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Judgment
Natesan, J.—The above appeal has been preferred by the three Defendants against whom the Plaintiff''s claim for specific enforcement of an
agreement for sale executed by Defendants 1 and 2 has been decreed by the learned Subordinate Judge of Tiruchirappalli. The agreement is dated
17th February 1960 and relates to buildings in Karur Town, belonging to Defendants 1 and 2, a portion of which was under usufructuary mortgage
in favour of the third Defendant for Rs. 5,000 under a deed, dated 31st January 1958, the period of redemption provided in the document being
five years. The third Defendant is impleaded as the subsequent purchaser of the property under two registered sale deeds, exhibits B-3 and B-4,
dated 29th May 1960, B-4 covering the properties under the usufructuary mortgage and exhibit B-3 taking in the remaining properties.
The agreement, exhibit A-l, covenanted for the sale of the properties by Defendants 1 and 2 to the Plaintiff or his nominee for a consideration of
Rs. 20,000. Rs. 3,000 had been paid at the time of the execution of the agreement. The vendee was himself to discharge the usufructuary
mortgage for Rs. 5,000 in favour of the third Defendant out of the consideration amount. For the vendors to buy landed property according to their
convenience near about their residential village of Tirukattupalli, a sum of Rs. 10,000 of the consideration was to be left with the vendee. The
vendee was to pay the said amount of Rs. 10,000 before the sub-registrar on behalf of the vendors when the vendors made their purchase, without
any obstacles coming in the way of their purchase. The balance of Rs. 2,000 of the consideration was to be paid by the vendee at the time of the
registration of the sale deed in his favour by the vendors. The time fixed for the completion of the sale was three months from the date of the
document, that is, till 17th May 1960, and the vendee had to bear the registration and stamp charges. There is a provision in the agreement for the
vendors giving as indemnity in the sale deed the landed property they intended purchasing. The agreement contains the usual default clause
providing for the vendee forfeiting the advance amount on failure to take the sale deed within the period provided, and if the vendors were in
default, they had to pay the vendee, besides the advance of Rs. 3,000 a further amount of Rs. 3,000.
The Plaintiff pleaded that he had always been ready and willing to fulfil his obligations under the agreement and take the sale deed in terms of the
same, and that, while so, the third Defendant, who had full knowledge of the agreement for sale in favour of the Plaintiff, deliberately made
Defendants 1 and 2 avoid the agreement, and took the deed of sale in his own favour. The principal defence was that the Plaintiff defaulted and
failed to fulfil his obligations in terms of the agreement within the time specified, there was, therefore breach, that Defendants 1 and 2 had entered
into an agreement for purchase of lands as provided for in the agreement exhibit A-l, that the Plaintiff had due intimation of the same in advance,
that he failed to make payments and take the sale in terms of the agreement by 17th May 1960, even though called upon to do so, and that
Defendants 1 and 2, having entered into contract with third parties, sold the property to the third Defendant bona fide to protect themselves from
loss. Defendants 1 and 2 in their written statement pleaded further that the third Defendant was not previously appraised of the agreement, dated
17th February 1960 and that his purchase was bona fide.
In the plaint, the Plaintiff had specifically averred that the sale deeds in question in favour of the third Defendant had been brought into existence
after interdict by the Plaintiff, the Plaintiff sending a telegram on 29th May 1960 to the third Defendant when he came to know of the conspiracy
between the Defendants and they were trying to wriggle out of the contract in his favour. The Plaintiff referred to the correspondence between the
parties till breach and emphasised the want of bona fides in the purchase by the third Defendant without even the title deeds, the title deeds
according to the Plaintiff, having been handed over to him and being in his custody. But the written statement of the third Defendant is a bald one,
and just denies knowledge of the agreement between the Plaintiff and Defendants 1 and 2, refers to the, usufructuary mortgage in his favour, and
then proceeds to state that the sale deed in favour of the third Defendant was, in fact, executed about ten days after the expiry of the three months
time from the date of the alleged agreement in favour of'' the Plaintiff. It further states that the third Defendant had paid Defendants 1 and 2 the
balance of the purchase money after deducting therefrom the amount due on his usufructuary mortgage. Excepting a general denial of the
allegations in the plaint and putting the Plaintiff to proof, there is not even a formal averment that the purchase by the third Defendant was bona fide
and in good faith.
On a careful and exhaustive consideration of the evidence, oral and documentary, and the probabilities, the learned Subordinate Judge has held
that Defendants 1 and 2 defaulted in the performance of the agreement and that the Plaintiff was not at fault at all. He further found that the third
Defendant had notice of the agreement in favour of the Plaintiff and that he was not a bona fide purchaser who had paid his money in good faith.
