 2 and 3 (the vendors) could have foreseen and foretold a future event, i.e the quashing of the compulsory purchase order made by the Central Government in 1987. Yet, the plaintiff seeks specific performance of the agreement. The order of the Central Government was made on 23-1-1987; the plaintiff filed the writ petition, being WP 338/1987. Yet, there is no mention of these facts. That these facts have become to some extent academic, is a matter of detail. The court, however cannot overlook the plaintiff''s conduct in this regard. Being aware of the statutory order, vesting the property in the Central Government, and even having challenged it, the plaintiff chose to deliberately remain silent, or even explain how the suit could be maintained, when it was filed.

According to the averments in the suit, the initial consideration for the agreement to sell was paid by M/s Allan Jacks and Co (India) Pvt. Ltd (so described in Exhibit PW-1/3). A receipt issued by the second and third defendants in this regard, Ex. PW-1/3 is relied on for this purpose. However, these cheques were issued, even according to the document, on 2nd September, 1982 (Rupees six lakhs) and 8th November, 1982 (Rupees five lakhs). PW-1 in his deposition stated that the payment was made when the agreement was not in force; he also stated that the plaintiff was subsidiary of M/s William Jacks. The same witness stated that William Jacks was the plaintiff''s tenant, but was unable to mention how long it continued in that capacity. No such tenancy agreement or any document to that effect has been brought on record. In fact, this is contrary to the averments of the plaintiff, which deposes, in para 7 of the plaint, that it has been in possession of the property, after the agreement to sell was entered into with the vendors.

Apart from the receipt and the agreement to sell, with the further extensions, all of which record that a balance of Rs. 22,50,000/- was payable to the vendor defendants, no independent evidence of the amounts having been paid, or the plaintiff''s ability to pay such amounts, at the relevant time, was shown. It is one thing to rely on documents, to say that there can be no dispute about payments, in an ex-parte proceeding, but entirely different, where a third party to the transaction alleges that grant of decree would be inequitable and prejudicial to its interests. The bank has always disputed the genuineness of the transaction between the plaintiff and the defendant vendors; it terms it as collusive. In these circumstances, whether the vendors contested the proceeding or not, the plaintiff still was under a duty to satisfy the court that grant of a decree would be sound exercise of jurisdiction, and that it was always ready and willing to pay the amounts, at the time of agreed performance, in 1988, and again, when it approached the court. Such independent evidence is lacking; the mere oral deposition of the plaintiff''s witnesses in that regard would be insufficient.

The Court has to independently examine whether the material on record entitles the plaintiff to the decree sought for it. Two important considerations always weigh with the Court while adjudicating a claim for specific performance of a contract of sale of immovable property. One, whether the plaintiff had pleaded and proved readiness and willingness to perform his part of the contract and two, whether the equities of the case demand that such a decree be made. see Aniglase Yohannan Vs. Ramlatha and Others, ; Surya Narain Upadhyaya Vs. Ram Roop Pandey and others, and Ouseph Varghese Vs. Joseph Aley and Others, .

Learned Counsel for the plaintiff was able to point out the averment in the suit to submit that the necessary pleadings had been made. He also referred to the affidavit of evidence of PW-1 and PW-2 for the contention that the plaintiffs always ready and willing and continued to be so for the performance of their obligation. However, independent of that, no other evidence, as noticed earlier, is forthcoming. It was urged that the plaintiff had at the relevant time, deposited a sum in excess of Rs. 37 lakhs in the defendant bank, in a no lien account, to show its bona fides. That was pursuant to an offer to pay off the banks'' dues, owed by the vendors; in any case, it was much after the filing of the suit. That aspect cannot be considered by the court as evidence of the plaintiff''s readiness and willingness to pay the balance, at least at the time of performance of the contract, or at the time of filing the suit. No bank statement, or document, revealing the plaintiff''s capacity, at those times, has been placed on record.

