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recission of contract for non deposit within reasonable time

ravidevaraj ,
  31 December 2009       Share Bookmark

Court :
Chennai High Court
Brief :
it is clear that the seller has been given a right to make an application for rescission of the contract after the decree has been passed against him, if the purchaser fails to pay the purchase money as directed by the Court within the prescribed period or such further period as the Court may allow. The contract of sale cannot be rescinded on any other ground except the one provided in the section. As already observed above, the respondents failed to pay the sale consideration within the prescribed period and they did not apply for extension of the period for doing so. Therefore, the petitioners became entitled to get the contract rescinded."
Citation :
1998 (2) CTC 585
Raju Naidu vs M. Kolandaisamy And Another on 28/10/1998

ORDER

1. The above revision is filed against the order passed by the Sub-Court,Karur in E.A.No. 161 of 1993, in E.P.No. 48 1992 in O.S.No. 483 of 1980, dated 20.4.1994.

2. The petitioner/defendant entered into an agreement with the respondents/plaintiff BE sell the suit property for a sum of Rs.74,000 and he paid a sum of Rs. 24,000 as advance. The balance was agreed to paid on or before
12.10.1980. The said agreement was executed on 4.7.1979. Since the sale deed was not executed as agreed, the respondents filed the suit in O.S.No. 483 of 1980, on the file of the Sub-Court, Karur and the same was decreed on 20.3.1982 directing the petitioner to execute the sale deed on or before 20.5.1982 failing which the plaintiffs were at liberty to have the sale deed executed through court. It is relevant to mention here that no time limit was fixed for
depositing the amount. Meanwhile the wife and sons of the petitioner have filed the suit in O.S.No. 531 of 1980 on the same court for partition which was dismissed on 20.3.1982 itself. Against that judgment and decree they filed appeal in A.S.NO. 249 of 1982 and the petitioner filed appeal in A.S.No. 495 of 1985 before this Court. On 12.6.1982 the respondents filed Execution Petition in
E.P.No. 38 of 1982 in O.S.No. 483 of 1980 on 12.6.1982 and they had deposited the balance of consideration of Rs. 50,000 only on 15.6.1982. The said E.P. was dismissed on 3.9.1982, in view of the stay granted by this Court in A.S.No. 249 of 1982 filed by the wife and sons of the petitioner. After dismissal of the said Execution Petition, the petitioner withdraw the amount deposited by filing
an application. This Court dismissed both the abovesaid appeals on 28.11.1989. The Review Applications filed also were dismissed on 18.12.1990. Thereafter on 27.3.1992 the respondents filed E.P. 48 of 1992 and deposited the said sum of Rs. 50,000 on 23.4.1992.

3. Now the petitioner has filed the above Application in E.A.No. 161 of 1993 in E.P.No. 48 of 1992 under Section 28 of the Specific Relief Act, to have the contract rescinded on account of the default on the part of the respondents
herein in not depositing the balance sale consideration within the reasonable period. The same was resisted by the respondents. The court below by the order dated 20.4.1994 rejected the same. Aggrieved against the same, the petitioner has filed the above revision.

4. The learned Senior Counsel appearing for the petitioner has submitted that the court below is not correct in holding that no objection was taken before
filing the draft sale deed and so it has to be taken that the respondents/plaintiff had waived their right of defence regarding the deposit of the balance sale consideration. According to him, the court below is not correct in taking into consideration of the earlier proceedings to come to the
conclusion that the said deposit of the amount is within the reasonable time per contra, the learned. Senior Counsel appearing for the respondents/plaintiffs has submitted that the application under Section 28 of the said Act cannot be
maintained as the said section will apply only if the decree has prescribed any time limit to deposit the said amount. She has further submitted that even Section 46 of the Contract Act cannot be made applicable to the present case, as it will apply only before passing the decree, to see that the purchaser has complied with his part of the contract. While explaining the delay in payment of
the amount, the learned Senior Counsel has relied on the proceedings taken by the petitioner and his wife and sons. She has also relied on the fact that the said amount was deposited on 15.6.1982, and only because of the stay order
obtained by the wife and the sons of the petitioner, the said Execution Petition was dismissed, and so the respondents withdrew the said amount. With respect to
the maintainability of the application, the learned Senior Counsel has submitted that such an application has to be filed in the suit. She has further submitted that when the said amount was deposited, the petitioner did not take any
objection and so the petitioner is barred from raising any objection at this stage. The executing court dismissed the application on the ground that there is no mention of any time for depositing the balance of sale consideration and so
it cannot be construed that the plaintiffs have defaulted in payment of the balance of sale consideration within reasonable time. Another reason that has been given by the Executing Court to reject the petitioners application is that the petitioners have not raised objection at the earliest point of time and so they are estopped from raising such objection. The court below has also accepted
the plea of the respondents there is no delay on their part in depositing the amount and getting the sale deed in their favour and the delay appears to be on the part of the petitioner who wanted to protract the proceedings.