To start with, we see that the time fixed in the agreement for its completion was till 17th May 1960 and the sale deed in favour of the third
Defendant purport to have been executed on 29th May 1960, just twelve days after the time fixed in the agreement for sale. Now, apart from
other considerations, if the Plaintiff had been ready and willing through the period of the agreement to act according to its tenor, if time was not of
the essence of the contract, and if the third Defendant had notice of the agreement for sale in favour of the Plaintiff, the Plaintiff would be entitled to
decree for specific performance against all the Defendants.
It is well settled that in regard to transactions relating to sale of immovable property time is not considered to be of the essence of the contract.
As observed by Lord Cairns in Tilley v. Thomas (1867) L.R. 3 Ch. 61, 67.
A court of equity will indeed relieve against, and enforce, specific performance, notwithstanding a failure to keep the dates assigned by the
contract, either for completion, or for the steps towards completion, if it can do justice between the parties, and if...there is nothing in the express
stipulations between the parties, the nature of the property, or the surrounding circumstances which would make it inequitable to interfere with and
modify the legal right. This is what is meant, and all that is meant, when it is said that in an equity time is not of the essence of the contract.
In Jamshed Khodaram v. Burjorji Dhunjibhai ILR (1945) 40 Bom. 289, (P.C.) after referring to the above passage their Lordships of the Judicial
Committee add:
The special jurisdiction of equity to disregard the letter of the contract in ascertaining what the parties to the contract are to be taken as having
really and in substance intended as regards the time of its performance may be excluded by any plainly expressed stipulation. But to have this effect
the language of the stipulation must show that the intention was to make the rights of the parties depend on the observance of the time limits
prescribed in a fashion which is unmistakable.
This decision of the Judicial Committee, which is the leading case on the subject, proceeds in the view that there is a presumption that for
purposes of specific performance time is not of the essence of the bargain with reference to immovable properties. The fact that there was a default
clause providing for forfeiture of the deposit was not considered to be of any significance or as showing a contrary intention. Now, in this case,
prima facie the agreement is an ordinary agreement for sale and the presumption that time is not of the essence in such cases is not displaced by
any circumstance existing at the time of the agreement. The intention to make time the essence of the contract, according to the above decision,
must appear from what has passed prior to the contract, the construction of which cannot be affected in the contemplation of equity by what takes
place after it has once been entered into. The inference as to intention that time should be of the essence of the contract, must be from what had
passed between the parties prior to the signing of the contract. No doubt, when there has been undue delay on the part of one party to the contract
equity will not come and assist him, when the other has given reasonable notice that the contract must be completed within a definite time. There is
nothing in the character of the property or the attendant circumstances at the time of the contract ex necessitate rei leading to the conclusion that
the parties considered that time was of the essence of the bargain. The agreement, as already stated, is just in the usual form of such agreements,
and there is nothing disclosed therein from which one could infer that the contract, at all events, must be completed within the time fixed. It will be
seen that the agreement provides for the vendors making purchase of some other property out of the consideration of Rs. 10,000. Admittedly, they
did not settle upon any purchaser at the time they entered into the agreement exhibit A-l; that purchase is also of immovable property and there
were no compelling reasons for finishing the transaction within any particular time.
Learned Counsel for the Appellants relied upon the observations of this Court in K.S. Sundaramayyar Vs. K. Jagadeesan and Another, for his
contention that time was not of the essence of the contract. That was a case where the agreement provided that the period of three months within
which the sale had to be completed, cannot be extended for any reason whatsoever, save by the consent in writing of both the parties. The trial
Court had held that the time was not of the essence of the contract, that the Plaintiff himself had committed breach of the contract and was not, at
all times, ready and willing to perform the -contract, and that therefore, his claim for specific performance had to fail. All that was observed in that
case by Ramachandra Ayyar C.J., who delivered the judgment of the Bench, was that this Court was.
not satisfied that the view taken by the learned Subordinate Judge that time was not of the essence of the contract was entirely correct.
His Lordship then proceeded to observe that it was unnecessary to go into that question, and the case itself was disposed of in the view that
the Plaintiff was not continuously ready and willing to perform his part of the contract. This decision cannot, in our view, in the least, help the
Appellants before us.
