Full Judgment Text
* IN THE HIGH COURT OF DELHI AT NEW DELHI
st
% Judgment Pronounced on 31 October, 2011
+ RFA (OS) 11/1984
ANIS AHMED RUSHDIE THRU LRs ..... Appellant
Through: Dr.A.M.Singhvi, Sr.Advocate with
Mr.Arun Maitri, Mr.Ashish Rana and
Mr.Nidhiram Sharma, Advocates
versus
BHIKU RAM JAIN & ORS. .....Respondents
Through: Mr.Sandeep Sethi, Sr.Advocate with
Mr.Rakesh Saini, Advocate for R-
1(D), 1(F), 2 and 3
Mr.Pradeep Dewan, Sr.Advocate
with Mr.Rajiv Samaiyar and
Mr.Anupam Dhingra, Advocates for
applicant.
CORAM:
HON‟BLE MR. JUSTICE PRADEEP NANDRAJOG
HON‟BLE MR. JUSTICE SURESH KAIT
1. Whether the Reporters of local papers may be allowed
to see the judgment?
2. To be referred to Reporter or not?
3. Whether the judgment should be reported in the
Digest?
PRADEEP NANDRAJOG, J.
1. The parties went to trial on the following eight issues:-
“1. Whether the suit is within time?
2. Whether the suit is bad for mis-joinder of
plaintiff Nos.2 and 3?
RFA (OS) 11/1984 Page 1 of 51
3. Whether the written statement has been
signed and verified by a duly authorized person? If
not to what effect?
4. Whether plaintiff No.1 has always been ready
and willing to perform his part of the agreement
nd
dated 22 December, 1970?
5. Whether the defendant has committed the
nd
breach of the agreement dated 22 December,
1970?
6. Whether the plaintiff No.1 has committed
breach of any of the terms of the agreement dated
nd
22 December, 1970? If so, to what effect?
7. Whether the plaintiffs are entitled to specific
nd
performance of the agreement dated 22
December, 1970?
8. If issue No.7 is not proved, whether plaintiff
No.1 is entitled to refund of earnest money and
interest thereon?”
2. Whereas issue No.3 was given up by the parties at the
final hearing of the suit, learned counsel for the appellant
stated during arguments in the appeal that issue No.2,
decided in favour of the plaintiffs/respondents, is also given
up.
3. Thus, issues Nos.1, 4, 5, 6, 7 and 8 survive for
consideration in the present appeal, but not as framed by
the learned Single Judge. For purposes of the appeal the
issues which were crystallized by learned counsel for the
parties are as under:-
(i) Whether the respondents were entitled to the benefit
of Sub-Section 5 of Section 15 of the Limitation Act 1963
while computing limitation.
RFA (OS) 11/1984 Page 2 of 51
(ii) Whether clause 7 of the Agreement to Sell entered
into between the parties obliged the plaintiff No.1 to give
money from out of balance sale consideration to the
defendant to enable the defendant to furnish a bank
guarantee to the income-tax authorities to secure payment
of income-tax dues of the defendant (if any found due in the
future) or obliged plaintiff No.1 to give further sum only to
the Income Tax Authorities; and if the answer to the
question is in the affirmative: Whether the plaintiff No.1 was
in breach of said obligation; and if so to what effect.
(iii) Whether the plaintiffs would be entitled to a decree for
specific performance or should be adequately compensated.
4. Deceased appellant, was the defendant and the
respondents Nos.1, 2 and 3 were plaintiffs Nos.1, 2 and 3
respectively. We shall be referring to the parties by their
nomenclature as per the plaint.
5. The plaintiffs filed a suit on 03.11.1977 seeking
specific performance of an agreement to sell dated
22.12.1970, pleading therein that the defendant was the
owner of land and building bearing Bungalow No.4, Flag
Staff Road, Civil Lines, Delhi (hereinafter referred to as the
„Suit Property‟). It was pleaded that the defendant had
inducted the plaintiff No.1, as a tenant in half portion of the
suit property, at a rent of ` 300/- per month on 20.12.1970
and delivered possession of said portion to the plaintiff No.1.
