Specific Performance – Limitation Act, 1963 – Article 54 – Limitation period for Specific Performance – Specific Relief Act, 1963 – ss. 10, 12 – Appellant herein (Purchaser) entered into an agreement with the Respondents herein (Vendors) in 1997 to purchase two stretches of land, and paid 90% of total amount by cash and cheque – Remaining 10% was to be paid within 3 months as per clause 3 of the agreement, which was defaulted by the appellant – However, appellant sent two notices to the respondents in 2000 and 2002 seeking performance of the agreement by agreeing to deposit the balance sale consideration – Thereafter, appellant filed a suit seeking specific performance in 2002 – Trial court dismissed the suit holding that it was barred by limitation – Appellant approached High Court – High Court held that the trial Court erred in making the distinction between time fixed for payment of sale consideration and time for performance of contract – Further, held that the purchaser was ready and willing to perform his contract, and through his acts, proved his bonafides by already paying 90% of the sale consideration within the stipulated period and by later depositing the balance amount in court – Also held that amended Section 10 of the Specific Relief Act, which provides that specific performance shall be enforced by courts subject to conditions mentioned, shall apply retrospectively and therefore benefit the appellent – HC partly allowed the appeal and directed the resondents to register the suit property in favour of the appellant to the extent of the amount paid by the appellant, i.e., 90% of the total sale consideration, within a period of 3 months – Aggrieved, both appellant and respondents approached this Court – Held: Fixed time period was mandated by Clause 3 of the agreement and accordingly, the suit filed by the purchaser was clearly barred by limitation in view of the provision provided under Article 54 of the Limitation Act – Amended Section 10 of the Specific Relief Act brought by the amendment of 2018 was not mere procedural enactment, rather it had substantive principles built in it and thus, the same would not apply retrospectively – As far as entitled to the relief of specific performance is concerned, it is clear that the purchaser did not voluntarily adhere to the time stipulation under the contract – In order to bypass the condition of time being the essence, the purchaser invoked the standard of good faith – Unless such duty is expressly stipulated, good faith standard cannot be implicitly read into any contract – Prior to 2018 amendment, general standard of good faith to imply broader good faith obligations cannot be accepted to give a go-by to the explicit conditions for maintaining the sanctity of contract – Such broad standards will have potentially far-reaching consequences - The purchaser was not ready or willing to perform his part of the contract within the time stipulated and accordingly, specific performance cannot be granted for the entire contract – There is no doubt that the claim of appellant is hit by delay and laches on their part as they did not take appropriate measures within the stipulated time and filing of the suit was delayed by almost five years – Thus, no relief can also be granted to the appellant u/s. 12 of the Specific Relief Act – Respondents directed to repay the deposited amount with interest.
Disposing of the appeals, the Court
HELD:
1. The vendors were entitled to rescind the contract as there was a breach of condition, i.e, ‘time was the essence’. Coming back to the point of limitation, it is clear that Article 54 of the Limitation Act mandates that in this case at hand, the date fixed for payment of consideration was three months from the date of the agreements (i.e. 26.03.1997 and 27.03.1997). In any case, the time period for filing the suit had commenced from 26/27.6.1997 and would have expired after three years, i.e., in the end of June 2000. [Para 35][434-B-C]
2. The purchaser has contended that the legal notice issued by them on 31.03.2000, would be sufficient to get past the bar of limitation, as the purchaser has paid the advance amount to a large extent. Although this argument seems to be very attractive at first blush, the same cannot be sustained in the eyes of the law for the reason that when a condition of a contract is breached and the consequences ensue for that breach, a party cannot claim equity to escape such consequences. In this context, this Court notes that Article 54 of the Limitation Act provides for two consequences based on the presence of fixed time period of performance. It is only in a case where the time period for performance is not fixed that the purchaser can take recourse to the notices issued and the vendors’ reply thereto. In the case at hand, the aforesaid circumstances do not come into play as a fixed time period was clearly mandated by Clause 3 read with Clause
23 of the agreements to sell, as explained above. [Paras 36 and 37] [434-D-F]
3. In light of the above, this Court notes that the suit filed by the purchaser was clearly barred by limitation in view of the first part of Article 54 of the Limitation Act and no amount of payment of advance could have remedied such a breach of condition. [Para 38][434-F-G]
