Contract Act 1872:

s. 55 - Effect of failure to perform at a fixed time in contracts in which time is essential - Held: In a contract relating to sale of immovable property if time is specified for payment of sale consideration but not in regard to the execution of sale deed, time will become the essence only with reference to payment of sale consideration but not in regard to execution of sale deed - Normally in regard to contracts relating to sale of immovable properties, time is not  considered to be the essence of the contract unless such an intention can be gathered either from the express terms of the contract or impliedly from the intention of the parties as expressed by the terms of the contract - In the instant case, in the agreement for sale, there was a conscious effort to delink the terms relating to payment of balance sale consideration  from the term relating to execution of sale deed and making the time essence only in regard to the payment of the balance sale consideration - Therefore, failure of the plaintiff to pay the balance consideration clearly amounted to breach since time for such payment was the essence of the contract - The defendants were justified in determining the agreement of sale - The rejection of the prayer for specific performance is upheld - However, there was no provision in the agreement for forfeiture of the amounts already paid, even in the event of breach by the purchaser - On the other hand, it provided that if the vendors did not satisfy the purchaser in regard to their title, the amounts received would be refunded - Though the plaintiff is not entitled to the relief of specific performance, it cannot be said that the plaintiff had filed false, frivolous and mischievous suits - In view of that, in terms of the agreement and in terms of its offer, the plaintiff was entitled to recover s the amounts paid by her.

Principle " Time is not of the essence of the contracts relating to immovable properties - Relevance of - Need for legislation - Held: The said principle took shape in an era  when market value of immovable properties were stable and did not undergo any marked change even over a few years - As. a consequence, time for performance, stipulated in the agreement was assumed to be not material, or at all events considered as merely indicating the reasonable period within which contract should be performed - This principle made sense during the period when there was comparatively very little inflation in India - But a drastic change occurred from . the beginning of the last quarter of the twentieth century - There is a galloping inflation and prices of immovable properties are increasing steeply, by leaps and bounds - Market values of properties are no longer stable or steady - · Judicial notice is taken of the comparative purchase power of a rupee in the year 1975 and now, as also the steep increase in the value of the immovable properties between then and now - Properties in cities, worth a lakh or so in or  about 1975 to 1980, may cost a crore or more now - The reality arising from this economic change cannot continue to be ignored in deciding cases relating to specific performance - The steep increase in prices is a circumstance which makes it inequitable to grant the relief of specific performance where G the purchaser does not take steps to complete the sale within the agreed period, and the vendor has not been responsible for any delay or non-performance - A purchaser can no longer take shelter under the principle that time is not of essence in performance of contracts relating to immovable property, to  cover his delays, laches, breaches and 'non-readiness' - The precedents from an era, when high inflation was unknown, holding that time is not the essence of the contract in regard to immovable properties, may no longer apply, not because the principle laid down therein was unsound or erroneous, but the circumstances that existed when the said principle was evolved, no longer exist - Legislation - Specific relief- Equity.

s. 54 - Reciprocal promises - In the instant case, agreement of sale of immovable property contained an unconditional promise to pay the balance consideration in three instalments and the said promise by the purchaser was not made dependent upon performance of any obligation by vendors - The contract specifically stated that having paid the balance price, if the purchaser is not satisfied about the title and on being intimated about the same if the vendors fail to satisfy the purchaser about their title, all amounts paid towards the price should be refunded to purchaser - This showed that the payment of balance of sale price in terms of the contract was not postponed nor made conditional upon the purchaser being satisfied about the title, but that payment  of the balance price should be made to the vendors as agreed unconditionally - The sale deed was not required to be executed within any specific period - The purchaser had to fulfil her obligation in regard to payment of price and thereafter vendors were required to perform their reciprocal promise of  executing the sale deed, whenever required by the purchaser - The sale deed had to be executed only after payment of complete sale consideration within the time stipulated.