On 22.12.1970 an Agreement to Sell was executed between
the plaintiff No.1 and the defendant, whereunder the
RFA (OS) 11/1984 Page 3 of 51
defendant agreed to sell the suit property to the plaintiff
No.1 for a sale consideration of ` 3,75,000/- (Rupees Three
Lakhs Fifty Thousand Only), out of which ` 50,000/- (Rupees
Fifty Thousand only) was paid to the defendant by the
plaintiff No.1 towards part sale consideration when the
agreement was executed. That vide clauses 4, 5 and 7 of
the Agreement to Sell, the defendant was under an
obligation to obtain a permission/certificate from the
income-tax authorities to sell the suit property and deliver
the same to the plaintiff No.1 within 12 months from the
date of the execution of the Agreement to Sell and that the
plaintiff No.1 was to pay the balance sale consideration to
the defendant within 3 months of the delivery of the income
tax clearance certificate to him and on the asking of the
defendant, the plaintiff No.1 was obliged to pay a sum not
exceeding the amount of balance sale consideration to the
income-tax authorities to clear income tax dues of the
defendant to facilitate sale permission being granted by the
income tax authorities. It was pleaded that since plaintiff
No.1 did not hear anything from the defendant regarding
execution of the sale deed in respect of the property in
question, the defendant wrote letter dated 27.12.1971 to
the plaintiff enquiring the steps taken to obtain the
necessary certificate from the income-tax authorities but did
not receive any response from the defendant. Instead he
received a legal notice dated 06.11.1972 issued by Mr.Ibqal
Kishan, Advocate on behalf of the defendant wherein it was
falsely alleged that the defendant had written letter dated
09.09.1971 to the plaintiff No.1 calling upon him to pay
RFA (OS) 11/1984 Page 4 of 51
` 1,00,000/- (Rupees One Lakh Only) to enable the defendant
to obtain the necessary certificate from the income-tax
authorities and that the plaintiff No.1 failed to provide the
amount. The said notice called upon the plaintiff No.1 to pay
the said sum of ` 1,00,000/- to the defendant failing which it
was threatened that the Agreement to Sell dated
22.12.1970 shall stand terminated and the earnest money
(part sale consideration) in sum of ` 50,000/- paid by the
plaintiff No.1 shall be forfeited by the defendant. It was
pleaded that in response to the notice dated 06.11.1972 the
plaintiff No.1 wrote a letter dated 14.11.1972 to Mr.Iqbal
Kishan Advocate, wherein plaintiff No.1 denied having
received letter dated 09.09.1971 written by the defendant
and stated that as per clause 7 of the Agreement to Sell
dated 22.12.1970 the plaintiff No.1 was required to deposit
a sum towards clearance of income-tax dues of the
defendant with the income-tax authorities and not to pay
said sum to the defendant as desired by the defendant. The
plaintiff No.1 further pleaded that he was always ready and
willing to deposit a sum towards clearance of income-tax
dues of the defendant with the income-tax authorities. It
was pleaded that when the plaintiff No.1 did not receive any
response to his letter dated 14.11.1972 he wrote another
letter dated 15.12.1972 to Mr.Iqbal Kishan Advocate,
reiterating the contents of his letter dated 14.11.1972.
Thereafter there was no correspondence between the
parties till about 5 years. Since the defendant was residing
in London the plaintiff could not take any action against him
for execution of the sale deed in respect of the suit
RFA (OS) 11/1984 Page 5 of 51
property. On 16.09.1977 he received a notice from
Mr.M.Wadhwani Advocate, on behalf of the defendant
wherein the defendant sought to terminate the tenancy of
plaintiff No.1 qua the suit property. Since the defendant had
breached the Agreement to Sell dated 22.12.1970 by not
executing the sale deed in respect of the suit property
within the prescribed period, the plaintiff No.1 who was
always ready and willing to perform his part of the
Agreement to Sell dated 22.12.1970 and his nominees i.e.
plaintiffs Nos.2 and 3 were entitled to a decree for specific
performance of the Agreement to Sell dated 22.12.1970. In
the alternative, a sum of ` 1,30,120.50 calculated in the
following manner was claimed from the defendant:-
1. Earnest money - ` 50,000/-
2. Interest @ 12 % p.a. thereon - ` 41,214.30
from 20.12.70 to 3.11.77
3. Damages - ` 25,000/-
4. Interest @ 12 % p.a. thereon - ` 13,906.20
from 14.3.73 to 3.11.77
Total ` 1,30,120.50
6. In the written statement filed, the defendant admitted
the tenancy created on 20.12.1970 as also the Agreement
to Sell dated 22.12.1970. By way of preliminary objection it
was pleaded that the suit was barred by limitation being
filed beyond 3 years of the date when cause of action
accrued. It was pleaded that the plaintiffs are not entitled
to a decree for specific performance since plaintiff No.1 did
RFA (OS) 11/1984 Page 6 of 51
not perform his obligations under the Agreement to Sell. It
was pleaded that on 09.09.1971 the defendant wrote a
letter to the plaintiff No.1 intimating him that the income-
tax officer had agreed to issue to him the necessary
certificate but on his i.e. the defendant furnishing a bank
guarantee in sum of ` 1,00,000/- in the favour of the
Commissioner of Income-Tax and thus the plaintiff No.1
should have paid a sum of `1 ,00,000/- to the defendant or
credit the said amount with the defendant‟s Banker, an
obligation of plaintiff No.1 under clause 7 of the Agreement
to Sell, so as to enable the defendant to furnish the bank
guarantee but the plaintiff No.1 failed to do so. It was
pleaded that due to the bank guarantee not being furnished,
the defendant was unable to obtain the necessary
certificate from the income-tax authorities. With respect to
the pleadings in the plaint qua exchange of correspondence,
the defendant admitted receipt of all letters save and
except the letter dated 27.12.1971. As noted above, the
defendant asserted having written letter dated 9.9.1971 to
plaintiff No.1.
7. The plaintiffs reiterated the case pleaded by them in
the plaint and denied that defendant No.1 ever wrote or
handed over letter dated 9.9.1971 to plaintiff No.1.
8. Issues were settled between the parties as noted in
para No.1 hereinabove.
