Court Must Consider Time Limit In Agreement To Determine Whether Discretion To Grant Specific Performance Should Be Exercised- SC

The Bench of Justice BR Gavai and Justice CT Ravikumar observed –

"In the case of K.S. Vidyanadam and Others v. Vairavan, this Court has held that 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."

Further, the Court also noted that in the above precedent it was held, "That in case of urban properties, the prices have been rising sharply. It has been held that while exercising its discretion, the court should bear in mind that when the parties prescribe certain time limit(s) for taking steps by one or the other party, it must have some significance and that the said time limit(s) cannot be ignored altogether on the ground that time is not the essence of the contract."

In this case, Defendant was the owner of the suit property and had executed an agreement of sale in favor of Plaintiff for the sale of the suit property. Plaintiff had paid an amount of Rs. 15,000 by way of Demand Draft as advance payment. Defendant had communicated to Plaintiff requesting to confirm whether the necessary permission from the Competent Authority (ULA Authorities) under Urban Land (Ceiling and Regulation) Act, 1976 (ULC Act) to sell the suit property had been obtained or not.

Defendant thereafter informed Plaintiff that the requisite permission from the ULC Authorities could not be obtained and therefore, she had canceled the agreement of sale and enclosed a Demand Draft of Rs. 15, 000 for the purpose of refund of advance payment.

Plaintiff replied to Defendant that, the contract was binding and returned the said Demand Draft. He reiterated that he was always ready to make the payment and execute the sale deed. It was also contended by him that because of the spiraling price rise, Defendant was going back on the promise.

Defendant addressed a letter to Plaintiff, stating therein that, she was forfeiting the advance payment of Rs.15,000/- since the plaintiff had not claimed the refund within 90 days from the date of the agreement of sale.

Later, the Government of Andhra Pradesh granted an exemption to the Defendant under the provisions of Section 20 of the ULC Act. Thereafter, a legal notice was issued to Defendant by Plaintiff for the execution of the sale deed in pursuance of the agreement of sale, however, the Defendant did not reply.

Plaintiff filed a suit for specific performance before the Trial Court which came to be decreed. The Court directed the Defendant to execute the sale deed.

Defendant then approached the High Court by filing an appeal which came to be allowed and the suit of Plaintiff was dismissed. Plaintiff filed an appeal before the Division Bench which was dismissed, however, the Court held that Plaintiff was entitled to get the refund for the advance payment of Rs.15,000/- along with the accrued interest or a sum of Rs.3,00,000/- in all.

Aggrieved, Plaintiff approached the Supreme Court.

Senior Counsel C. Nageswara Rao appeared for the Appellants while Counsel Sridhar Potaraju appeared for the Respondents before the Court.

The Apex Court noted that it was almost after two years since Defendant obtained permission after the cancellation of the earlier agreement, the Plaintiff chose to file the suit.

Further, the Court placing reliance on the precedent observed that 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.

The Court thus observed –

"Taking into consideration the fact that the agreement of sale provided that in the event the permission was not obtained within 75 days, the purchaser shall be entitled to get back his advance money paid after 75 days but not later than 90 days under any circumstances, the findings of the learned Single Judge cannot be said to be erroneous."

The Court also noted, "After the defendant terminated the agreement on 12th April 1982 stating therein that since the permission from the ULC Authorities could not be obtained, she had cancelled the agreement of sale, the plaintiff did not take any step till 19th February 1984. Only after the ULC permission was granted on 7th February 1984, the plaintiff had issued a legal notice to the defendant on 19th February 1984."

Thus, the Court upheld the impugned judgment of the High Court denying a decree for specific performance.

Cause Title - Kolli Satyanarayana (Dead) By Lrs. v. Valuripalli Kesava Rao Chowdary (Dead) Thr. Lrs. and Others

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