1998 JTR(SC) 95
1998 AIR(SC) 970 ; 1998 AIR(SCW) 734 ; 1998 AllLJ 508 ; 1998 32 AllLR 660 ; 1998 1 ALT(SC) 24 ; 1998 3 CivLJ 252 ; 1998 1 CTC 621 ; 1998 DNJ 57 ; 1998 1 ICC 858 ; 1998 1 JT 262 ; 1998 2 MLJ 6 ; 1998 1 RCR(Civ) 583 ; 1998 89 RD 342 ; 1998 1 Scale 178 ; 1998 2 SCC 226 ; 1998 1 SCR 284 ; 1998 1 UJ 324 ; 1998 WBLR 103 ; 1998 KHC 727 ; 1998 1 Supreme 310
1998(1) Supreme 310
Supreme Court of India
S.B. Majmudar & M. Jagannadha Rao, JJ.
Smt. Bismillah Begum (dead) by LRs. -Appellants
versus
Rahmatullah Khan (Dead) by LRs. -Respondents
Civil Appeal No. 2010 of 1980
Decided on 21-1-1998
Counsel for the Parties :
For the Appellants : Mr. J.M. Khanna, Advocate.
For the Respondents : Mr. Atul Sharma, Mr. K.C. Jain and Mr. E.C. Agrawala, Advocates.
Important Point
In contracts relating to reconveyance of property time is always essence of the contract.
Act
Referred
:CONTRACT ACT : S.47
SPECIFIC RELIEF ACT : S.16(c)
(A) The relevant statutory framework comprising Section 47 of the Contract Act and Section 16(c) of the Specific Relief Act, 1963, governs the enforcement of contracts for the reconveyance of immovable property. Section 47 addresses contracts for sale where the property is not transferred, while Section 16(c) specifically provides that time shall not be considered the essence of a contract for the sale of immovable property, allowing the aggrieved party to sue for specific performance at any time before the limitation period expires. In this matter, the application of these provisions is constrained by the nature of the contract being a reconveyance agreement, where the seller seeks to repurchase property previously sold. The absence of a statutory provision under the pre-1963 regime places the matter within the common law principles as subsequently interpreted under the new Section 16(c), requiring strict compliance with the stipulated period for repayment to revive the sellers option. The court examines whether the provisions of the Specific Relief Act have any retrospective application and how the common law doctrine of time being the essence of a reconveyance contract interacts with the new statutory regime.
(B) The core legal principles delineated in the judgment are that (i) time is the essence of a contract of reconveyance relating to immovable property, (ii) the doctrine of lapse of an option to repurchase applies strictly where the stipulated period for repayment expires, (iii) the burden of proving readiness and willingness to perform the contract lies on the party seeking specific performance, and (iv) the provisions of Section 16(c) of the Specific Relief Act, 1963, do not apply retrospectively to contracts governed by the former common law. Equity follows the common law rule that strict compliance with the time limit is mandatory for the exercise of an option to repurchase immovable property.
Facts of the case:
The appellants, as legal representatives of the deceased plaintiff, filed a suit for specific performance of a registered reconveyance agreement dated 8.2.1955. The agreement stipulated that the seller would regain the property if the purchase consideration of Rs.2.000/- was repaid within three years along with certain expenses. The appellants failed to prove that they offered to repay the amount within the stipulated period or that they made any effort to do so. The notice of repayment issued was not properly served as it was not addressed to the correct address of the defendant. The lower courts held that time was the essence of the contract and that the plaintiff was not ready and willing to perform.
Findings of Court:
The courts below found as a fact that no effort was made by the plaintiff to repay the consideration within the three-year period. The High Court specifically observed that the notice dated 6.2.1958 did not reach the defendant due to an incorrect address. The court held that the plaintiff was not ready and willing to perform the contract and that the plea of the defendants attitude was not established. The High Court also noted that under the common law applicable to contracts of reconveyance, time is the essence, and the option had lapsed due to the delay.
Issues:
Whether time is the essence of a contract for reconveyance of immovable property? Whether the plaintiff was ready and willing to perform her obligation to repay the consideration within the stipulated time? Whether the provisions of Section 16(c) of the Specific Relief Act, 1963, have any application to a contract entered into before its enactment?
Ratio Decidendi:
The court reaffirmed the established common law principle that in contracts of reconveyance relating to immovable property, time is the essence, and strict compliance with the period stipulated for repayment is mandatory. The plaintiffs failure to repay the consideration within the three-year period, without sufficient cause, resulted in the lapsing of the option in favour of the plaintiff. The notice of repayment was ineffective as it was not served at the proper address, and there was no evidence of any other attempt to repay within the stipulated time. The court distinguished the present case from authorities cited regarding the sale of immovable property, emphasizing that the option in a reconveyance agreement is strictly time-bound.