The point urged in favour of the Appellants is that they had entered into-an agreement with a third party for purchase of property as
contemplated in the agreement, exhibit A-l, and that the Plaintiff failed to pay up in time. There was also a faint suggestion that the Plaintiff had not
the necessary funds in time to provide consideration in terms of the agreement. We may immediately say that these pleas of the Defendants are
devoid of merits. The Plaintiff has got exhibited his call deposit register, exhibit A-34, in the Lakshmi Vilas Bank, Limited, Karur. Even before he
entered into the agreement, he had a sum of Rs. 5,000 in call deposit. Apart from this amount he had paid the advance amount of Rs. 3,000 under
the agreement, exhibit A-l. On 25th March 1960 he added to the deposit a sum of Rs. 2,000 payable at call after 24 hours notice. Again, on 14th
April 1960, he added another sum of Rs. 3,500 payable at call after 24 hours notice; that is, on 14th April 1960, he had to his credit, as call
deposit, a sum of Rs. 10,500 in bank, payable at 24 hours notice. After dispute between the parties started, he transferred the sum of Rs. 10,500
to fixed deposit, on 8th October 1960. The fixed deposit receipt is exhibited as exhibit A-30. All that the Plaintiff had to do, when called upon,
was to pay the sum of Rs. 10,000 when the vendors choose to get ready to complete their purchase. He had to pay at the registration of the sale
deed in his favour a sum of Rs. 2,000. So far as the other in favour of the third Defendant was concerned, it was an encumbrance over the
property, which he was purchasing and he had to discharge the same and redeem to secure actual possession. There is his evidence that he is a
trader doing business in coffee, piece-goods and glass-ware, and at any time was having a cash balance of Rs. 10,000 in trade. In the
circumstances, it cannot be said that the Plaintiff could not find the wherewithal when the occasion arose. The Plaintiff has more than established his
capacity to meet the demands on him as regards the consideration for the conveyance. It may be stated that it is not necessary for a purchaser to
establish in addition that he had the required money with him in advance or arrangements had been made for financing the transaction: all that is
required of him is to show that he was ready and willing to fulfil his terms of the agreement. As observed by the Privy Council in Bank of India Ltd.
v. Jamsetji J.A.H. Chinoy ILR (1950) Bom. 606(P.C).
In order to prove himself ready and willing, a purchaser has not necessarily to produce the money or to vouch a concluded scheme for financing
the transaction.
Far from there being any delay or dilatory tactics on the part of the Plaintiff, a perusal of the correspondence will establish that it was
Defendants 1 and 2 that had been pleading for time. In exhibit A-8, dated 14th April 1960, the Plaintiff is pointing out the delay on the part of the
Defendants and requesting them to attend to the affairs and execute the sale immediately. The negotiations and settlement of the agreement on
behalf of Defendants 1 and 2 were made by the second Defendant''s husband, Nataraja Asari, and Chinniah Asari, his brother who has given
evidence as D.W. 2. Exhibits A-11 to A-13 and exhibits A-16 and A-17 are letters by Chinniah Asari with reference to this agreement, and they
reveal that the Defendants 1 and 2 were taking time. The letters refer to the difficulty they had in securing land for their purchase. It is stated in
exhibit A-11 that it was difficult to get land. In exhibit A-12, dated 5th May 1960, it is stated that in the matter of purchasing land there was delay
because of laws and regulations, lease and disputes, etc. There is a specific request that it was better if the time of the agreement was extended
further. The delay is stated to be because of the affairs at Tirukattupalli, the residence of Defendants 1 and 2. Exhibit A-13 also refers to the need
for extending the time of the agreement. Exhibit A-13 purports to be written by Chinniah Asari on behalf of the first Defendant. In exhibit A-16,
also by D.W. 2 on behalf of the first Defendant, reference is made to the fact that a child was suffering from measles and the party can come only
after giving bath to the child. There is no express intimation here that their purchase was getting finalised. This letter is, dated 8th May 1960. Exhibit
A-17 is another letter by D.W. 2 under the directions of the first Defendant. This is, dated 12th May 1960. It is stated therein that 15 more days
would lapse as regards the matter of purchase of lands by the Defendants at their place. They offered to execute the sale deed and desired the
Plaintiff to go over to that place. It may be remarked here that Tirukattupalli is about 90 miles from Karur. On the same day, 12th May 1960, the
Plaintiff has sent his notice, exhibit A-20 (copy) through his lawyer, requiring Defendants 1 and 2 to go over to Karur and execute the sale deed
and threatening proceedings for specific performance of the agreement. These notices, exhibits A-18 and A-19, were returned by the Defendants
without being received. Meanwhile, the Plaintiff had purchased the necessary stamp papers for Rs. 1,600. In fact, on 6th May 1960, itself he had
intimated the vendors by-exhibit A-15, that he had indented for the stamp papers required for the sale deed. The correspondence, the purchase of
the requisite stamp papers for Rs. 1,600 in advance, and the provision made for ready cash, all indubitably establish that the Plaintiff has been right
through ready and willing to complete the agreement and was anxious to put through the purchase.
