On January 10, 2024, the Supreme Court of India in the case of, Alagammal v. Ganesan, held that specific performance of an agreement to sell cannot be sought by a buyer who has failed to adhere to the timeline provided for payment under the agreement to sell.

Brief Facts:

1. The Appellant Nos. 1 and 2 entered into a registered Agreement of Sale (“Agreement”) dated November 22, 1990 with the Respondents to sell the property in question for a consideration of Rs. 21,000/- (Rupees twenty-one thousand only), against which, a sum of Rs. 3,000/- (Rupees three thousand only) was received in advance. A period of 6 (six) months was fixed for the completion of the transaction.
2. The Appellant Nos. 1 to 3, in the interim, executed a Sale Deed dated November 5, 1997 with respect to the property in question with the Appellant No. 7 for a consideration of Rs. 22,000/- (Rupees twenty two thousand only) (“Sale Deed”).
3. The Respondents addressed a notice to the Appellants calling upon them to execute the Agreement and consequently filed Original Suit No. 165 of 1998 before the Munsif, District Court, Dindigul against the Appellants seeking specific performance of the Agreement, damages and suit for recovery of money with interest (“Suit”). The Suit was dismissed by the Principal District Munsif Judge, Dindigul vide Order dated September 10, 2000.
4. An Appeal bearing A.S. No. 258 of 2008 filed by the Respondents was allowed by the First Appellate court and the same was upheld by the High Court of Madras vide the Judgment dated April 28, 2009 (“Impugned Judgment”).

Submissions by the Appellants:

1. In terms of the Agreement, the balance sale consideration of Rs. 18,000/- (Rupees eighteen thousand only) was to be paid within 6 (six) months, which was admittedly not paid.
2. The alleged subsequent payments made by the Respondents on December 16, 1990 of Rs. (Rupees one thousand only), on April 15, 1991 of Rs. 3,000/- (Rupees three thousand only) and on September 17, 1991 of Rs. 2,500/- (Rupees two thousand and five hundred only) was not actually paid to the Appellant No. 1 since even the fingerprint expert had found that the thumb impression of the Appellant No. 1 on the receipts of payments was not that of the Appellant No. 1. Once the fingerprint had been disproved by an expert and such report had been brought before the First Appellate Court, the claim based on such a document on which forgery has been committed, itself renders the entire transaction inadmissible in law. Without prejudice to the above, the Appellant No. 1 had not received the alleged payments made by the Respondents.
3. The Notice dated November 18, 1997 issued by the Respondents was issued to get over the fatal lapses on the part of the Respondents and to give life to a dead cause, i.e. to revive the Agreement, which already stood incapable of being performed due to efflux of time.
4. Readiness and willingness must be pleaded and proved, which had not been done.
5. The alleged last payment was made and endorsed on September 17, 1991 and thus, three years from such date would be September 16, 1994, however the Suit was filed on March 23, 1998, which was clearly barred by limitation.
6. The alleged endorsements were silent regarding any extension of time and the period under the Agreement would expire on May 21, 1991 and the three year limitation would expire on May 22, 1994.
7. Neither the Original Suit No. 551 of 1992 nor the Judgment rendered thereunder had been mentioned by the Respondents in the Suit while computing the cause of action.
8. It was incumbent upon the Respondents to obtain the sale deed and possession through court, as set out in the Agreement.