Result:
The appeal is dismissed with no costs awarded.
(A) The relevant statutory framework comprising Section 47 of the Contract Act and Section 16(c) of the Specific Relief Act, 1963, governs the enforcement of contracts for the reconveyance of immovable property. Section 47 addresses contracts for sale where the property is not transferred, while Section 16(c) specifically provides that time shall not be considered the essence of a contract for the sale of immovable property, allowing the aggrieved party to sue for specific performance at any time before the limitation period expires. In this matter, the application of these provisions is constrained by the nature of the contract being a reconveyance agreement, where the seller seeks to repurchase property previously sold. The absence of a statutory provision under the pre-1963 regime places the matter within the common law principles as subsequently interpreted under the new Section 16(c), requiring strict compliance with the stipulated period for repayment to revive the sellers option. The court examines whether the provisions of the Specific Relief Act have any retrospective application and how the common law doctrine of time being the essence of a reconveyance contract interacts with the new statutory regime.
(B) The core legal principles delineated in the judgment are that (i) time is the essence of a contract of reconveyance relating to immovable property, (ii) the doctrine of lapse of an option to repurchase applies strictly where the stipulated period for repayment expires, (iii) the burden of proving readiness and willingness to perform the contract lies on the party seeking specific performance, and (iv) the provisions of Section 16(c) of the Specific Relief Act, 1963, do not apply retrospectively to contracts governed by the former common law. Equity follows the common law rule that strict compliance with the time limit is mandatory for the exercise of an option to repurchase immovable property.
Facts of the case:
The appellants, as legal representatives of the deceased plaintiff, filed a suit for specific performance of a registered reconveyance agreement dated 8.2.1955. The agreement stipulated that the seller would regain the property if the purchase consideration of Rs.2.000/- was repaid within three years along with certain expenses. The appellants failed to prove that they offered to repay the amount within the stipulated period or that they made any effort to do so. The notice of repayment issued was not properly served as it was not addressed to the correct address of the defendant. The lower courts held that time was the essence of the contract and that the plaintiff was not ready and willing to perform.
Findings of Court:
The courts below found as a fact that no effort was made by the plaintiff to repay the consideration within the three-year period. The High Court specifically observed that the notice dated 6.2.1958 did not reach the defendant due to an incorrect address. The court held that the plaintiff was not ready and willing to perform the contract and that the plea of the defendants attitude was not established. The High Court also noted that under the common law applicable to contracts of reconveyance, time is the essence, and the option had lapsed due to the delay.
Issues:
Whether time is the essence of a contract for reconveyance of immovable property? Whether the plaintiff was ready and willing to perform her obligation to repay the consideration within the stipulated time? Whether the provisions of Section 16(c) of the Specific Relief Act, 1963, have any application to a contract entered into before its enactment?
Ratio Decidendi:
The court reaffirmed the established common law principle that in contracts of reconveyance relating to immovable property, time is the essence, and strict compliance with the period stipulated for repayment is mandatory. The plaintiffs failure to repay the consideration within the three-year period, without sufficient cause, resulted in the lapsing of the option in favour of the plaintiff. The notice of repayment was ineffective as it was not served at the proper address, and there was no evidence of any other attempt to repay within the stipulated time. The court distinguished the present case from authorities cited regarding the sale of immovable property, emphasizing that the option in a reconveyance agreement is strictly time-bound.
Result:
The appeal is dismissed with no costs awarded.
Judgment
M. Jagannadha Rao, J.-The appellants are the legal representatives of the deceased plaintiff. The suit was filed on 7.2.1958 seeking specific performance of a contract of reconveyance dated 8.2.1955.
2. The brief facts of the case are that the appellants’ predecessor in interest who owned the suit house property in Kapur executed a registered sale deed dated 8.2.1955 for Rs.2.000/- in favour of the sole defendant (who has also since died) and also simultaneously obtained an agreement of reconveyance from the defendant on the same day. It appears that the said agreement for reconveyance stipulated that in case the seller was able to pay back the consideration within a period of three years and certain expenses and other monies expended by the purchaser towards repairs, the seller would be entitled to get back the property. It is on the basis of the above said agreement of reconveyance that the seller filed the present suit on 7.2.1958.
