M.V. Krishnamurthy vs Srinivasu and Another

This is plaintiff''s appeal from the judgment and decree dated 3-2-1997 passed by the I Additional City Civil Judge, Bangalore, in O.S. No. 5118 of 1980 dismissing the plaintiff''s suit.

The facts of the case in brief are that view agreement dated 7-4-1972 entered arrived at and executed by the plaintiff and the defendants, plaintiff agreed to purchase and the defendants agreed to sell the plaint schedule property as described in the schedule for a sum of Rs. 8,000/-. According to the plaintiff/appellant''s case, 1st defendant obtained the consent of the 2nd defendant to sell the plaint schedule property to the plaintiff/appellant and according to the plaintiff, the defendant 2 joined in execution of agreement of sale. According to the plaintiff/appellant, he had paid a sum of Rs. 1,000/- in advance towards the part of the sale consideration and it was also provided as per the terms of the agreement to sell that out of the sale consideration of Rs. 8,000/- , Rs. One thousand has already been paid in advance and Rs. 3,000/- has to be paid to the mortgagee S. Nagaraju and balance of Rs. 4,000/- has to be paid to the owner-defendant 1 within three months before the Sub-Registrar. The plaintiff/appellant''s case is that he approached the defendants i.e., respondent''s with money and asked them to execute the sale deed and to perform the agreement. But, the defendants avoided. The plaintiff has alleged in the plaint that he has always been ready and he is still willing to perform his part of the contract of which defendants have the notice. With these allegations, the plaintiff filed the above suit and sought the reliefs as under.-

The plaintiff claims that the Court may order the defendants and particularly, the 1st defendant specifically to perform the agreement and to do all acts necessary to put the plaintiff in full possession of the schedule property and to pay the costs of the suit. He also prayed that any other reliefs which the Court deems fit, may also be granted.

The defendant/respondent 1 filed the written statement. He has, in paragraph 2, very clearly stated that, it is true that the defendant had entered into agreement to sell the suit schedule property to the plaintiff vide agreement dated 7-4-1972. But he denied that he had obtained the consent of defendant 2 for sale of schedule property. The defendant 1 asserted that the defendant 2 had joined and signed the deed not as a party to the sale deed, but only as a witness attesting the agreement. The defendant admitted that earnest money of Rs. 1,000/- was paid to him. He asserted that he had received only Rs. 1,000/- towards advance and Rs. 3,000/- is payable to the defendant 2 in terms of conditions of mortgage deed dated 25-2-1972 and balance to the defendant. The defendant pleaded that at the time of contract, the plaintiff had not performed his part of contract within three calendar months from 7-4-1972 namely on or before 7-7-1972. The defendant alleged that the plaintiff failed to perform his part of contract and notice dated 11-7-1972 had been issued to coerce the defendant to perform terms of contract. The defendant/respondent 1 denied to have committed breach of contract. He alleged that the plaintiff is the erring party as the plaintiff has not performed his part of contract and he is not entitled to decree for specific performance of agreement to sell dated 7-4-1972. The defendant denied that the plaintiff is or has been ready to perform his part of contract.

On the basis of the pleadings of the parties, the Trial Court framed the following issues.-

Whether the plaintiff proves that he was ready and willing to perform his part of the obligation under the suit schedule agreement of sale within the time stipulated thereunder?

If so, whether defendant 1 proves that plaintiff committed breach of suit agreement?

Whether defendant 1 proves that defendant 2 is only in attestor of suit agreement?

Whether the plaintiff is entitled to the specific performance of the suit agreement?

Whether the suit has no cause of action?

Whether the plaintiff is entitled to possession of the suit property?

What order or decree?

The Trial Court, after perusal of the material on record including the evidence, recorded the following findings.-

That the plaintiff proves that he is and has always been ready and willing to perform his part of obligation under the said agreement within the time stipulated. That the defendant failed to prove that the plaintiff committed breach of said agreement. It held that the defendant proved that the defendant 2 was only a witness or an attestor to the agreement. Dealing with issue 4, the Trial Court held that the plaintiff is not entitled to the decree for specific performance of the contract. It observed that in view of Ex. P. 1 and P. 3 which provides an alternative remedy that in case of breach of contract by vendor the purchaser will be entitled to receive Rs. 1,000/- more from the defendant and as the remedy is available to the plaintiff to recover the amount of Rs. 1,000/- which he had paid in advance as well as Rs. 1,000/- towards damages, in total Rs. 2,000/- , the plaintiff is not entitled to the decree for specific performance. His remedy is to recover that amount of Rs. 2,000/-. After recording these findings, the Court below dismissed the suit. It observed that the agreement itself provides the remedy available to the plaintiff in case of breach of agreement in the form of damage amount of Rs. 2,000/- i.e., refund of Rs. 1,000/- i.e., amount as paid in advance and Rs. 1,000/- further amount towards damages and in view of what has been mentioned in Ex. P. 3 to the effect that:

"You are aware that there has been a stipulation in the agreement that in the event of your failing to act upto the terms of the agreement, you will be liable to pay a sum of Rs. 1,000/- towards damages besides returning the part of the purchase money paid as advance".