Submissions by the Respondents:

1. The Appellant No. 1 filed Original Suit No. 551 of 1992 on March 23, 1992 against her husband, mother-in-law, second wife of her husband and the son of the second wife, which was decreed.
2. The Appellants, even after accepting an excess amount over and above the amount in the Agreement and even after getting a decree for declaration and possession of the property in question in her favour on July 24, 1996, did not execute the Sale Deed due to which the notice dated November 18, 1997 was issued by the Respondents. As no action was taken by the Appellants, the Respondents filed the Suit on March 23, 1998 seeking specific performance.
3. The issue whether time is the essence of the contract i.e. the Agreement would depend on the conduct of the parties and in the instant case, when money was accepted by the Appellant No. 1, much after the expiry of the time period under the Agreement, the Agreement’s validity so as to culminate in sale could not be said to be extinguished, since by accepting money after the expiration of the timeline stipulated under the Agreement, the time indicated for completion of the transaction by execution of the Sale Deed stood extended.
4. The actual intention of the parties was not only to execute the sale deed but also handover possession of the property in question. The Appellant No. 1 became capable of handing over possession only on July 24, 1996, limitation would commence from such date as otherwise, even if the Sale Deed was executed in favour of the Respondents, it would have been of no real consequence in the absence of possession being handed over to the Respondents.
5. When a party is not in possession to hand over the same at the time of the execution of an Agreement, then time would not be of essence as the right to sue would accrue in favour of the person to whom the property in question is required to be sold only upon the seller being in a position to handover possession of the property in question to the buyer.
6. The subsequent conduct of the parties is also relevant for testing whether time is of the essence and in the instant case, the acceptance of money by the Appellant No. 1, much after the expiry of the six months period for completing the transaction, leaves no doubt that time was not of the essence and time for performance of the Agreement would commence only after the obtainment of the physical possession of the property in question by the Appellants.

Issue: 

Whether the Agreement of Sale dated November 22, 1990 disclosed a fixed time frame for making payment in full by the Respondents?

Observations of the Court:

1. It was an admitted position that the time indicated in the Agreement was 6 (six) months from November 22, 1990, i.e. till May 21, 1991 and as per the Notice dated November 18, 1997 addressed by the Respondents, only Rs. 7,000/- (Rupees seven thousand only) was paid within the said period.
2. It was not the case of the Respondents that they had even offered to pay the remaining amount before the expiry of the 6 (six) months’ period and thus, the Respondents had failed to comply with their obligation under the Agreement within the 6 (six) months’ period.
3. The Appellant No. 1 having accepted the payment of Rs. 1,000/- (Rupees one thousand only) on April 21, 1997, after the Appellant No. 1 had already executed a Sale Deed in favour of the Appellant No. 7 alongwith the fact that the forensic report found that the thumb impression acknowledging such payment did not match the fingerprints of the Appellant No. 1 clearly indicated that the time had not been extended and no enforceable right accrued in favour of the Respondents under the Specific Relief Act, 1963.
4. At the highest, if the Appellant No. 1 had accepted money from the Respondent No. 1 after the expiry of the time limit, which in fact had not been conclusively proved, the remedy available to the Respondent was to seek recovery of such monies paid to the Appellant No. 1 alongwith damages or interest, but a Suit for Specific Performance to execute the Sale Deed would not be available.
5. No relief qua cancelation of the Sale Deed executed in favour of the Appellant No. 7 had been sought for by the Respondents and a Suit for Specific Performance for the execution of the Sale Deed qua the very same property could not be maintained.
6. Even if the case of later payments by the Respondents to the Appellants is accepted, the same being at great intervals and there being no willingness shown by them to pay the remaining amount or getting the sale deed ascribed on the necessary stamp paper and giving notice to the Appellants to execute the sale deed, it cannot be said, in view of the conduct of the parties, especially the Appellants, that time was not of the essence of the contract.

Decision: 

The Court, observing that when an agreement provides for a specific time period for making payments, a party that has defaulted in adhering to such time frame, cannot be granted the relief of specific performance of the agreement, set aside the Impugned Judgment.

Analysis: 

The present judgment reemphasizes on the importance of time being the essence of a contract and shall act as a safeguard for vendors/sellers in suits for specific performance filed by defaulting vendees/purchasers that have failed to adhere to the time period determined under an agreement.  

Please find attached a copy of the judgment.

This update has been contributed by Namitha Mathews (Partner) and Poorva Pant (Principal Associate).

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