9. Before trial commenced, the defendant sought to
amend the written statement and was permitted to do so
RFA (OS) 11/1984 Page 7 of 51
and the effect of the amendments is that the defendant was
permitted to plead the defence of undue hardship to him if
the suit was decreed. Qua the letter dated 9.9.1971 and the
demand raised upon plaintiff No.1 by the defendant to
provide ` 1,00,000/- so that a bank guarantee could be
furnished to the Commissioner Income Tax, additional
pleadings came on record that said request was additionally
conveyed verbally to plaintiff No.1 through the common
broker, Sh.Lajjya Ram Kapoor through whom the Agreement
to Sell was executed between the parties.
10. Since, as noted hereinabove in para 3, the appeal was
argued not with respect to all issues which were debated
before the learned Single Judge, we propose to note only
such evidence as would be relevant for a discussion on the
points urged in the appeal and thus would recapitulate for
the benefit of the reader of the present judgment that with
respect to the factual matrix debated such evidence as is
relevant on the willingness of plaintiff No.1 to discharge his
obligations under the Agreement to Sell dated 22.12.1970
are relevant inasmuch as, from the rival pleadings of the
parties it would be apparent that the dispute would be
whether clause 7 of the Agreement to Sell obliged plaintiff
No.1 to give ` 1,00,000/- to the defendant to enable the
defendant to furnish a bank guarantee to the income tax
authorities so that he could obtain permission from the
income tax authorities to sell the subject property and
further, whether the defendant ever requested plaintiff No.1
to give him ` 1,00,000/- so that he could furnish a bank
RFA (OS) 11/1984 Page 8 of 51
guarantee to the income tax authorities and this issue had a
lot to do with the dispute pertaining to the letter dated
09.09.1971 which defendant claimed to have written and
personally handed over to plaintiff No. 1 and denial of said
fact by plaintiff No.1. Thus, we ignore the testimony of PW-
1 and PW-4 as it has no relevance on the issues debated
before us during hearing of the appeal.
11. We may note that the plaintiffs examined only 4
witnesses but surprising enough, nobody was assigned the
number PW-2 and thus we have PW-1, PW-3, PW-4 and PW-
5. Since the debate before us does not require noting
testimony of PW-1 and PW-4, we would note the testimony
of PW-3 and PW-5 as the same is relevant, besides noting
the relevant documentary evidence.
12. Lajjya Ram Kapur PW-3, deposed that he is a property
broker and that the Agreement to Sell dated 22.12.1970
was executed between the plaintiff No.1 and the defendant
through his firm. On several occasions the plaintiff No.1
requested him to get the sale deed executed. When the
defendant came to Delhi from London on 3-4 occasions he
requested him to execute the sale deed but could not
remember whether the defendant even applied to the
income-tax department for a no objection certificate to be
issued. He stated that on an occasion the defendant told
him that some money is required to be deposited with the
income tax authorities but said that he did not remember
what happened thereafter. This he deposed by way of
examination-in-chief. Certain portions of his testimony
RFA (OS) 11/1984 Page 9 of 51
during cross-examination are relevant and thus we note the
same. He stated as follows:-
“….This is correct that I wrote several letters to
the defendant at London. This is correct that I
wrote to him to come to India in connection with
this transaction in question and he did come to
India. I do not remember if defendant told me
that he had been called upon by the income tax
authorities to either deposit money or bank
guarantee before he could be given income tax
clearance.
Ques. Is it correct that the defendant asked
you to catch hold of some money from Shri Bhiku
Ram Jain for depositing the same with Income
Tax authorities so that income tax clearance
certificate might be issued?
Ans. This is correct. I conveyed the matter to
Shri Bhiku Ram Jain who told me that he was
ready to deposit the amount with the income tax
authorities whatever was needed. I duly
conveyed that reply and readiness of Sh. Bhiku
Ram Jain.
Ques. Is it correct that Mr.Rushdie defendant
told you that he wanted to give bank guarantee
rather than depositing the amount with income
tax department because he had no taxable
income in India?
Ans. Yes.
Ques. Is it correct that Shri Bhiku Ram Jain,
plaintiff refused to give money for enabling
defendant to give bank guarantee?
Ans. I do not remember.
….
Ques. Do you remember that in September,
1971 defendant came to India?
RFA (OS) 11/1984 Page 10 of 51
Ans. As far as I think he did come.
Ques. Is it correct that he so came in
response to your writing letter that he should
come to India to finalize the transaction?
Ans. Yes.
Ques. Is it correct that at that time he told
you that he had to give bank guarantee for
getting income tax clearance?
Ans. I do not remember.
Ques. Is it correct that on account of said
talk of the defendant you told Shri Bhiku Ram
Jain, plaintiff for depositing a sum of ` 100000/- in
a bank to enable the defendant to give bank
guarantee?
Ans. Shri Bhiku Ram Jain was ready to deposit
` 100000/- with the income tax authorities
because in that way defendant could not
withdraw that amount but he was not willing to
deposit the said amount in the name of the
defendant in a bank because in that way
defendant could have withdrawn the amount.
Ques. Is it correct that you persuaded Shri
Bhiku Ram Jain to arrange for bank guarantee for
the defendant for filing in the Income Tax
department bu the said plaintiff flatly refused
and said that he would not arrange?
Ans. In fact the plaintiff Shri Bhiku Ram Jain
refused to arrange bank guarantee in the name
of defendant so that he may not withdraw the
amount.
Ques. Is it correct that there have been
several meetings between Shri Bhiku Ram Jain
and the defendant in your office?