Taking this into account, the Court below opined that as the plaintiff has got the alternative remedy of recovery of Rs. 2,000/- , he is not entitled to decree for specific performance of contract and dismissed the suit.

Feeling aggrieved from the Trial Court''s decree dismissing the suit, the plaintiff has come up in appeal before this Court.

I have heard Sri B.G. Sriram holding brief for Sri C. Diwakar, learned Counsel for the appellant, and Sri M.S. Subbarayappa, learned Counsel for the respondents, assisted by Sri.G.E. Doreswamy Gowda.

The learned Counsel for the appellant contended that this has been the admitted case to this extent that the agreement dated 7-4-1972 had been entered into between the plaintiff and the defendants and especially between the plaintiff and defendant 1 which was also signed by defendant 2 as witness. The execution of agreement being an admitted fact and the Trial Court, after having found that the plaintiff has always been ready and willing to perform his part of contract and has still being willing to perform his part of contract, should not have dismissed the plaintiff''s suit and it acted illegally in dismissing the suit only on the ground that liquidated sum of Rs. 1,000/- has been mentioned in the agreement that in case of breach of contract by the owner, the purchaser will be entitled to get that sum along with refund of advance money as well as a further amount of damage, taking the view that there is an alternative remedy provided by the agreement to the purchaser or the buyer. The learned Counsel submitted that the Court below has failed to apply its mind to the provisions of Section 10 of the Specific Relief Act. The learned Counsel for the appellant contended that in view of provisions of Sections 10, 20 and 23 of the Specific Relief Act, the Court below should have decreed the suit as it is well-settled that in the matter of suit for specific performance of contract to execute the sale deed, compensation is not an adequate remedy and it is to be presumed that in the matter of suit for specific performance of contract, to execute the sale deed of immovable property, compensation is not an adequate or alternative remedy unless it has been so established by the defendants. The learned Counsel, as such, contended that the judgment and decree of the Court below may be set aside and suit may be decreed for decree for specific performance of contract to execute the sale deed. The learned Counsel for the appellant in support of his contention, made reference to the following decisions namely, the decision of their Lordships of the Supreme court in the case of M.L. Devender Singh and Others v Syed Khaja, AIR 1973 SC 2457 and to the decision of Rajasthan High Court in the case of Smt. Shakuntla Devi v M/s. Mohanlal Amrit Raj Jain Market, Pali, AIR 1994 Raj. 259.

On behalf of the respondents, the learned Counsel Sri M.S. Subbarayappa contended that the finding to the effect that the plaintiff has been and always been ready to perform his part of the contract is erroneous. He submitted that under the agreement, the purchaser had to pay Rs. 3,000/- to the mortgagee-defendant/respondent 2. The balance of Rs. 4,000/- had to be paid by the plaintiff-appellant to the defendant within three months from 7-4-1972. The learned Counsel contended that neither amount was paid to the respondent within the specified period nor was tendered and period was allowed to expire. Notice was given only after the expiry of three months. The learned Counsel further contended that it is in the discretion of the Court to grant decree for specific performance of contract or not and the Court below did not commit any error in dismissing the suit as under the contract, it had been agreed and provided that in case of breach of contract by the seller, the purchaser will be entitled to refund of Rs. 1,000/- as well to a sum of Rs. 1,000/- more as damages. So quantified damages were there indicated and this clause the plaintiff had also made reference in his notice and in this view of the matter, the plaintiff was rightly held not to be entitled to decree for specific performance of contract. The learned Counsel Sri Subbarayappa with great emphasis submitted that equity lies in favour of the defendants/respondents and the plaintiff may be entitled to Rs. 1,000/- refund and Rs. 2,000/- as quantified damages. He further contended that the expression "before the Registrar" will not control the payment of money to the mortgagee.

I have applied my mind to the contentions made by the learned Counsels for the parties.