It is now established law refer Smt. Chand Rani (dead) by LRs. Vs. Smt. Kamal Rani (dead) by LRs., that there is no presumption that the time is not of the essence of the contract, in the case of an agreement to sell immovable property yet at the same time absence of any stipulation does not relieve the parties concerned from the obligation to perform it within reasonable time. As to what is reasonable time would vary from case to case having regard to attendant facts and circumstances. In this case, the parties, as evident from documentary evidence, fixed the time for performance. It was extended no less than 8 times, spanning more than 5 years. Strangely, despite the undeniable appreciation in value, the terms were never renegotiated.

On behalf of the bank, DW-2 its witness, mentioned about five legal proceedings filed against the defendant vendors, as well as other sister concerns. The documents relied upon (DW-2/1 to DW-2/3) are to the effect that an overall settlement of the said groups'' liabilities was acceptable, for the sum of Rs. 5.3 crores, provided the Supreme Court''s approval was forthcoming, and without prejudice to the banks'' rights. The bank also contends that as a result of this arrangement, Rs. 37.5 lakhs was kept in a no lien account, as a without prejudice arrangement.

The plaintiff contends, by relying on these documents, as well as evidence introduced by PW-2, in the form of five letters (PW-2/1 to PW-2/3) a draft application under Order 23, Rule 3, signed by Shri Tejwant Singh (PW-2/4) a draft receipt (PW-2/5) certificate dated 10-1-2002 (PW-2/6) and Fixed Deposit Receipt dated 28-12-2001 (PW-2/7) that the bank would not be prejudiced, as its interests are fully taken care of.

Now to tie the threads of reasoning which seem disparate and dis- jointed. The evidence on record no doubt reveals that the plaintiff agreed to purchase the suit property from the vendor defendants (No. 1 and 2). Its reliance on the receipt, as discussed above, about the payment of initial amounts, to the said vendors, through M/s William Jacks, is inconsistent. Though it would not ordinarily be of any consequence, yet the defendant bank''s refutation of the transaction, and its claim to the agreement affecting its interests, placed an obligation on the plaintiff to explain to some degree, and lead evidence in that regard. It did not do so. It has also not led any evidence in the form of any contemporaneous document, about its ability and willingness to perform its part of the bargain. If one keeps in mind that the initial agreement was to have been executed in 1983, but was mutually extended up to 1988, the plaintiff should have shown its financial capacity as of the time for performance, as well as when it approached the court. Evidence is lacking in that regard.

The plaintiff has not denied that the property was subject to mortgage. Its argument was that the bank did not elect to enforce the securities through a suit for foreclosure, but filed a suit for recovery. Ordinarily, perhaps, this would have been a relevant factor. However, having regard to the observations in the preceding paragraph, and the circumstance that the property had vested in the Central Government, (which was not even pleaded in the suit, when filed, but disclosed by the fourth defendant, Union of India) that is not of significance. If these are taken together with the Supreme Court''s orders attaching the properties of the Skipper group, and Shri Tejwant Singh, the picture emerging is an entirely different one.

Section 20 of the Specific Relief Act, 1963 reads as follows:

20 DISCRETION AS TO DECREEING SPECIFIC 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 is lawful to do so; but the discretion of the court is not arbitrary but sound and reasonable, guided by judicial principles and capable of correction by a court of appeal.

(2) The following are cases in which the court may properly exercise discretion not to decree specific performance:

(a) where the terms of the contract or the conduct of the parties at the time of entering into the contract or the other circumstances under which the contract was entered into are such that the contract, though not voidable, gives the plaintiff an unfair advantage over the defendant; or

(b) where the performance of the contract would involve some hardship on the defendant which he did not foresee, whereas its non- performance would involve no such hardship on the plaintiff; or

(c) where the defendant entered into the contract under circumstances which though not rendering the contract voidable, makes it in equitable to enforce specific performance.

Explanation 1 : Mere inadequacy of consideration, or the mere fact that the contract is onerous to the defendant or improvident in its nature, shall not be deemed to constitute an unfair advantage within the meaning of Clause (a) or hardship within the meaning of Clause (b).

Explanation 2 : The question whether the performance of a contract would involve hardship on the on the defendant within the meaning of Clause (b) shall, except in cases where the hardship has resulted from any act of the plaintiff subsequent to be the contract, be determined with reference to the circumstances existing at the time of the contract.