4. This Court does not subscribe to the aforesaid reasoning provided by the High Court for the simple reason that after the 2018 amendment, specific performance, which stood as a discretionary remedy, is not codified as an enforceable right which is not dependent anymore on equitable principles expounded by judges, rather it is founded on satisfaction of the requisite ingredients as provided under the Specific Relief Act. For determination of whether a substituted law is procedural or substantive, reference to the nature of the parent enactment may not be material. Instead, it is the nature of the amendments which determine whether they are in the realm of procedural or substantive law. [Para 45][436-D-E]
5. Having come to the conclusion that the 2018 amendment was not a mere procedural enactment, rather it had substantive principles built into its working, this Court cannot hold that such amendments would apply retrospectively. [Para 51][438-G]
6. It is clear that when a substantive law is brought about by amendment, there is no assumption that the same ought to be given retrospective effect. Rather, there is a requirement for the legislature to expressly clarify whether the aforesaid amendments ought to be retrospective or not. [Para 53][440-C]
7. In the case at hand, the amendment act contemplates that the said substituted provisions would come into force on such date as the Central Government may appoint, by notification in the Official Gazette, or different dates may be appointed for different provisions of the Act. It may be noted that 01.10.2018 was the appointed date on which the amended provisions would come into effect. [Para 55][440-F]
8. This Court does not have any hesitation in holding that the 2018 amendment to the Specific Relief Act is prospective and cannot apply to those transactions that took place prior to its coming into force. [Para 56][440-G]
9. It was necessary that the purchaser should have taken immediate steps to complete the transaction and if such steps were immediately completed then the purchaser would have a clear right for seeking enforcement for 3 years reckoned from the last date decided for completion of the contract. [Para 59][442D-E]
10. It is clear that the purchaser did not voluntarily adhere to the time stipulation under the contract. In order to by-pass the condition of time being the essence, the purchaser invoked the standard of good faith. Aforesaid standard prescribes a higher duty of care for parties entering into a contract. Unless such duty is expressly stipulated, good faith standard cannot be implicitly read into any contract. [Para 65][444-D]
11. This Court does not subscribe to acceptance of a general standard of good faith to imply broader good faith obligations only to give a go-by to the explicit conditions for maintaining the sanctity of contract. Such broad standards will have potentially far reaching consequences. This Court agrees that such an implicit reading would come into play post the 2018 Amendment to the Specific Relief Act which enables specific performance of contracts to uphold their sanctity. However, from the facts and circumstances of this case, we cannot accept that such higher standards of good faith was relevant. [Para 66][444-E-F]
12. It is clear that Section 16(c) of the Specific Relief Act would only come into force if the purchaser was ready and willing to perform the contract within the three month period prescribed under Clause 3 of the agreements. The aforesaid conclusion is also bolstered by the fact that specific performance can only be granted when essential terms of contract are not violated in terms of Section 16(b). [Para 68][444-G-H]
13. This Court does not think that it is an appropriate case for granting relief to the purchaser in terms of Section 12 of the Specific Relief Act, 1963 as the claim of the purchaser is barred by delay, laches and limitation. [Para 78][449-E]
14. This Court is of the firm opinion that the contract was breached due to the conduct of the plaintiff/purchaser, who were not willing to perform the contract after entering into a time sensitive agreement. In any case, it is an admitted fact that plaintiff had paid only part consideration. Though there is a forfeiture clause in the agreement, this Court with a view of rendering complete justice between the parties, deems it appropriate to direct the vendors/appellants to repay the said amount with interest @ 7.5% p.a. from the date such payment was made by the purchaser to the vendors, till the entire amount is paid back. We further direct the vendors to pay the entire amount to the credit of the suit account within six months from the date of receipt of a copy of the order. [Para 79][449-E-G]
Chand Rani (dead) by Lrs. v. Kamal Rani (dead) by Lrs. (1993) 1 SCC 519 : [1992] 3 Suppl. SCR 798;
Whiteley Limited v. Hilt (1918) 2 K.B. 808;
Shyam Sunder and Others (2001) 8 SCC 24: [2001] 1 Suppl. SCR 115; Saradamani Kandappan v.
S. Rajalakshmi and Other, (2011) 12 SCC 18 : [2011]
8 SCR 874; Jaswinder Kaur v. Gurmeet Singh (2017)
12 SCC 810 : [2017] 5 SCR 430; Rachakonda
Narayana v. Ponthala Parvathamma (2001) 8 SCC 173; [2001] 2 Suppl. SCR 71; Radheshyam Kamila v. Kiran Bala Dasi AIR 1971 Cal 341; Adhunik Steels Limited v. Orissa Manganese and Minerals (P) Ltd. (2007) 7 SCC
125 : [2007] 8 SCR 213 - referred to.
As published in the Supreme Court Reports, Supreme Court of India. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
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