It will be appropriate to quote Sections 10, 20 and 23 of the Specific Relief Act, 1963 in extenso. It reads as under.-

"Section 10. Cases in which specific performance of contract enforceable.-Except as otherwise provided in this chapter, the specific performance of any contract may, in the discretion of the Court, be enforced-

(a) when there exists no standard for ascertaining the actual damage caused by the non-performance of the act agreed to be done; or (b) when the act agreed to be done is such that compensation in money for its non-performance would not afford adequate relief.

Explanation.-Unless and until the contrary is proved, the Court shall presume-

(i) that the breach of a contract to transfer immovable property cannot be adequately relieved by compensation in money; and (ii) that the breach of a contract to transfer movable property can be so relieved except in the following cases.-

(a) where the property is not an ordinary article of commerce, or is of special value or interest to the plaintiff, or consists of goods which are not easily obtainable in the market;

(b) where the property is sold by the defendant as the agent or trustee of the plaintiff".

Section 20 reads as under.-

"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 is lawful to do so but the discretion of the Court is not arbitrary but sound and reasonable guided by judicial principles and capable 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;

(c) where the defendant entered into the contract under circumstances which though not rendering the contract voidable, makes it inequitable 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 defendant within the meaning of clause (b) shall, except in cases where the hardship has resulted from any act of the plaintiff subsequent to the contract, be determined with reference to the circumstances existing at the time of the contract".

Sub-sections (3) and sub-section (4) of Section 20 are not very material for our purpose.

Section 23 of the Specific Relief Act reads as under.-

"Section 23. Liquidation of damages not a bar to specific performance.-(1) A contract, otherwise proper to be specifically enforced, may be enforced, though a sum be named in it as the amount to be paid in case of its breach and the party in default is willing to pay the same, if the Court, having regard to the terms of the contract and other attending circumstances, is satisfied that the sum was named only for the purpose of securing performance of the contract and not for the purpose of giving to the party in default an option of paying money in lieu of specific performance.

(2) When enforcing specific performance under this Section, the Court shall not also decree payment of the sum so named in the contract".

No doubt, Trial Court had made reference to Section 23 of the Specific Relief Act in its judgment. Section 23 had to be read along with Sections 10 and 20. Sections 20 and 23 are to be read together. Section 20 of the Specific Relief Act provides that the jurisdiction to grant decree for specific performance is discretionary and the Court is not bound, in every case, to grant the relief of specific performance of contract merely because it is lawful to do so. But, it has to be taken note of that the section has provided that this discretion of the Court is not to be exercised arbitrarily, but on sound and reasonable principles guided by judicial principles. It further provides that exercise of discretion is capable of being corrected by the Appellate Court as well. Sub-section (2) of Section 20 provides the category of cases in which Court may properly exercise discretion not to decree the suit for specific performance of contract which cases are referred in clauses (a), (b) and (c). Such cases may be where the contract is such which is not voidable, but it gives an unfair advantage to the plaintiff over the defendant, but where the contract is such the performance of which would involve some hardship to the defendant which he did not foresee and the non-performance of which is not going to cause any such hardship to the plaintiff or in cases where though contract under the circumstances is not to render the contract voidable, but it makes it inequitable to enforce the specific performance. The Explanation 1 indicates the circumstances and provides that, merely because inadequacy of consideration or merely because the contract is onerous to the defendant or improvident in its nature, it shall not be deemed to constitute an unfair advantage within the meaning of clause (a) nor shall be deemed to cause hardship under clause (b). Similarly, Explanation 2 provides that the question whether the performance of contract would involve hardship to the defendant, it has ordinarily to

be determined with reference to the circumstances existing at the time entering into of the contract. To the general rule the exception is in cases where the hardship has resulted from any act of the plaintiff subsequent to the contract. The present does not come ordinarily within the framework of this case.

Section 23 provides that liquidation of damages is not a bar to specific performance of contract. It provides that a contract otherwise proper to be specifically enforced may be so enforced though a sum may have been named in it as amount to be paid on its breach and the party in default is willing to pay the same, if the Court, having regards to the terms of the contract and other attending circumstances, is satisfied that the sum was named only for the purpose of securing performance of the contract and not for the purpose of giving to the party in default an option of paying money in lieu of specific performance. Sub-section (2) is not very relevant.