5. It is not in dispute that the respondents/ plaintiffs got a decree against the petitioner/defendant to sell the suit property for a sum of Rs. 74,000, in and by the decree dated 20.3.1982. Admittedly, no time limit was fixed in the
said decree to pay the balance amount, though ultimate date was fixed to execute the sale deed. It is also not indisputed that the petitioner's wife and sons filed a suit for partition, and further appeal. Ultimately it was dismissed on 28.11.1989. The petitioner also challenged the decree passed in favour of the respondents by filling appeal in this Court which also ended indismissal on
28.11.1989. The respondents originally filed the Execution Petition on 12.6.1982 and deposited the said amount of Rs. 50,000 on 15.6.1982.

In view of the dismissal of the Execution Petition on the basis of the stay obtained by the wife and sons of the petitioner in the appeal filed before this Court, the respondents withdrew the said amount. Thereafter, from the abovesaid facts, it can be seen that the Execution Petition was filed on 27.3.1992, but the balance amount was paid on 23.4.1992. On the basis of the abovesaid facts and findings of the court below, it has to be construed, Whether the petition filed by the petitioner is maintainable under Section 28 of the Specific Relief Act, and whether the petitioner is entitled for the relief sought for.

6. The learned Senior Counsel appearing for the respondents has submitted that the application filed under Section 28 of the Specific Relief Act is not maintainable as there is no time limit fixed in the decree to pay the balance sale consideration, and, if only time is fixed the said section will attract.
Section 28(1) of the said Act reads as follows:-

"Rescission in certain circumstances of contracts for the sale or lease of immovable property, the specific performance of which has been decreed:-
(1) Where in any suit a decree for specific performance of a contract for the sale or lease of immovable property has been made and purchaser or lessee does not, within the period allowed by the decree or such further period as the court may allow, pay the purchase money or other sum which the court has ordered him to pay, the vendor or lessor may apply in the same suit in which the decree is made, to have the contract rescinded and on such application the court may, by order, rescind the contract either so far as regards the party in default or altogether, as the justice of the case may require" -

The abovesaid section contemplates the failure on the part of the purchaser to pay the money which the court has ordered him to pay within the period allowed by the decree or such further period as the court may grant. Even though
this section does not by its term apply to a decree if no time limit is fixed or no time is granted for payment of money, the principles of the said section would apply even to cases in which decree had not fixed any time limit for
payment of the money.

7. The Division Bench of this Court in Saraswathi Alias Kalpana v. P.S.S Somasundaram Chettiar, 1977 (II) M.L.J. 68 in which the Division Bench has dissented from the observations made in Abdul Bhaker Sahib v Abdul Rahman Sahib
and another, 44 M.L.J. 107 : A.I.R. 1923 Mad. 284, has held as follows:-

"Thus, the real point which the Bench considered was whether such a decree should be treated to be a preliminary decree, the trial Court retaining full control over the suit, or it should be treated as a final decree. Only because the learned Judges took the view that such a decree must be treated as a preliminary decree, they observed that if it was intended to be a final decree, the learned Judge had no jurisdiction to pass such a final decree. Therefore,
the decision relied on by the learned counsel for the appellant cannot be said to have laid down any proposition that the trial Court which passes a decree for
specific performance has no jurisdiction at all to fix a time-limit for depositing the money due by the decree-holder, provided the decree is trusted as a preliminary decree and the Court retains control over the entire action. If at all, the only passage in the judgment of Wallace, J., with which we do not agree is that which regards the decree itself as a contract. Equally, we do not agree with the learned Chief Justice when he observed that the vendor can succeed in his motion for rescission for the contract only when there has been a positive refusal on the part of the vendee to complete and a default on his part to
comply with the direction of the Court is not sufficient".