But the Plaintiff had some apprehensions that his vendors were trying to wriggle out of the contract, and presented the agreement itself for
registration on 20th April 1960. By reason of the dilatory tactics adopted by the Defendants the agreement could not be registered immediately,
and it was registered long after, pending the suit, the suit having been instituted on 19th June 1960. While there is nothing in the correspondence
prior to 17th May 1960, anywhere indicating that the Plaintiff was reselling from the contract or was in any way at fault, on 17th May 1960 a
telegram is sent to the Plaintiff by the first Defendant intimating that though she was ready, the Plaintiff unnecessarily delayed the matter and that
they (Defendants 1 and 2) were not responsible thereafter. This telegram has been sent from Karur itself. The Plaintiff promptly replied
telegraphically (exhibit A-22) that he had always been ready to perform his part of the contract, that in the absence of her daughter, that is, the
second Defendant, she could not execute the sale deed as agreed, and that her alleged readiness in the telegram was false. By the return of the
notice sent to the second Defendant from Tirukattupalli as refused on 17th May 1960, the Plaintiff has properly and naturally inferred that the
second Defendant was not at Karur on 17th May 1960. It must also be noticed that nothing prevented the Defendants 1 and 2 from meeting the
Plaintiff and requiring him to execute the document in terms of the agreement. The issue of this telegram after all the correspondence that had
passed between the parties till that day clearly betrays that it was an attempt on the part of the Defendants to make out a case that the Plaintiffs
was in default. The second Defendant has given evidence as D.W. 6 that after executing the agreement, exhibit A-1, she did not go to Karur at all.
Added to the return of the notice issued on behalf of the Plaintiff, from the admission of the second Defendant it is clear that even if time was of the
essence of the contract and the sale had to be completed by 17th May 1960, the second Defendant was nowhere near Karur for completing the
sale. The contention of Defendants 1 and 2 that they were at Karur on 17th May 1960, and that the Plaintiff defaulted, therefore, fails. If the
attitude of Defendants 1 and 2 had been perfectly above board and their demand legitimate, one would expect them to have followed up the
telegram by another letter or notice requiring completion. But far from that, one finds them conveying the properties to the third Defendant by
deeds (exhibits B-3 and B-4) purporting to bear the date 29th May 1960.
While there was no whisper in the correspondence or in the telegram of any default on the part of the Plaintiff, a case is attempted that during
the subsistence of the agreement the Plaintiff required Defendants 1 and 2 to execute a sale deed in terms of a draft which he produced, containing
stipulations contrary to the agreement, exhibit A-l. The Defendants sought to develop the case that they were not agreeable to any variation in the
terms of the sale deed and on their refusal the Plaintiff went back on his agreement. This suggestion by the Defendants has been stoutly denied by
the Plaintiff as P.W. 1. On behalf of the Defendants certain statements made by the Plaintiff in the enquiry relating to the registration of the
agreement are relied upon for this case. Exhibit B-2 is a draft which is put forward as containing the variations. In his deposition during the enquiry,
the Plaintiff had admitted that exhibit B-2 was written by one Krishnamachari as per the dictation of certain panchayatdars. The Plaintiff now
denies having given any draft agreement to Chinniah Achari (D.W. 2) or to Defendants 1 and 2. According to the Plaintiff, at the panchayat it was
provided that Rs. 12,000 should be paid at the time of the registration of the sale deed. At that enquiry there was a suggestion by the Defendants
of some other agreement also and the Plaintiff stated that exhibit B-l was written as advised by the panchayatdars, who wanted to effect a
compromise. It is not the case of the Defendants that there was any such finalised panchayat agreement. It is not also their case that the draft,
exhibit B-2, had been brought to their notice and sale in its terms asked. Such is not the plea in the written statement. The correspondence does
not refer to any draft containing fresh stipulations having been given by the Plaintiff. The learned Subordinate Judge has rightly rejected this defence
that the Plaintiff insisted upon the fulfilment of a varied contract. There is no acceptable evidence to show, nor any specific case, that the Plaintiff
insisted upon a sale deed containing stipulations contrary to the agreed terms. Assuming there was some suggestion by some mediators as stated at
the registration enquiry, the Plaintiff himself has never stood by it and never demanded and stuck to a sale deed contrary to the agreement between
the parties. In our view it has not been established that the Plaintiff went back upon his agreement, for one reason or other.
Equally untenable, even on the merits, is the case that by reason of the Plaintiff''s default, Defendants 1 and 2 could not take their conveyance
of the land at Tirukkattupalli within the time stipulated and that they had thereby to forfeit the advance they had made of Rs. 2,000. The plea in the
written statement with reference to this was that they had entered into an agreement for purchase of properties in Tirukattupalli with one
Sundararaja Nattar (D.W. 7) and that the advance of Rs. 2,000 had been paid. But the evidence now given shows that the agreement for
purchase was with one Visalakshi Ammal. The purchase for Rs. 8,500 and the document exhibit B-l show that the entire consideration of Rs.