Ans. Yes.
RFA (OS) 11/1984 Page 11 of 51
Ques. Is it correct that defendant told Shri
Bhiku Ram Jain that the former could not arrange
any money in India except what he had to
receive on account of agreement to sell?
Ans. I do not remember. (Emphasis Supplied)
13. Bhiku Ram Jain PW-5, after perusing the passport of
the defendant stated that between the period from
September, 1970 to May 1981 the defendant was in India
from 24.09.1970 to 15.10.1970, 17.12.1970 to 28.12.1970,
16.08.1971 to 11.09.1971, 29.10.1972 to 10.11.1972,
02.09.1977 to 01.10.1977, 10.10.1978 to 21.10.1978,
12.04.1979 to 23.04.1979 and 10.05.1981 to 20.05.1981.
He deposed to the various letters he had sent to the
defendant including the letter dated 27.12.1971 and proved
the postal receipt under which the letter was sent to the
defendant at his address in London and he categorically
denied that the defendant ever handed over letter dated
09.09.1971 to him. Certain portions of his testimony during
cross examination are relevant and we note the same. They
read as under:-
“….It is wrong to suggest that defendant asked
me to obtain bank guarantee in respect of the
amount payable to the income tax department in
favour of the Commissioner, Income Tax. It was
only once through notice sent by Shri Iqbal
Krishan, Advocate that such a demand was
made. I did not consult any advocate or
Chartered Accountant as to what that bank
guarantee demanded by Shri Iqbal Krishan,
Advocate meant because I did not think it to be
necessary and the agreement to sell did not
provide for the same.
RFA (OS) 11/1984 Page 12 of 51
Q. Is it correct that you told Shri Lajjya Ram
Kapur that he should tell the defendant to come
to India and execute the sale deed?
Ans. I did tell Shri Lajjay Ram Kapur but not
exactly in the language mentioned in the
question. I told him to get the execution of the
sale deed expedited.
Q. Is it correct that whenever the defendant
came to India, you met him several times in the
office of Shri Lajjay Ram Kapur as well as your
own residence?
Ans. The question of the defendant‟s coming to
India several times does not arise. He first came
when the agreement to sell was executed. Then
he came in 1972 when he sent a registered letter
sent through Iqbal Krishan, Advocate and then
he came to India in 1977 when I filed the present
suit. Therefore, there was no question of his
meeting me several times. Actually he never met
me at the place of Shri Lajjay Ram Kapur or my
residence.
Shri Lajjay Ram Kapur never told me for a bank
guarantee…..I have been shown the copy of the
th
letter dated 9 September, 1971. I never
received the original of the same, from the
defendant. (At the request of the learned counsel
th
for the defendant, the copy of the letter dated 9
September, 1971 has been marked for
identification only as Mark IV).
Q. It is suggested to you that defendant and
Shri Lajjay Ram Kapur once came together and
then defendant handed over original of the letter
marked as IV to you personally? Is it correct?
Ans. This is wrong.
Q. It is further suggested to you that the letter
aforesaid was delivered to you and at that time
you told the defendant that you could not get
RFA (OS) 11/1984 Page 13 of 51
sale deed executed because you did not have
the funds to pay the price?
Ans. This is totally wrong.
….
Q. Kindly go through the Ex. P-6 which is a
letter written by Shri Iqbal Krishan, Advocate to
you. It is pointed out to you that Shri Iqbal
th
Krishan referred to a letter dated 9 September,
1971 of defendant having been written to you.
Did you at any time deny by way of writing to
Shri Iqbal Krishan, Advocate that you never
th
received such a letter dated 9 September, 1971
from the defendant?
Ans. The reply mentioned in the question was
sent under my instructions by Rameshwar Dayal
& Co.
…..I cannot tell exactly as to when I met the
defendant for the first time in m life because the
same happened a number of years ago. If my
memory can help me, it was once before the
execution of the agreement to sell Ex.P-5. But I
am not very sure. I also met him on the date of
the execution of the agreement Ex.P-5. I think I
had no chance to meet him after the execution
of the agreement Ex.P-5 at all.....” (Emphasis
Supplied)
14. The defendant examined himself as his sole witness
and reiterated having met plaintiff No. 1 in September 1971
and having handed over letter dated 09.09.1971 as also
demanding ` 1,00,000/- from plaintiff No.1 so that he could
obtain necessary sale permission from the income tax
authorities after furnishing a bank guarantee in favour of
the Commissioner Income Tax. He denied having received
the letter dated 27.12.1971 from the plaintiff No.1. Certain
RFA (OS) 11/1984 Page 14 of 51
portions of his testimony are relevant to be noted and we
note the same as under:-
“……I did take steps for obtaining wealth tax
certificate as mentioned therein. What I
understand from the wealth tax certificate that
the same is issued by the I.T.O. to the effect that
the person concerned named in the certificate
has made satisfactory provision for the payment
of his tax dues and that he is allowed to get the
documents regarding his property registered.