The abovesaid decision of the Division Bench of this Court has been approved by the Apex Court in the decision in K. Kalpana Saraswathi v. P.S.S. Somasundaram Chettiar, .

8. Srinivasan, J., as he then was, in Narasimhan v. Balammal, 1988 (II) M.L.J. 95 has held as follows:-

"On the facts of this case, the respondent has not proved her readiness and willingness to perform her part of the contract within a reasonable time after the decree. Though the decree in the present case has not specified any time to deposit the amount, it was the duty of the respondent to have performed her part within a reasonable time. The time taken viz. 3 years and odd cannot be said to
be reasonable by any standard. Hence, the contract has to be rescinded as prayed for by the petitioner. The Court below is wrong in dismissing the application filed by the petitioner. The application filed under S. 28 of the Specific Relief Act will have to be allowed".

In view of the above, the submission of the learned Senior Counsel appearing for the respondents that if time is not fixed in the decree, the application under section 28 of the Specific Relief Act cannot be maintained, cannot be countenanced.

9. To meet the submission of the learned counsel appearing for the respondents that the application under section 28 of the said Act cannot be filed before the executing court, and it should have been filed only in the
suit, the learned Senior Counsel appearing for the petitioner has submitted that such submission of the learned Senior Counsel for the respondents cannot be
sustained, in view of the decision in Annadavally v. Natesan, 1992(2) KLT 833 wherein similar objection was taken and the same was rejected by the learned
Judge, observing as follows:-

"I shall first consider the technical objection that the application should have been filed on the trial side and not on the execution side. It is an admitted fact that both the trial court and the execution court are the same.
The decree was also passed by the Sub Court, Cherthala and the execution was also done there. If a party is entitled to file an application under S. 28, the mere fact that he filed it as an execution application will not affect the
maintainability of the same, if he is otherwise entitled to move the court. As the trial court and the execution court is the same I am not inclined to accept this technical contention and reject the application filed by the defendant on that ground alone. The same view was taken by the Bombay High Court in M. V. Kshrsagar v. B. K. Jadhav, ".

So, the abovesaid objection of the learned counsel for the respondents cannot also be sustained, as in this case also both the executing court and the trial court are the same.

10. Relying on section 46 of the Indian Contract Act, the learned Senior Counsel appearing for the petitioner has submitted that it is the obligation on the part of the respondents to comply with the contract within a reasonable
time. He has relied on the fact that though originally the Execution petition was filed on 12.6.1982 and the amount was deposited only thereafter on 15.6.1982, and, though the proceedings taken by the petitioner, his wife and
sons were over as early as on 18.12.1990, the respondents have come forward with the present Execution Petition only on 27.3.1992 and deposited the money subsequently on 23.4.1992. Relying on these facts, the learned Senior Counsel for the petitioner has submitted that it cannot be said that the respondents have performed their part of the contract within the reasonable time. I find some force in the said argument. The court below has not taken into
consideration of this fact before rejecting the application on the ground that the same was not raised at the earliest point of time. Merely because the petitioner filed the said application subsequently, it cannot be said that the
non-performance of obligation by the respondents/within the reasonable time has to be ignored. While construing the question as to what is the reasonable time, the Apex Court in H.I. Trust v. Haridas Mundhra, has held as follows:-

"If a contract does not specify the time for performance, the law will imply that the parties intended that the obligation under the contract should be
performed within a reasonable time. Section 46 of the Contract Act provides that were, by a contract, a promisor is to perform his promise, without application
by the promise, and no time for performances is specified, the engagement must be performed within a reasonable time and the question 'what is reasonable time' is, in each particular case, a question of fact. We have already indicated that the contract between the parties was not extinguished by the passing of the decree, that it subsisted notwithstanding the decree. It was an implied term of the contract and, therefore, of the decree passed thereon that the parties would perform the contract within a reasonable time. To put it other words, as the contract sub-sisted despite the decree and as the decree did not abrogate or modify any of the express or implied terms of the contract, it must be presumed that the parties to the decree had the obligation to complete the contract
within a reasonable time"

In this case, it is clear that the respondents have not deposited the balance sale consideration within a reasonable time. In a suit for specific performance,
the plaintiff should be prompt and diligent in the matter of processing the relief sought for, as the relief contemplates discretionary power, and, it is for the plaintiff to act in time so as to acquire the relief granted to him, in time, by the Court. If the respondents fail to do so, law provides the relief to the petitioner defendant for such action, who is statutorily entitled to apply to the Court which granted the decree for specific performance for rescindence of such decree under section 28 of the said Act. It is well settled that a decree for specific performance is granted in judicial discretion of the court and, ultimately, the relief is based on equity, and the person who wishes to enforce the equity should do equity. But, in this case, the respondents in whose
favour the decree for specific performance has been passed were not prompt in depositing the said amount into court.