8,500 had been paid before the Sub-Registrar. It is trotted out in evidence that a sum of Rs. 2,000 had already been paid to this Visalakshi Ammal
and this had been forfeited but there is no reference to any earlier agreement for sale in exhibit B-l. D.W. 2 Chinniah Asari refers to an anterior
written agreement with Visalakshi Ammal. This agreement is not produced. D.W. 7 Sundararaja Nattar refers to the passing of a letter by
Visalakshi Ammal wherein the default clause is provided. This letter is stated to be with one Srinivasa Iyer, a relation of Visalakshi Ammal. Though
Visalakshi Ammal is dead, this Srinivasa Iyer is admittedly alive. Neither Srinivasa Iyer is called, nor is he directed to produce the letter. D.W. 7
states that there was no written agreement as such, apart from the letter above referred to. But D.W. 2 Chinniah Asari refers to a written
agreement; however, he admits that in the written agreement there is no provision for any forfeiture, of the advance of Rs. 2,000. Visalakshi
Ammal is stated to be a rich lady and not in need of money. The question is whether it has been made out at all that a contract for the purchase of
immovable property had been entered into providing for forfeiture of the deposit of Rs. 2,000 in default of completion of the transaction within one
week. D.W. 7 states that the period provided is only one week. Admittedly, no notice was given to the Plaintiff that a peremptory agreement had
been entered into for purchase of land by Defendants 1 and 2. D.W.2., no doubt, would state that he sent a letter, but that he did not keep a copy
of that letter. There is no evidence of any such letter being sent to the Plaintiff. As the sale with Visalakshi Ammal was completed only on 11th June
1950, one would expect Defendants 1 and 2 to intimate specifically the default by the Plaintiff by written notice intimate forfeiture of this deposit or
demand performance. As already stated, the telegram by Defendants 1 and 2 is laconic, and appears to be a clever ruse. D.W. 2 deposes that
even after the 17th of May 1960, he waited for seven or eight days and only thereafter he asked the third Defendant whether he would purchase
the property. When we notice that the Plaintiff had ready cash available with him is it at all likely that he would allow the opportunity to pass by and
not complete the transaction, which he was anxious to finish? For the registration of the agreement itself he had paid a fee of Rs. 290 in April 1960,
apprehending trouble from the Defendants. He had purchased stamp papers for Rs. 1,600 before the 14th of May 1960. In these circumstances,
we agree with the learned Subordinate Judge that the contention on behalf of Defendants 1 and 2 that the Plaintiff defaulted in paying money for
their purchasing lands and so the sale deed in favour of the Plaintiff could not be executed, is unacceptable, this is on the basis that the sale deed in
favour of the Plaintiff could only be executed and registered after the completion of the purchase by Defendants 1 and 2 of the lands at
Tirukkattupalli.
Here again, even assuming that the Plaintiff could not find the money or there was default on his part in providing for the purchase by
Defendants 1 and 2, the Plaintiff could be non-suited only if time was of the essence of the contract. The Plaintiff having never repudiated the
contract and as has been established, being ever ready and willing to abide by the tenor of the agreement without variation, the failure to find
money within 17th May 1960 as the Defendants would allege, will not, by itself, disentitle the Plaintiff to specific performance. As already pointed
out, the purchase by Defendants 1 and 2 is a collateral matter. It has not been established that, with reference to this agreement with Visalakshi
Ammal time had been made the essence of the contract. The presumption is that it was not. Even otherwise, there is no acceptable evidence of the
Plaintiff being informed of the urgency and need for prompt payment. As it is, the sale took place only on 11th June 1960. In our view, on the
terms of the agreement exhibit A-l between the parties, and in the circumstances, the need and urgency of Defendants 1 and 2, by itself, will not
make time the essence of the contract and defeat the Plaintiff''s claim for specific performance by reason of any default of payment within the time
specified. In this connection, we may refer to a recent decision of this Court in N. Palanichami Nadar Vs. Gomathinayagam Pillai and Others, That
was a case where the time for performance had been extended till 30th April 1959. There was the usual default clause. Originally there was no
time limit. Subsequently an agreement in writing came into existence fixing the time limit as 15th April 1959, which was later extended up to 30th
April 1959. It was found that on or before the 30th of April 1959, the Plaintiff was not ready with the necessary funds to go through the sale and in
that sense had defaulted. There was urgency for money on the side of the vendors. The brother of one and the son of another were involved in a
murder case and they had been committed to the Sessions in March 1959. A sentence of imprisonment for life had been given. Money was
immediately required in March 1959, and in the first part of April in connection with the trial and for filing a criminal appeal. Veeraswami J.,
delivering the judgment of the Bench, referring to the urgency observed:
But we are not persuaded that, by itself, is enough to hold time to be of the essence of the agreement.
It follows from the above discussion that the Plaintiff has never been at default, but was ever ready and willing to perform his obligations under
the contract and take the sale deed from Defendants 1 and 2, according to the tenor of the agreement, exhibit A-l. There can, therefore, be no
defence to the Plaintiff''s claim for specific performance against Defendants 1 and 2.
The next question for consideration is whether the third Defendant is a transferee for value, who has paid his money in good faith and without
notice of the original contract between the Plaintiff and Defendants 1 and 2. Now, the sale in favour of the third Defendant of the suit properties is
under two sale deeds, one sale deed for Rs. 14,500, and the other for Rs. 5,500, the latter sale deed comprising the properties already under othi
to the third Defendant. The consideration for this sale deed is the amount due under the of othi plus a sum of Rs. 500 paid in cash at the time of the
execution of the sale deed. Under the sale deed for Rs. 14,500, the third Defendant pays an advance of Rs. 1,500, and retains a sum of Rs.
