II. FAILURE TO PERFORM PART OF THE CONTRACT RENDERS A CLAIM OF ‘TIME IS OF THE ESSENCE’ AS NON-MAINTAINABLE.
In Gaddipati Divija & Anr. vs Pathuri Samrajyam & Ors. [Civil Appeal No. 4206-4207 of 2011 (Arising out of Special Leave Petition (C) No. 3229-3230 of 2011)], the Appellant is the wife of late Mr. G. Venugopala Rao (“Mr. Rao”) who executed an agreement of sale with the Respondent in the year 2002 in respect of his immovable property (“Property”). As per the Agreement, the Respondent paid a partial advance consideration amount to Mr. Rao based on Mr. Rao's promise to execute the Sales Deed in favor of the Respondent within three months after demarcating the Property and receiving the balance sale consideration.
Eventually, the Respondent learned that the Ld. Civil Court had attached the Property in a recovery proceeding against Mr. Rao. Thereafter, the Respondent asked Mr. Rao to get the Property measured and its attachment removed as a condition precedent for the Respondent to pay the remaining sales consideration. Meanwhile, in 2003 Mr. Rao died and was survived by two minor children and the Appellant. In 2004, the Respondent sent a legal Notice to the Appellant, expressing her willingness to perform part of the contract by paying the balance sales consideration. Subsequently, the Respondent filed a suit before Ld. Civil Court seeking Specific Performance of the Agreement of Sale dated 14.08.2002 to execute a Sale Deed in favor of the Respondent.
However, the Ld. Civil Court observed that the Respondent has failed to prove that she is entitled to the Specific Performance of the contract and consequently, directed the Appellant to refund the advance sales consideration amount to the Respondent. Aggrieved by the order of the Ld. Civil Court, the Respondent filed an appeal before the Andhra Pradesh High Court.
The Andhra Pradesh High Court observed all the facts and held that time may not be the essence of the contract, and even an express stipulation of the same will not suffice unless a specific intent to the contrary can be evinced. Furthermore, the Respondent is entitled to seek specific relief as the conditions laid down in Section 16(c) of the Specific Relief Act, 1963 (“Act”) (before the 2018 amendment) had been performed by the Respondent. The High Court set aside the order of the Trial Court and directed the Appellant to discharge the debt of Mr. Rao, by relieving the property from attachment and executing a Sale Deed in favor of the Respondent. Aggrieved by the Order of the Hon'ble High Court, the Appellant filed an appeal before the Apex Court.
Before the amendment of Section 16 of the Act in 2018, to seek the Specific Performance of the contract, the Plaintiff had to state and prove before the Court that he has performed or is willing to perform his obligation under the contract. However, after the amendment, the requirement to specifically aver their willingness to fulfill the obligation has been discarded. However, the amendment being prospective in nature does not apply to the present proceedings.
The issue before the Supreme Court was whether time is of the essence in the concerned Agreement of Sale or not. The Court placed reliance upon the judgment in Katta Sujatha Reddy v. Siddamsetty Infra Projects (P) Ltd. & Ors. [2023 (1) SCC 355], wherein it held that in the sale of immovable property, there is no presumption that time is of the essence in the contract. However, the Court may infer performance in a reasonable time if the conditions are evident from the contract’s express terms, the nature of the property, and the surrounding circumstances. However, the bench observed that the factual matrix of the present appeal can be distinguished from Siddamsetty (supra) as the purchaser’s obligation to pay the balance consideration amount was dependent upon the performance of the vendor’s obligation to get the land measured and demarcated within three months.
Furthermore, the bench observed that “Therefore, it can be deduced that unless the vendor got the subject land measured and demarcated within three months, it would be impossible for the purchaser (Respondent No. 1 herein/Plaintiff) to get a Sale Deed executed, and as such, the question of paying the balance sale consideration does not arise. This was also observed by the High Court while placing reliance on the recitals in the Sale Agreement coupled with the evidence of PW1 and PW2. Moreover, as has been held above, it is clear that the vendor (deceased G. Venugopala Rao) failed to perform his part of the obligations by getting the subject land measured and demarcated, while the purchaser (Respondent No. 1 herein/Plaintiff) was ever ready and willing to pay the balance consideration. As such, when the Specific Performance of the terms of the contract has not been done, the question of time being of the essence does not arise. In this way, the facts of the present case are distinguishable from that of Siddamsetty (supra), and the Appellants herein cannot claim that time was of the essence of the contract.”
Additionally, despite the Respondent’s willingness to perform her part of the contract, the Appellant’s failure to discharge its obligations became a ground for the Supreme Court to affirm the judgment of the High Court.