11. The learned Senior Counsel appearing for the respondents, however, has tried to relied on the earlier deposit made on 15.6.1982. But the said amount was withdrawn. Merely because the respondents had earlier deposited the said amount, it cannot be said that the subsequent non-performance of the contract on their part within the reasonable time, can be taken as prompt performance of the contract on the part of the respondents. In this case, as stated earlier all the proceedings between the parties had become final as early as on 18.12.1990. But
the balance sale consideration was deposited only on 23.4.1992. So it cannot be said that the respondents had tried to perform their part of the contract by
depositing the balance sate consideration within a reasonable time, as there is no explanation given by them for non-performance of the contract immediately.

12. The respondents, admittedly, have not filed any petition to extend the period for depositing the balance sale consideration. While dealing with similar
situation, the learned Judge of the Punjab and Haryana in Omkar Nath v. Basheer, , has held as follows:-

"Section 28 of the Specific Relief Act, 1963 inter alia provides that wherein any suit a decree for specific performance of the contract for sale of immovable property has been made and the purchaser does not, within the period
allowed by the decree or such other period as the Court may allow, pay the purchase money or other sum which the Court has ordered him to pay, the vendor may apply in the same suit in which the decree is made to have the contract
rescinded and on such application the Court may, by order, rescind the contract either so far as regards the party in default or altogether, as the justice of the case may require."

From a bare reading of the section it is clear that the seller has been given a right to make an application for rescission of the contract after the decree has been passed against him, if the purchaser fails to pay the purchase money as directed by the Court within the prescribed period or such further period as the Court may allow. The contract of sale cannot be rescinded on any other ground except the one provided in the section. As already observed above, the
respondents failed to pay the sale consideration within the prescribed period and they did not apply for extension of the period for doing so. Therefore, the petitioners became entitled to get the contract rescinded."

13. The learned Senior Counsel appearing for the respondents has submitted that the delay in depositing the balance sale consideration was only due to the
fact that the petitioner filed appeal against the judgment and decree of the court below and that his wife and sons have filed suit, and further appeal before this Court. In view of the said fact, the learned Senior Counsel has
submitted, that the petitioner cannot find fault with the respondents in not depositing the balance sale consideration within the reasonable time. As stated
above, those proceedings ended as early as on 18.12.1990. But the Execution Petition was filed only on 27.3.1992 and the balance sale consideration was deposited only on 23.4.1992, after the filing of the Execution Petition. The
abovesaid facts will clearly prove that there is no explanation available before the court below for not depositing the balance sale consideration immediately
after the disposal of the abovesaid cases. In the absence of such reason, it cannot be said that the respondents were diligent and prompt in depositing the balance sale consideration, and they cannot take shelter on the proceedings taken by the petitioner, his wife and sons.

14. The learned Senior Counsel appearing for the respondents has further submitted that when the amount towards balance sale consideration was deposited
and draft sale deed was filed, the petitioner did not take any objection. So, at this stage, the petitioner should not be allowed to file the application under Section 28 of the said Act. Merely because the petitioner did not take any
objection to the deposit of the amount towards balance sale consideration, and to the filing of the draft sale deed, it cannot be said that he had lost his right under Section 28 of the said Act, especially when he has not positively
accepted the amount. These facts cannot be construed as res judicata against the petitioner to invoke his right under Section 28 of the Specific Relief Act, 1963. While dealing with the application under Section 28 of the said Act, we
have to see only whether plaintiffs had performed their part of the contract promptly or not: In this case, as found earlier, the respondents had not performed their part of the contract promptly, and they have deposited the
amount towards balance sale consideration long after the proceedings were over and so the order of the court below cannot be sustained.

15. For the reasons stated above, the order passed by the court below in E.A.No. 161 of 1993 in E.P.No. 48 of 1992 in O.S.No. 483 of 1980, dated 20.4.1994 is set aside, and the E.A.No. 161 of 1993 is allowed. Consequently,
this revision is allowed. No costs.


 
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