Section 10 of the Specific Relief Act provides that specific performance of contract is enforceable in the discretion of the Court it may be enforced where there exists no standard for ascertaining the actual damage caused by the non-performance of the act agreed to be done and when the act agreed to be done is such that compensation in money for its non-performance would not afford adequate relief. Explanation to Section 10 clearly provides that unless and until the contrary is proved and established, the Court shall presume that the breach of contract to transfer i.e., sell immovable property cannot be adequately relieved by compensation in money, while Explanation 2 provides that the Court shall presume that in case of breach of a contract to transfer movable property, the Court shall presume that it can be relieved by compensation with exception to cases referred to in clauses (a) and (b) of Explanation 2. The present is a case for enforcement of contract to transfer the immovable property. Firstly, the presumption is thereunder that breach of contract to transfer immovable property cannot be adequately compensated nor breach can be relieved by compensation in terms of money. This presumption is rebuttable. Merely because of provision in contract for liquidated damage or liquidated amount it cannot be said to provide adequate relief. The Court has ordinarily no jurisdiction to refuse to pass decree for specific performance of contract.

Section 23 of the Specific Relief Act provides, as mentioned earlier, that a contract, otherwise proper to be specifically enforced, may be so enforced even though a sum has been named in the contract as an amount to be payable in case of breach. The contract has been read over to me. It does not provide it as any option to the vendor that he may pay the compensation in alternative or in lieu of specific performance of contract. The provision appears to be in the nature of one indicating that the intention was to seek and enforce the performance of contract, as it provides that in case of breach thereof by vendor, there is a penalty clause that an additional sum has to be paid apart from refund of advance money and in case of breach by the purchaser, the sum advanced by him may be forfeited. The purpose appears to be securing the performance of contract. When I so opine, I find support for my view, with reference to scheme of provisions of the Act particularly Sections 10, 20 and 23, from the view expressed by their Lordships of the Supreme Court in the case of M.L. Devender Singh. In paragraphs (19) and (20), their Lordships have observed as under.-

"(19) A reference to Section 22 of the old Act, (the corresponding provision is Section 20 of the Act of 1963), would show that the jurisdiction of the Court to decree specific relief is discretionary and must be exercised on sound and reasonable grounds ''guided by judicial principles and capable of correction by a Court of appeal''. This jurisdiction cannot be curtailed or taken away by merely fixing a sum even as liquidated damages. We think that this is made perfectly clear by the provisions of Section 20 of the old Act (corresponding to Section 23 of the Act of 1963) so that the Courts have to determine, on the facts and circumstances of each case before it whether specific performance of a contract to convey a property ought to be granted.

(20) The fact that the parties themselves have provided a sum to be paid by the party breaking the contract does not, by itself, remove the strong presumption contemplated by the use of the words ''unless and until the contrary is proved''. The sufficiency or insufficiency of any evidence to remove such a presumption is a matter of evidence. The fact that the parties themselves specified a sum of money to be paid in the event of its breach is, no doubt, a piece of evidence to be considered in deciding whether the presumption has been repelled or not. But, in our opinion, it is nothing more than a piece of evidence. It is not conclusive or decisive".

This above decision of the Supreme Court has been followed by the Hon''ble Supreme Court in later cases as well and reference may profitably be made in this regard to the decisions in the case of Prakash Chandra v Angadlal, AIR 1979 SC 1241 and to the decision in the case of Manzoor Ahmed Margray v Gulam Hassan Aram, AIR 2000 SC 191, wherein as per para 9, the Hon''ble Supreme Court has laid it down as under.-

"9. The Court also held that the fact that the parties themselves have provided a sum to be paid by the party breaking the contract does not, by itself, remove the strong presumption contemplated by the use of the words "unless and until the contrary is proved" in Section 10 of the Specific Relief Act of 1963. The sufficiency or insufficiency of any evidence to remove such a presumption is a matter of evidence. Similar clause was interpreted by this Court in the case of Prakash Chandra, supra and it was observed that a perusal of the terms of the contract indicated that stipulation for damages was made only for the purpose of securing performance of the contract and not for the purpose of giving an option of paying money in lieu of specific performance. Court observed.-

"Even if a sum has been named in the contract for the sale as the amount to be paid in case of a breach, the appellant is entitled in law to the enforcement of the agreement"".

Similar view has, no doubt, been expressed by the Rajasthan High Court in the case of Smt. Shakuntla Devi, supra.

In the present case, as I have observed that the terms of contract or the contents of notice cannot be said to rebut the presumption which explanation to Section 10 provides that in case of breach of a contract to transfer immovable property, the presumption is that it has to be presumed that money is not an adequate compensation. This presumption has not been rebutted. Notice also indicates only that there is a clause in the contract which has intention to see that contract is enforced.