2. In the courts below the questions as to whether time was the essence of contract and whether the plaintiff was ready and willing to perform her part of the contract were debated. The courts below held that the plaintiff was not ready and willing to perform the contract by way of offering to repay - what has quoted in the reconveyance agreement - within the period stipulated therein. It was also held that time was the essence of the contract. When the matter came up in Second appeal to the High Court it was argued for the appellant-vendor relying upon a decision in the case of A.H. Mama v. Flora Sassoon1 , that time was not the essence of the contract in contracts of sale regarding immovable property. However, the High Court held that a close scrutiny of the plaint did not reveal that there was any averment on the part of the plaintiff that she was ready and willing to perform her part of the contract. It was no doubt averred in the plaint that the vendor had spoken to the defendant orally several times to receive the stipulated amount and execute the reconveyance deed and get it registered, but no dates on which the vendor allegedly spoke to the defendant were mentioned. In fact the plaintiff relied only on a notice by telegram dated 6.2.1958 which was referred to in the plaint and on the paragraph relating to cause of action, proposing to repay. Apart from the said notice there was no other documentary evidence to show that any effort was made within the period of three years for repayment of the consideration for the purpose of obtaining reconveyance. The High Court has also observed that the above said notice dated 6.2.1958 issued by the vendor to the defendant purchaser was not addressed to his proper address and in fact it never reached the defendant. Under such circumstances, the High Court dismissed the Second Appeal holding that there was neither any plea nor proof of readiness and willingness on the part of the plaintiff to perform her part of the contract.
3. In this appeal, learned counsel for the appellants has contended that time is not the essence of the contract in relation to contracts of immovable property and that it is also not necessary to tender the amount or to deposit the consideration amount in court except when directed by the Court. It will be noticed that a provision to that effect has now been incorporated in Section 16(c) of the Specific Relief Act, 1963 but there was no such statutory provision before 1963 Act. Learned counsel for the appellants also relied upon a decision of the Calcutta High Court in Manik Lal v. Shankar Lal2, for the proposition that delay in payment of the sale consideration even in the case of reconveyance contract would disentitle the plaintiff to obtain specific performance if such delay had occurred on account of the defendant’s attitude.
4. Even assuming that the above said decision of the Calcutta High Court would support the point convassed by learned counsel for the appellant it will be noticed that the finding in the above said Calcutta case was that the plaintiff was unable to perform his part of the contract because of the defendant’s attitude. But in the present case before us there is no proof that any attitude of the defendant towards the plaintiff was the cause for the plaintiff not being able to pay the amount to the defendant. As already stated, the findings of fact arrived at by the courts below that no effort has been made by the plaintiff to pay the sale consideration to the defendant are findings of fact, binding in Second appeal.
5. We may also add that in contracts relating to reconveyance of property time is always essence of the contract as laid down by the Federal Court in the case of Shanmugam Pillai & Ors. v. Annalakshmi Ammal & Ors.3 and also laid down by this Court in Caltex (India Ltd. v. Bhagwan Devi Marodia4. The relevant passage in the judgment of this Court in Caltex (India) Ltd. at page 407 in para 3 reads as follows :
“At common law stipulations as to time in a contract giving an option for renewal of a lease of land were considered to be of the essence of the contract even if they were not expressed to be so and were construed as conditions precedent. Equity followed the common law rule in respect of such contracts and did not regard the stipulation as to time as not of the essence of the bargain. As stated in Halsbury’s Laws of England, 3rd edn., Vol. 3, Article 281, p. 165 : “An option for the renewal of a lease, or for the purchase or re-purchase of property, must in all cases be exercised strictly within the time limited for the purpose, otherwise it will lapse.” This passage was quoted with approval by Danckworts L.J., in Hare v. Nicoll, 1966-2 QB 130, 145. A similar statement of law is to be found in Foa’s General Law of Landlord and Tenant, 8th ed., Art. 453 p. 310, and in Hill and Redman’s Law of Landlord and Tenant, 14th ed., p. 54. The reason is that a renewal of a lease is a privilege and if the tenant wishes to claim the privilege he must do so strictly within the time limited for the purpose.”
The above passage refers both to options for renewal and options to repurchase where, in regard to immovable property, as a matter of law time becomes essence of the contract. Therefore in regard to contracts of reconveyance relating to immovable property, the principle laid down in A.H. Mama v. Flora Sassoon (supra) - that time is not normally essence of the contract in contracts relating to immovable propery - does not apply. It is in fact, so observed in Caltex (India) Ltd. case. In view of the abovesaid decision of this Court relating to contract of reconveyance, and inasmuch as the amount was not paid within the stipulated time, the said option in favour of the plaintiff must be deemed to have “lapsed”. For the aforesaid reasons, the appeal fails and is dismissed. No costs.
Appeal dismissed.
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