The first step I took was that I went to see the
I.T.O. concerned. The I.T.O. told me that certain
ex-parte assessments were made during my
absence from India. When I stated to him that
according to me there was no tax dues either in
respect of income or wealth because I had
migrated in 1962 and I had no income or taxable
wealth in India. The I.T.O. said that in that event
these assessments will have to be reviewed,
revised or set aside and that will involve
considerable time. I explained to him that I had
entered into an agreement to sell and I had to
complete it by a certain date. The I.T.O. then
said that in that event I should furnish a bank
guarantee which should be enough protection to
recover any dues that may be found payable by
me ultimately. I had taken the usual application
forms and duly filled in for obtaining the
certificate which he kept with him and asked me
to come back with the bank guarantee. He stated
that within two or three days of the furnishing of
the bank guarantee, the certificate would be
issued. I will have to refer to my passport or my
notes for the purpose of replying the date on
which I so visited the I.T.O…..That happened
th
during my visit to India from 16 August 1971 to
th
11 September 1971. I came from London to
India. My object was to complete the sale, after
getting the price and be free from the property.
Shri Lajjay Ram Kapur, the broker was in
correspondence with me. He asked me to come
RFA (OS) 11/1984 Page 15 of 51
to India and it was for the purposes of
completing the sale that I came….When I came
th
to India during the period from 16 August, 1971
th
to 11 September, 1971, I met Shri Bhiku Ram
Jain, plaintiff No.1 as well as Shri Lajjay Ram
Kapur, the broker. I met them two or three times.
I asked Bhiku Ram Jain to give me about one lac
or so for facilitating the grant of wealth tax
certificate to me so that transaction of sale could
be completed. I explained to him that I had seen
the I.T.O. and that I.T.O. himself had suggested
that the final demand will take some time for
determination and the best way for me was to
furnish a bank guarantee in favor of the
commissioner of income tax which would give up
enough provision for payment of such dues as
may be finally determined and the clearance
certificate would be issued within a few days.
The I.T.O. has also told me that if I will make
each deposit, he refund would be a very tedious
and long process. I explained all that to Bhiku
Ram Jain. I asked him money for the aforesaid
purpose only. Of course the aforesaid money was
to eventually debited to me in the matter of
payment of price. I did not want payment of
money to me but I wanted that the money
should be deposited in any bank he liked in my
name so that I could get bank guarantee in my
account in favor of the Commissioner of Income
Tax. That guarantee could be discharged only by
aforesaid Commissioner and I could not draw any
amount from the Bank. He did not acede to my
request and on the contrary he pleaded with me
his inability to find money at that time…..When
after couple of meetings, I did not get any
satisfactory answer, I wrote a letter to him (Shri
Bhiku Ram Jain). I believe that letter was written
th
on 9 September, 1971, copy of which is Mark IV.
The copy bears my initial. (Now the letter has
been exhibited as Exhibit DW1/1). The letter
aforesaid was typed at the office of Shri Lajjay
Ram Kapur and Exhibit DW1/1 is the carbon
copy. 3 or 4 copies of the letter aforesaid were
RFA (OS) 11/1984 Page 16 of 51
made. I delivered one copy to Shri Lajjay Ram
Kapur and give him an extra copy with which he
and I same evening went to Shri Lajjay Ram‟s
house, from where we went to next door to the
house of plaintiff no.1. We met him in the office
of plaintiff no.1 and delivered the letter to the
said plaintiff. This time plaintiff no.1 was very
brusque and rather curt about this matter. He
said, “I have already explained to you my
difficulties. If you want to go on, do whatever you
like. I can not at the moment accept your
request as contained in the letter.” In fact he
appeared to be completely dis-interested in the
completion of the sale….Within two days of
delivering the letter on 9.9.1971, I left for
London…..After that, on my own, I wrote a letter
to Shri Lajja Ram Kapur and asked him whether I
should come again to India to complete the sale
and whether he has been able to persuade the
buyer to do the needful as requested in my letter
dated 9.9.1971…..On 30.10.1972 he informed on
the telephone that the meeting had been
arranged for 31.10.1972 at the office of Shri
Bhiku Ram Jain which is a part of his residence.
As was usual, I went to Shri Lajja Ram Kapur first
and then he and I together went to the office of
Shri Bhiku Ram Jain plaintiff at his residence
aforesaid- A talk took place about the completion
of the sale and the arrangement of bank
guarantee on which depended the completion of
the sale. At first plaintiff No.1 was evasive and
dodging, but when I insisted on a clear cut
answer, Shri Bhiku Ram Jain told me that he was
unable to complete the transaction and told that
he was unable to pay the money for furnishing
the bank guarantee….”
15. Certain answers given by the defendant during cross
examination are relevant and we note the same as under:-
“….I did make a written application in the duly
prescribed form to the Income-tax authorities for
RFA (OS) 11/1984 Page 17 of 51
the issuance of tax-clearance certificate…..I did
keep a copy of that application but I do not have
the same with me. That copy is with my Income-
tax advisor who is residing at Delhi. I might be
able to get it, if required. I cannot produce any
acknowledgment slip because the aforesaid
application was given by me to the Income-tax
Officer at his desk. That application was not
given at the counter where the acknowledgment
slip is issued.
…..
Que. It is suggested to you that you never met
th
Bhiku Ram Jain on 9 September, 1971 and
never delivered the letter, copy of which is
Ex.DW1/1. What have you to say?