10,000 payable to the vendor of the lands in favour of Defendants 1 and 2 as and when the registration of their sale deed takes place; the balance
of Rs. 3,000 was not payable immediately and had to be retained by the third Defendant himself payable to his vendors in six months time, the
amount meanwhile to carry interest at ten annas per cent per mensem. Both these documents, exhibits B-3 and B-4, were registered only on 11th
June 1960. With reference to the sum of Rs. 10,000 retained for payment to the vendors of Defendants 1 and 2, on 11th June 1960 itself the
document in their favour was got registered and the consideration of Rs. 8,500 payable therefore was paid by the third Defendant before the Sub
Registrar.
With reference to these sale deeds, the Plaintiff, hearing that the third Defendant was making arrangements for the purchase of the property, on
29th May 1960 itself sent a telegram exhibit A-23 addressed to the third Defendant intimating that the first Defendant''s prior agreement of sale in
his favour, dated 17th February 1960 was subsisting to the knowledge of the third Defendant, that the third Defendant was purchasing a dispute
and that the risk would be his and the sale would be invalid. Proceedings were also threatened. According to the third Defendant, the telegram was
received only at 8 p.m. and the document had been written and money received in the morning itself. But even admittedly by then he had paid only
Rs. 2,000 of the Rs. 20,000 consideration to Defendants 1 and 2. Defendants 1 and 2 are stated to have come to his house only on 28th May
1960. According to the third Defendant, they did not tell him anything about the prior agreement with the Plaintiff, or that the Plaintiff failed to
perform his part of the agreement and that he (third Defendant) might purchase the properties. The whole matter, according to the third Defendant,
was settled on 28th May 1960 itself. No agreement was written and no advance was paid then. He did not care to call for the title deeds, as
according to him he knew the title, in view of the usufructuary mortgage in his favour. He would add that Defendants 1 and 2 stated that they had
title deeds and that they would give them. The stamp papers for Rs. 14,500 sale deed had been purchased on 17th May 1960 itself. The third
Defendant attempts an explanation that he had negotiated for the purchase of some other property through one Balakrishna Chettiar and secured
the stamp papers for that purpose. But he had not paid him any advance for this and there was no written agreement with Balakrishna Chettiar. He
is not able to give any details as to the property which he intended purchasing from that Balakrishna Chettiar. The default according to the third
Defendant was on the part of Balakrishna Chettiar, but still he did not give him any notice though he had spent money buying stamp papers. He
denies any previous intimation by the Plaintiff of the agreement in his favour. D.W. 8 is the document writer for the third Defendant''s purchase. The
third Defendant goes to him in the morning of the day on which exhibits B-3 and B-4 were written, fixes up D.W. 8, and then fetches D.Ws. 1 and
2 at about 9-30 a.m. Straightaway the document is got ready. The parties had gone to him ready with stamp papers. He admits that the Plaintiff is
a good man and was not aware of the agreement of sale by Defendants 1 and 2 in his favour. According to him, the Plaintiff met him the next day,
after exhibits B-3 and B-4 were executed, and informed him of the agreement. At that time no one else was present. The third Defendant, it may
be stated, refers to his also being present on the occasion and attempt at some settlement. In view of the contradictions in the evidence, the learned
Subordinate Judge has rightly rejected this case of the third Defendant. But the second Defendant, as D.W. 6, states that she signed the sale deeds
in favour of the third Defendant only at the Sub-Registrar''s office, and before signing the documents in the Sub-Registrar''s office she did not sign
the documents. In fact, she says that she had not seen the third Defendant, and Chinniah Asari took her signature to the sale deed in favour of the
third Defendant at Karur. She signed the sale deed as her mother asked her to sign it. This evidence of D.W. 2 that she has not seen the third
Defendant falsified both the third Defendant and D.W. 8 as to the circumstances under which the documents exhibits B-3 and B-4 were executed.