In this view of the above facts and the law, in my opinion, the Trial Court erred in law in opining that the plaintiff had an alternative remedy and no decree for specific performance of contract can be given. In my opinion, mere naming of a liquidated sum in the agreement cannot be said to give an option to the seller to sell the property or not to sell the property and therefore, mandate of law has been to enforce the agreement. As such, the finding on issue 4 is incorrect.

The learned Counsel for the respondents Sri Subbarayappa had further contended that the plaintiff had failed to perform his part of contract. The part of contract that plaintiff had to perform was to pay Rs. 4,000/- to defendant 1 and Rs. 3,000/- to mortgagee within three months and on the date of registration i.e., before the Registrar. He further contended that the expression "before the Registrar" will not control the payment of money to the mortgagee. I am unable to accept this contention for the reason that if the expression "before the Registrar" has to be excluded and not to be read with the payment with reference to Rs. 3,000/- , but is to be confined only to payment of Rs. 4,000/- , then the period "within three months" expression is there. Then that will not control the payment of Rs. 3,000/- to the mortgagee that it is to be made within three months and will means that only Rs. 4,000/- had to be paid within three months before the Registrar, and for Rs. 3,000/- to be paid to the mortgagee, there was no period prescribed. It could be paid at any time. Therefore, in my opinion, it appears that both the expressions "within three months" and "before the Registrar" controls the payment of money in entirety i.e., Rs. 3,000/- to the mortgagee and Rs. 4,000/- to the vendor, because by virtue of sale deed, the mortgagee may also have to execute and sign the document of delivery of possession and give a receipt thereof regarding payment before the Registrar. Therefore, this contention of the learned Counsel for the respondent, in my opinion, is without substance. Therefore, in my opinion as mentioned earlier, no breach of contract has been committed by the plaintiff/appellant.

The learned Counsel for the respondent Sri Subbarayappa further contended that since after the date of contract, value of the property had been enhanced and prices of properties have risen much high and therefore, to grant decree for specific performance of contract would be inequitable.

In my opinion, this contention is without force for the reason that, to Judge whether the granting of decree can cause hardship to the defendant/appellant or it would be inequitable to the defendant, it has to be examined with reference to the circumstances existing at the time or period i.e., date when the contract was entered into. The finding, as such, has been shown, to have been arrived at with reference to those circumstances. Subsequent change of circumstances or price i.e., rise in prices of property, subject-matter of agreement to sell, cannot be of any ground to refuse the decree, particularly when it has not been shown that hardship would result because of some act of commission or omission of the plaintiff/appellant. It would, at this stage, be appropriate to refer and to quote the following observations made by their Lordships of the Supreme Court in the case of S.V.R. Mudaliar (dead) by L.Rs and Others v Mrs. Rajabu F. Buhari (dead) by L.Rs and Others, AIR 1995 SC 1607, vide para 27.-

"As regards the rise in prices, the submission is that it should not weigh with the Court in refusing the relief if otherwise due, as opined in S.V. Sankaralinga Nadar v P.T.S. Ratnaswami Nadar AIR 1952 Mad. 389, which decision was cited with approval in Mir Abdul Hakeem Khan v Abdul Mannan Khadri, AIR 1972 AP 178. We are in agreement with this view because of the normal trend of rise in prices of properties situate especially in metropolitan city like Madras, where the property in question is situate. If merely because the prices have risen during the pendency of litigation, we were to deny the relief of specific performance if otherwise due, this relief could hardly be granted in any case, because by the time the litigation comes to an end sufficiently long period is likely to elapse in most of the cases. This factor, therefore, should not normally weigh against the suitor in exercise of discretion by a Court in a case of the present nature".

Reference in this connection can also appropriately be made to the Division Bench decision of Madhya Pradesh High Court in the case of Babulal Agrawal v Smt. Jyothi Shrivastava and Others, AIR 2000 MP 83, wherein the Division Bench has also held that rise in price of property during the pendency of suit cannot be a ground to deny equitable relief of specific performance of contract to execute the sale deed.

Thus considered, I am of the view that the appellant''s Counsel''s this last contention is of no force and is without force, so is rejected. Hence, suit is decreed. A direction is issued to the defendants to execute the sale deed, particularly to defendant 1 to execute the sale deed, within a period of four months from the date of delivery of this judgment. The plaintiff has already deposited a sum of Rs. 7,000/- in the Court below. The defendants may take the money and execute the sale deed and if they fail to execute the sale deed within four months, the plaintiff will be entitled to take proceeding execution of the decree for execution of sale deed.

Appeal is allowed. The suit is decreed with costs throughout.