Ans. This is wrong. I definitely met Bhiku Ram
th
Jain and also delivered the letter dated 9
September, 1971. I reaffirmed my statement in
this respect earlier. This is also wrong to suggest
st
that I never met him on 31 October, 72. This is
also wrong to suggest that Bhiku Ram Jain did
not tell me in September 1971 that there was a
raid on him and that he was unable to pay the
money for enabling me to arrange bank
guarantee. He definitely told me in September
1971 that a raid had taken place and that he was
unable to provide the money for enabling me to
arrange bank guarantee and therefore, it is
wrong to suggest that he never told me in this
respect.”
16. Since the defendant did not prove by filing any
document that he applied to obtain clearance from the
income tax authorities nor did he prove any communication
sent to him by the income tax authorities, after closing
defence evidence he sought permission to produce letters
statedly written by him to the income tax officer, but vide
order dated 28.9.1981 the said documents were not taken
RFA (OS) 11/1984 Page 18 of 51
on record and the defendant was not permitted to lead any
further evidence. The order in question was never
challenged and attained finality.
17. Vide impugned judgment and decree dated
05.10.1983 the learned Single Judge decreed the suit and
directed specific performance of the Agreement to Sell
dated 22.12.1970. It has been held by the learned Single
Judge that if for any reason the plaintiffs fail to get the relief
for specific performance, they shall be entitled to a sum of
` 1,30,120.50 claimed by them in the suit from the
defendant together with the interest @12% per annum for
the period from 04.11.1977 till the payment was made.
18. Briefly noted, the reasoning of the learned Single
Judge is that:- (i) the evidence adduced by the plaintiffs
shows that the plaintiff No.1 was in a position to pay
balance sale consideration to the defendant at all material
points of time; (ii) the evidence adduced by the plaintiffs,
particularly the letter dated 27.12.1991 written by the
plaintiff No.1 to the defendant, establishes that the plaintiff
No.1 was always ready and willing to perform his obligation
under Agreement to Sell dated 22.12.1970; (iii) in view of
the fact that the letter dated 27.12.1991 was sent by the
plaintiff No.1 by Regd. Post at the correct address of the
defendant the stand of the defendant, of not having
received the same is not acceptable as it is in teeth of the
provisions of Section 27 of the General Clauses Act and
illustration (f) to Section 114 of the Evidence Act which
provide that a letter which is properly addressed and sent
RFA (OS) 11/1984 Page 19 of 51
by the registered post, a presumption arises that the letter
has reached the addressee in the ordinary course of post;
(iv) the oral statement of the defendant that he had applied
to the income tax authorities for sale permission did not
inspire confidence for reasons; namely:- (a) no particulars of
the stated application filed before the income tax officer has
been furnished by the defendant in the written statement;
(b) the defendant did not produce any receipt pertaining to
the said application being filed with the income-tax officer;
and (c) it was contrary to Government working that the
income-tax officer would pass oral orders (as claimed by the
defendant) requiring the defendant to furnish bank
guarantee for permission to be granted; (v) no material has
been brought on record by the defendant to show that he
ever required the plaintiff No.1 to pay ` 1,00,000/- to him or
deposit the same with his Banker to enable him to obtain a
bank guarantee; (vi) stand of the defendant that he
personally delivered the letter dated 09.09.1971 to the
plaintiff No.1 cannot be believed as the said letter appears
to be a manipulated letter for it could not be appreciated
that the defendant himself delivered the said letter to the
plaintiff No.1 instead of sending the same by post; (vii) even
if it is assumed that the defendant was asked by the
income-tax officer to furnish bank guarantee for permission
to be granted, the plaintiff No.1 cannot be faulted for not
paying ` 1,00,000/- to the defendant or deposit the same in
the account of the defendant to enable the defendant to
obtain a bank guarantee, inasmuch as clause 7 of the
Agreement to Sell obliged plaintiff No.1 to directly pay
RFA (OS) 11/1984 Page 20 of 51
money to the income tax authorities if any income tax due
was determined qua the defendant; (viii) it is the defendant
who has breached the Agreement to Sell dated 22.12.1970
by not taking any steps for obtaining the necessary
Certificate from the income tax authorities; (ix) delay in
filing the present suit is of no consequence because firstly,
the delay was caused due to absence of the defendant from
India and secondly, it has been settled by the Courts in India
unlike the legal position in England the delay in filing a suit
for specific performance is no ground to refuse the relief for
specific performance if the suit was filed within the
prescribed period of limitation; and (x) in computing
limitation, the plaintiffs are entitled to the benefit of Section
15(5) of the Limitation Act 1963.
19. Issues Nos.4, 5 and 6 were the ones which were hotly
contested before the learned Single Judge and in the appeal
the debate centered around the said issues. A perusal of the
issues would show that the factual matrix to be considered
for deciding the three issues was the same.
20. That the parties had entered into an agreement to sell
on 22.12.1970 was not in dispute. We need to note the
relevant terms of the Agreement to Sell dated 22.12.1970.
Clause 4, 5, 7 and 9 thereof are relevant. They read as
under:-
“4. That the Vendor shall obtain at his own cost
a Wealth Tax clearance Certificate as required
under the Wealth Tax Act, 1957 and other
relevant papers for the purpose of transfer of the
above property as soon as possible & will
RFA (OS) 11/1984 Page 21 of 51
intimate to the Purchaser by Registered Post or
his having obtained necessary certificate
delivering a certified copy of the same to the
Purchaser not later than 12 (twelve) months from
this date.