Agreement of sale - Suit by purchaser for permanent  injunction to protect possession - Held: As per the terms of the contract, the purchaser was only entrusted with the suit schedule properties as a caretaker until possession is given on receipt of the entire sale consideration - As neither the entire sale consideration was paid nor possession delivered, the plaintiff remained merely a caretaker and on cancellation of the agreement of sale by the defendants, the plaintiff became liable to leave the suit schedule properties as the possession continued to be with the defendants - Since appellant never had 'possession' she was not entitled to seek a permanent injunction to protect her possession.

Agreement of sale whether amounts to encumbrance - Held: An 'encumbrance' is a charge or burden created by transfer of any interest in a property - It is a liability attached to the property that runs with the land - Mere execution of an MOU, agreeing to enter into an agreement to sell the property, does not amount to encumbering a property - Receiving advances or amounts in pursuance of an MOU would also not amount to creating an encumbrance.

Suit: Recovery suit - Claim of plaintiff that she paid Rs.1,25,000- to defendant no.4 as commission - Trial court --held that the said amount was not paid as commission but was paid as consideration for the movables - Said suit dismissed by trial court - In the High Court, the appellant did not press for any decree in view of the finding that the amount paid was part of the consideration for movables - No reason to interfere with the dismissal of the suit for recovery.

Legislation: Reasonableness of- Held: Laws, which may be reasonable and valid when made, can, with passage of time and consequential change in circumstances, become arbitrary and unreasonable - There is an urgent need to revisit the principle that time is not of the essence in contracts relating to immovable properties and also explain the current position of law with regard to contracts relating to immovable property made after 1975, in view of the changed circumstances arising from inflation and steep increase in prices - Contract Act, 1872.

Specific relief: Suit for specific performance - Held: Courts, while exercising discretion in suits for specific performance, should bear in mind that when the parties prescribe a time/period, for taking certain steps or for completion of the transaction, that must have some significance and, therefore, time/period prescribed cannot be ignored - Courts will apply greater scrutiny and strictness when considering whether the purchaser was 'ready and willing' B to perform his part of the contract - Every suit for specific performance need not be decreed merely because it is filed within the period of limitation by ignoring the time-limits stipulated in the agreement - Courts will also 'frown' upon suits which are not filed immediately after the breach/refusal - The fact that limitation is three years does not mean a purchaser can wait for 1 or 2 years to file a suit and obtain specific performance - The three years period is intended to assist purchasers in special cases, as for example, where the major part of the consideration has been paid to the vendor and possession has been delivered in part performance, where equity shifts in favour of the purchaser- Equity- Contract Act, 1872.

Pleadings: Plea of fraud - Held: Whenever a party wants to put forth a contention of fraud, it has to be specifically  pleaded and proved - In the instant case, plaint did not allege any fraud by the defendants - The _contention that the vendors deliberately or intentionally suppressed any information regarding the pending encumbrances or the fact that the original documents were not available and thereby committed  fraud was neither pleaded nor proved - The appellant did not allege in the plaint, any fraud on the part of vendors, in regard to suppression of encumbrances over the property- From the evidence on record as rightly held by the courts below it was not possible to make out either any fraud or any suppression  or failure to disclose facts on the part of the respondents.

Evidence: Defendants 1 to ;3 entered into an agreement of sale of properties - Entire transaction done on behalf of the defendants 1 to 3 by defendant No.4 who alone had  complete knowledge of the entire transaction - In suits between the plaintiff and defendants, defendant no. 4 gave A evidence on behalf of all the other defendants ~ Non examination of defendants 1 to 3 - Held: When one of the defendants who was conversant with the facts has given evidence, it was not necessary for the other defendants to be examined as witnesses to duplicate the evidence - Where the entire transaction has been conducted through a particular agent or representative, the principal has to examine that agent to prove the transaction; and that where the principal at no point of time had personally handled or dealt with or participated in the transaction and has no personal knowledge  of the transaction, and where the entire transaction has been handled by the agent, necessarily the agent alone can give evidence in regard to the transaction - Therefore, the evidence of the fourth defendant was sufficient to put forth the case of the defendants and there was no need to examine the other three defendants who did not have full or complete knowledge of the transactions.