According to the Plaintiff, shortly after the agreement, he had enquired of the third Defendant whether he would receive the mortgage money
and surrender the properties. The Plaintiff also states that Chinniah Asari on one occasion intimated that the third Defendant was offering some
more money and that the Plaintiff might offer some more money and purchase the properties. Though the learned Subordinate Judge has noticed
that apart from the evidence of the Plaintiff, there was nothing to show that he told the third Defendant about the agreement in his favour, on a
discussion of the other evidence in the case, and the probabilities, he accepts the evidence of the Plaintiff that the third Defendant had knowledge
of the agreement. The tendering of exhibit A-l for registration was by reason of the apprehensions the Plaintiff had. The third Defendant was the
usufructuary mortgagee of a portion of the property. Defendants 1 and 2 are strangers, and when they do come to Karur they stay in the suit house
itself, as admitted by D.W. 6. Defendants 1 and 2 had admittedly come for executing the agreement, exhibit A-l, and, according to the second
Defendant, they then stayed in the suit house. It is a reasonable inference that the third Defendant, who was the usufructuary mortgagee of a
portion of the property, must have been aware of the coming to Karur of Defendants 1 and 2, and he must have had knowledge of the transaction
they were entering into in relation to the property of which he was usufructuary mortgagee. It is some Apprehensions in this direction of
competition that made the Plaintiff present the agreement for sale for registration, as there was delay in its completion. The lack of bona fides in the
third Defendant is quite apparent from the manner in which even admittedly he has hurried through the transaction. A major portion of the
consideration, namely, Rs. 10,000, paid in cash was long after the receipt of the telegram from the Plaintiff, that is only on the 11th of June 1960.
Rs. 3,000 of the consideration he had not paid at all and Bs. 5,000 was in discharge of his own usufructuary mortgage where the time for
redemption had not come. He had parted with only Bs. 2,000, a mere fraction of the total consideration, when he admittedly got the warning from
the Plaintiff with threat of proceedings if he should proceed with the sale.
Apart from these, we have the admission of D.W. 1 that before the sale she told the third Defendant of the agreement for sale in favour of the
Plaintiff. She has deposed that she informed the third Defendant that the Plaintiff went back on the agreement, that she was in need of money and
that the third Defendant might, therefore, purchase the property. We fail to see why this deposition of the first Defendant should not be accepted.
Here, it may be remarked that the learned Counsel for the Appellants is in an embarrassing position. The appeal has been filed by all the
Defendants together, and the Appellants, that is, Defendants 1 to 3 are all represented by the same Counsel.
Mr. V.Vedanthachari, learned Counsel for the Appellants, contends that all that D.W. 1 had informed the third Defendant even if her evidence
is accepted was that there was an agreement in favour of the Plaintiff, that there was breach of the agreement and that it was, therefore, no longer
subsisting. It is contended that the only notice that would defeat the subsequent purchaser is notice of a subsisting contract for sale. Learned
Counsel refers to Section 91 of the Trusts Act, which runs thus:
Section 91--Where a person acquires property with notice that another person has entered into an existing contract affecting that property, of
which specific performance could be enforced, the former must hold the property to the benefit of the latter to the extent necessary to give effect to
the contract.
Emphasis is laid by learned Counsel on the words existing contract affecting that property. But in our view, a reference to this section, by itself,
is of little help to the Appellants. This section only postulates the obligation on the subsequent purchaser, and certainly that can only exist if there is
a subsisting contract affecting the property. If the contract was not enforceable, it goes without saying that the property is free of the obligations
under the contract. The relevant section which provides for the enforcement of the contract against the subsequent purchaser is clause (6) of
Section 27 of the Specific Relief Act (Act I of 1877), which runs thus:
Section 27--Except as otherwise provided by this Chapter, specific performance of a contract may be enforced against--
(a) either party thereto;
(6) any other person claiming under him by a title arising subsequently to the contract, except a transferee for value who has paid his money in
good faith and without notice of the original contract;
It is elementary that specific performance can be obtained only in respect of a subsisting contract, and the necessity for enforcement will arise
only on the default or refusal to perform by the opposite party. For a third party to be relieved of the subsisting contract on the property, he must
show (i) that he is a transferee for value, (ii) that he has paid his money in good faith and (iii) without notice of the original contract. Once the third
party is appraised of the original contract, he cannot plead good faith, if he merely acts on any representation made by his vendor, without further
enquiries. When he has been given notice of the original contract, whether that contract has become unenforceable or is subsisting, is a matter for
determination by Court if there is contest.
The construction of the contract, whether it is subsisting or not, whether time is of the essence of the contract, are matters for the Court and not
matters for determination by the party seeking benefit under the contract or repudiating the contract. The liability of the subsequent purchaser rests
upon the antecedent liability of the party to the original agreement, which is sought to be enforced, and arises by reason of the fact that the
subsequent transferee takes the property subject to the transferor''s pre-existing contractual obligation. Of course, where there is no pre-existing
contractual obligation, the claim against the subsequent purchaser fails automatically.
Mr. V.Vedantachari, learned Counsel for the Appellants, relied upon a passage in the decision of this Court in Ramasami Pattar Vs. Chinnan
Asari, where Shephard J., has observed:
In my opinion, notice of a contract such as is required to satisfy the section (Section 27 of the Specific Belief Act) must be notice of an existing
obligation. When a transferee, hearing of a contract, is also informed that the time for performance has long passed without anything being done,
the inference he would naturally draw is that the right has been waived or otherwise discharged.