5. That the Vendor agrees to execute the Sale
Deed within a period of 15 (fifteen) months from
this day and the Purchaser has agreed to pay to
the Vendor the balance of the sale price at the
time of registration of the Sale Deed after
deducting the earnest money of ` 50,000/- within
3 months after receipt of the intimation as
mentioned in para 4 above with copies of the
Wealth Tax Certificate.
X X X
7. That the Purchaser agrees to pay to the
Income-tax authorities such money as may be
desired by the Vendor (not exceeding the
balance sale price of the property) against Tax
dues from the Vendor to facilitate the Vendor to
get the required Wealth Tax certificate. Such
money as paid to the income tax Authorities on
the request of the Vendor will be paid in the
Vendor‟s account and will be deducted by the
purchaser from the balance of the sale price at
the time of the execution of the Sale Deed.
8. If the purchaser does not pay the balance
sale price within 3 months as mentioned
hereinabove, the Vendor shall be entitled either
to get the sale completed by specific
performance through a Court of law at the cost
of the Purchaser or to forfeit ` 25,000/- out of the
earnest money of ` 50,000/- and shall return
` 25,000/- (Rupees twenty five thousand only) the
balance earnest money to the Purchaser.
X X X
9. If the Vendor does not execute the Sale
Deed for any reason and makes a default the
Purchaser will be entitled to get back from the
RFA (OS) 11/1984 Page 22 of 51
Vendor a sum of ` 50,000/- paid by the Purchaser
as earnest money together with a sum of
` 25,000/- as special damages in all ` 75,000/- or
get the sale completed by a specific performance
through a Court of law at the cost of the Vendor
or if the Purchaser does not get the sale
completed by a specific performance in that
event the Vendor will have no right to ask for the
vacant possession of the portion possessed by
the Purchaser as tenant, but if the Vendor pays a
sum of ` 50,000/- to the Purchaser for
inconvenience and for the improvement made by
the Purchaser then the Purchaser will vacate his
portion and will hand it over to the Vendor, other
than the payment about the portion in
occupation with Shri Nanak Chand, as mentioned
above.”
21. That under the agreement to sell the defendant was to
obtain the necessary certificate permitting sale by the
income tax authorities was also not in dispute. That the
parties had agreed for sale to be completed within 3 months
of the income tax clearance certificate being obtained and
that the income tax clearance certificate was to be obtained
within 12 months of the agreement to sell was also not
disputed by the parties. In other words, the defendant was
to obtain the income tax clearance by 23.12.1971 and the
sale deed had to be executed within 3 months thereafter.
That clause 7 of the agreement enjoined upon the plaintiff
No.1 to pay to the income tax authorities such money as
may be desired by the vendor i.e. the defendant against tax
dues was also not in dispute between the parties.
RFA (OS) 11/1984 Page 23 of 51
22. Thus, the breach of reciprocal obligations alleged by
the parties against each other was rightly considered by
deciding the three issues under a common caption.
23. From the pleadings and evidence of the parties it
clearly emerges that the stand taken by the plaintiffs was
that the defendant neither applied for an income tax
clearance certificate nor ever informed the plaintiff No.1
that the income tax officer had desired a bank guarantee to
be furnished in the name of the Commissioner Income Tax
to secure a tax demand if any determined and alternatively
that the only obligation of plaintiff No.1 was to pay, on
behalf of the defendant and to his credit, such sum as may
be found payable to the income tax authorities, but within
the limits of the balance sale consideration. The stand
taken by the defendant was that he did so and for which he
relied upon the letter dated 09.09.1971 and admissions
made by Lajjya Ram Kapur PW-3. It was in this context that
letter dated 9.9.1971 with reference to it being delivered to
plaintiff No.1 assumes importance. The letter dated
27.12.1971 written by the plaintiff No.1 to the defendant,
qua it being received by the defendant became relevant in
the context of the defendant not having responded thereto.
24. Since plaintiff No.1 not only deposed, but made good
his deposition with reference to the letter dated 27.12.1991
by proving postal receipt Ex.P-12, evidencing his having
sent a registered letter dated 27.12.1971 to the defendant
at the correct address of the defendant at London, the
learned Single Judge has taken recourse to the provisions of
RFA (OS) 11/1984 Page 24 of 51
Section 27 of the General Clauses Act and illustration (f)
under Section 114 of the Evidence Act to draw a
presumption that the defendant received the letter in
question and therefrom held that the contents of the letter
established the readiness and willingness of the plaintiff
No.1 to perform his obligations under the Agreement to Sell.
25. Though not so expressly stated, the signature tune of
the reasoning of the learned Single Judge rests upon an
inference based on the conduct of the defendant to not
respond to the said letter; the conduct being no assertion in
response by the defendant that plaintiff No.1, by not paying
him ` 1,00,000/- to enable him to obtain the necessary
income tax clearance certificate, was in breach of the
Agreement to Sell.