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

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

In M. Meenakshi and Others Vs. Metadin Agarwal (D) by LRs. and Others, it was held that:

Furthermore, Section 20 of the Specific Relief Act confers a discretionary jurisdiction upon the courts. Undoubtedly such a jurisdiction cannot be refused to be exercised on whims and caprice; but when with passage of time, the contract becomes frustrated or in some cases increase in the price of land takes place, the same being relevant factors can be taken into consideration for the said purpose. While refusing to exercise their jurisdiction, the courts are not precluded from taking into consideration the subsequent events. Only because the plaintiff-respondents are ready and willing to perform their part of contract and even assuming that the defendant was not entirely vigilant in protecting his rights in the proceedings before the competent authority under the 1976 Act, the same by itself would not mean that a decree for specific performance of contract would automatically be granted. While considering the question as to whether the discretionary jurisdiction should be exercised or not, the orders of a competent authority must also be taken into consideration.

As to what are properly matters of discretion, was spelt out in a perceptive decision reported as K.S. Vidyanadam and Others Vs. Vairavan, :

It has been consistently held by the courts in India, following certain early English decisions, that in the case of agreement of sale relating to immovable property, time is not of the essence of the contract unless specifically provided to that effect. The period of limitation prescribed by the Limitation Act for filing a suit is three years. From these two circumstances, it does not follow that any and every suit for specific performance of the agreement (which does not provide specifically that time is of the essence of the contract) should be decreed provided it is filed within the period of limitation notwithstanding the time-limits stipulated in the agreement for doing one or the other thing by one or the other party. That would amount to saying that the time-limits prescribed by the parties in the agreement have no significance or value and that they mean nothing. Would it be reasonable to say that because time is not made the essence of the contract, the time-limit(s) specified in the agreement have no relevance and can be ignored with impunity'' It would also mean denying the discretion vested in the court by both Sections 10 and 20. As held by a Constitution Bench of this Court in Chand Rani v. Kamal Rani 1 SCC 528

...it is clear that in the case of sale of immovable property there is no presumption as to time being the essence of the contract. Even if it is not of the essence of the contract, the Court may infer that it is to be performed in a reasonable time if the conditions are (evident''): (1) from the express terms of the contract; (2) from the nature of the property; and (3) from the surrounding circumstances, for example, the object of making the contract.'' In other words, the court should look at all the relevant circumstances including the time-limit(s) specified in the agreement and determine whether its discretion to grant specific performance should be exercised. Now in the case of urban properties in India, it is well-known that their prices have been going up sharply over the last few decades.

No doubt, most of the decisions involving courts'' discretion refusing specific performance have been in the context of equities favouring the defendant vendor. However, the construct of Section 20(2) and 20(3) is such that discretion is not limited to examining whether an order of either kind would prejudice the parties; it is wide enough to comprehend prejudice or injury to third parties. Here, the bank''s interests are involved. Also, importantly the attachment of properties of the Skipper group, by the Supreme Court''s directions are wide and comprehend the present property, since the ''corporate veil'' was pierced by the Supreme court. The object of the attachment order was to protect the interests of parties who suffered on account of the actions of the Skipper group and the third defendant. Arguendo, if the court were to, on the basis of only materials on record, decree specific performance, such order would result in potential injury to large number of persons, whose economic interests (apart from the interests of the bank) are sought to be secured by the Supreme Court''s attachment order. Such decree would defeat the attachment, and undermine public justice. These circumstances are indeed weighty; they outweigh the plaintiff''s interests.

In view of the above discussion, it is held that the plaintiff is not entitled to the decree for specific performance; issue Nos 2 and 3 are held against the plaintiff.

As a consequence of the findings on Issue Nos 1 to 3, this Court is of the opinion that the reliefs sought cannot be granted. In view of the above findings as well as express provision of Section 22(2) of the Specific Relief Act, 1963, this Court cannot consider the relief of refund of earnest money or consideration, as it has not been pleaded.

The suit, therefore fails. It is dismissed with costs. Counsel''s fee is quantified at Rs. 75,000/-; the same shall be paid to the third defendant.