But a reference to the facts of this case would show the limited scope of the observations. The instrument of mortgage executed in 1872
contained a covenant for pre-emption in favour of the mortgagee. In 1873 itself the mortgagor sold his equity of redemption and the purchaser''s
interest was sold in execution of a decree against him and bought by Plaintiff before 1893. In 1897 the Plaintiff instituted the suit for redemption
against the representative of the mortgagee, and in defence the right of pre-emption created under the mortgage deed was pleaded. It was
contended that the original assignment of the equity of redemption and the subsequent purchase in Court auction were invalid. It should be noticed
that the cause of action for specific performance arose in 1873 itself, when there was an assignment of the equity of redemption, and the right to
enforce and the right of pre-emption would prima facie be hopelessly barred. The Defendant in that case was seeking to use his covenant against a
person, who bought in 1893 from one who himself had bought in 1873. There was, in fact, no subsisting obligation in that case when the plea was
put forward by the Defendant, and the case can be of little help to the Appellants, as in this case the contract is a subsisting one.
We fail to see how it would be open to a subsequent purchaser to plead good faith, when he had made no enquiries whatsoever of the person
in whose favour there was a prior agreement of sale, once the subsequent purchaser had been put on notice of the said agreement. A thing cannot
be said to have been done in good faith, when it is done without due care and caution, that is, care and caution expected of a man of ordinary
prudence. Here is a transaction in respect of immovable property, the consideration being Rs. 20,000. Admittedly the purchaser had three months
time. It is generally known, and taken for granted, that time is not of the essence with reference to a transaction of sale in respect of immovable
property. The prior purchaser has parted with an advance. He was in possession of the title deeds relating to the property. Normally, even if the
transaction falls of, with reference to the advance paid there may be disputes. A subsequent purchaser, if acting bona fide and as a prudent man,
would make enquiries about the prior agreement of the person who entered into the agreement and seek his assurance that it was no longer
subsisting. It is not the conduct of a prudent man to go by the mere statement of the vendor, who pleads that the other man is in default. The true
position in a case of this kind is tersely summed up thus in Williams on Vendor and Purchaser (fourth edition, at page 1012):
If, on a sale of land, the purchaser has notice that the vendor has entered into a prior contract for sale thereof, which has not been carried out, and
the vendor claims to have lawfully rescinded that contract for the default of the other party thereto, the purchaser must, of course, require very
clear evidence that the prior purchaser has committed such as breach of the contract as justified the vendor in rescinding it. If the fact is at all
doubtful he should refuse to accept the title, for, having notice of the prior contract, he will be bound thereby, in case it is still subsisting and
enforceable. And unless the vendor can prove the fact to be reasonably certain, he cannot oblige the purchaser to accept the title, even at law ; still
less can he enforce the second contract specifically.
One other aspect in this case may be noticed. The sale deed in favour of the third Defendant was brought about only on 29th May 1960. That
very day the Plaintiff has sent a telegram intimating the subsisting agreement in his favour. As already pointed out by the time the telegram was
received, the third Defendant had paid only a sum of Rs. 2,000.'' It is only several days after that he parts with a further sum of Rs. 10,000.
Though, on registration, the sale will date back to the date of execution, still, before the sale was completed the third Defendant had admittedly
been put on notice of the agreement in favour of the Plaintiff and its subsisting nature. Though the third Defendant may claim himself to be a
transferee for value, can it be said that he had paid the money in good faith, without notice of the original contract? A substantial portion of the
money is paid only later, long after the receipt of the notice. The law in England is that notice before actual payment of the whole of the purchase
money, even though it may have been secured, or before the conveyance is actually executed, is binding in the same manner as notice had before
the contract. In Himatlal Motilal v. Vasudev Ganesh ILR (1912) 36 Bom. 446 it is observed that under the law in India also the same principle
must hold good. In our view, at any rate, when a substantial part of the consideration still remains unpaid, the same principle would apply and it
cannot be said that the money under the contract had been paid in good faith before notice, when only a fraction of the entire consideration had
been parted with. There can be no good faith in a person parting with money under such circumstances, and he can claim no protection under the
exception in Section 27(6) of the Specific Relief Act.
In the circumstances, we have no hesitation in agreeing with the finding of the learned Subordinate Judge that the third Defendant had prior
notice of the agreement in favour of the Plaintiff and that he cannot be deemed to be a bona fide purchaser without notice of the agreement in
favour of the Plaintiff. The third Defendant, it will be seen, has nothing to loose in the bargain. He did not part with the sum of Rs. 3,000 which he
has retained in his hands. Admittedly, the third Defendant has parted with a sum of Rs. 12,000 only in all in cash under the contract. It goes without
saying that the money which the Plaintiff would be depositing as balance of purchase price would be available to the extent necessary to the third
Defendant who as the subsequent vendee, has to join in the execution of the sale deed in favour of the Plaintiff. Time for deposit of balance three
months from today.
In the result, the appeal fails and is dismissed with costs.