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Supreme Court overturns order of Madras HC bench, restores single judge order in property case

The division bench of Justice L. Nageswara Rao and S. Ravindra Bhat passed this judgement while hearing a Civil Appeal filed by A.R. Madana Gopal and others.

The Supreme Court on Friday observed that escalation of prices cannot be the sole ground to deny specific performance while deciding a civil appeal.

The division bench of Justice L. Nageswara Rao and S. Ravindra Bhat passed this judgement while hearing a Civil Appeal filed by A.R. Madana Gopal and others against a division bench of Madras High Court judgment that reversed a Single Judge decree for specific performance.

The appellants filed four suits for specific performance of the agreements of sale dated March 20, 1991 and Memoranda of Understanding dated January 24, 1994.

These suits were decreed by the Single Bench. The Division Bench reversed the judgment of single bench citing factors such as delay in deposit of the balance consideration etc.

In this appeal, it was alleged that the respondent entered into separate agreements with the appellants who belong to the same family for sale of property situated at Door No.325, Arcot Road, Vadapalani, Chennai on March 20, 1991.

As per the terms of the agreement, the sale was to be concluded within a period of four months. The respondents would produce the encumbrance certificate much before the execution and registration of the sale deeds.

Raghavendra S. Srivatsa, advocate for the appellants, said that the sale consideration of all four agreements for purchase of the property is Rs 37 lakh of which Rs 34 lakh was paid by August, 1994.

Srivatsa submitted that the demand made by the appellants for execution of the sale deeds was rejected by the respondents on the ground that the Appeal filed by the Income Tax Department against the judgment of the High Court dated October 11, 1998 was pending.

It was only on receipt of information by the appellants that the property was already encumbered, that the appellants filed suits for specific performance. According to the appellants, it cannot be said that there was any delay in filing the suits.

Narasimha, Senior Counsel for the Respondents, contended that time is the essence of the agreements dated March 20, 1991 and the MOUs dated January 24, 1994. Though, the Petitions were disposed of on November 11, 1998, the Appellants filed the suit only between October and December, 2000.

The Appellants had not issued any notices to the Respondents to execute sale deeds after the disposal of the Writ Petitions. The Appellants also did not discharge their obligation of paying balance sale consideration.

The Court noted that the rulling of the Division Bench of the High Court that the Appellants were not ready and willing to perform their part of the contract by not paying the balance consideration immediately after disposal of the Writ Petition is incorrect.

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“A suit for specific performance cannot be dismissed on the sole ground of delay or laches. However, an exception to this rule is where an immovable property is to be sold within a certain period, time being of the essence, and it is not found that owing to some default on the part of the plaintiff, the sale could not take place within the stipulated time. Once a suit for specific performance has been filed, any delay as a result of the Court process cannot be put against the plaintiff as a matter of law in decreeing specific performance. However, it is within the discretion of the Court, regard being had to the facts of each case, as to whether some additional amount ought or ought not to be paid by the plaintiff once a decree of specific performance is passed in its favour even at the appellate stage. We are in agreement with the Appellants that they did not file the civil suits immediately after the disposal of the Writ Petition in 1998 due to the pendency of Writ Appeals. Escalation of prices cannot be the sole ground to deny specific performance. We are of the considered view that the Respondents are not entitled for any additional amount as 90 per cent of the sale consideration was paid by the Appellants before 1994,” the bench said while allowing appeals.

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