26. The learned Single Judge may be technically correct in
drawing the inference drawn regarding proof of service of
the letter dated 27.12.1971 in view of postal receipt Ex.P-
12, since the letter was posted at the correct address of the
defendant at London and that the stand of the defendant
that the address at which the letter was posted was not his,
was rightly negated, for the reason an earlier dated
06.01.1971, admitted to have been received by the
defendant from Lajjya Ram Kapur, was posted at the same
address. But the learned Single Judge lost sight of the fact
that Indo-Pak war was fought in December 1971 and due to
hostilities, flights from India to United Kingdom, which fly
over territory of Pakistan were disrupted and there may
have been a possibility of the letter in question not having
RFA (OS) 11/1984 Page 25 of 51
reached the destination i.e. the letter not being delivered at
the address to which it was posted.
27. The learned Single Judge has held that there is no
evidence of the defendant having ever applied for an
income tax clearance certificate and further that there is no
evidence that the defendant ever asked the plaintiff No.1 to
pay him further sum of ` 1,00,000/- from out of the balance
sale consideration to facilitate the sale permission being
granted and for which conclusion, as noted hereinabove,
learned Single Judge disbelieved the defendant‟s version of
having written and delivered letter dated 09.09.1971 to the
plaintiff No.1.
28. We clarify once again that the signature tune of the
judgment, with reference to the letter dated 27.12.1971, is
the assertion of the plaintiff No.1 in the letter that he had
not received any communication from the defendant and
the same being in consonance with the plea of the plaintiff
No.1 that he had not heard anything on the subject from the
defendant. The relevant assertion in the letter dated
27.12.1971, is as under:-
“I am referring to the agreement made on
22.12.1970 between you and myself for the sale
by you of your bunglow at civil lines, Delhi to me,
subject to your obtaining a Wealth-Tax clearance
certificate from the income-tax authorities
required for the registration of the sale deed. You
were to obtain this certificate not later than
21.12.1971 within 12 months from the date of
the above agreement and with three months for
your obtaining the certificate and intimates to
me, I was to get the sale completed by paying
RFA (OS) 11/1984 Page 26 of 51
you the balance money, before the sub-Registrar
Delhi. You had desired me to pay to the income
Tax authorities such money as may be due from
you against taxes which they were likely to claim
before issuing certificate and you were to inform
me about the same after a demand has been
created by the income-tax authorities, no
intimation about which has been received by me
so far nor do I know about the progress in your
efforts to obtain the certificate.
I am anxious to have to sale deed completed and
am ready for the same. I am writing you this
letter, therefore, to please let know what is the
position in this regard and whether you have
applied for or obtained the certificate so that
after receipt of your letter, such action as may
be necessary is taken by me. I am sorry to write
that I have not received any communication from
you during the entire period of 12 months in
regard to the said agreement and I hope that I
shall now be with your reply per return.”
(Emphasis Supplied)
29. The controversial letter dated 09.09.1971 claimed to
have been written and delivered by the defendant to the
plaintiff No.1, reads as under:-
“I was requested to come to Delhi by your Agent
Shri Lajya Ram Kapur of M/s Devi Ditta Mal Lajya
Ram Kapur, New Delhi to complete the sale of
the property agreed to be sold to you namely
No.4, Flag staff Road, Civil Lines, Delhi.
As agreed between us, you were to pay on
demand all dues of Income-tax for payment to
the Income-tax officer in order to obtain the
necessary clearance certificate. I inform you that
it will be necessary for me to deposit in the Bank
a sum of ` 1,00,000/- in order to secure a Bank
Guarantee in favour of the Commissioner of
Income-tax as the I.T.O. had agreed to issue the
RFA (OS) 11/1984 Page 27 of 51
clearance Certificate upon production of this
Bank guarantee.
I request you to make this sum of money
available for the purpose of obtaining the Bank
guarantee. Please note that as agreed the sale
can be completed only upon the production of
the clearance certificate which you wanted to be
ready before the end of December, 1971. Please
take notice that the amount of ` 1,00,000/-
(Rupees One Lac only) is to be paid to me or to
my Bank against my receipt by you immediately
for me to deposit the same in a Bank to with
instructions to the Bank guarantee in favor of
Commissioner of Income-tax. This will be in part
payment of sale proceeds.” (Emphasis Supplied)
30. Parties were not at variance that through his lawyer
Mr.Iqbal Krishna, the defendant had caused to be served
upon the plaintiff No.1 a legal notice dated 06.11.1972,
which was replied to by the plaintiff No.1 vide his letter
dated 14.11.1972. In the notice dated 06.11.1972, it is,
inter alia written as under:-
“2. That in accordance with para No.7 of the
said agreement you were to provide my client or
to pay to the income-tax authorities on his behalf
such amount as may be required by for payment
of tax dues from securing a clearance certificate
to enable him to execute the Sale Deed. He was
required to deposit a sum of Rupees One Lac on
account subject to adjustment later before the
certificate could be granted and he came herein
September 1971 for the purpose. By letter dated
th
9 September 1971 he asked you to pay the said
amount to him or to deposit the same in his Bank
account against his receipt so as to enable the
Bank to give the necessary guarantee but you
gave no reply and when personally contacted,
you asked for more time. Thereafter he asked
you several times through your agent Shri Lajya
RFA (OS) 11/1984 Page 28 of 51
Ram Kapur to carry out your commitment but
you neither paid the amount nor gave any reply.
3. My client being anxious to finalize the
matter came here again all the way from London
st
and contacted you personally on 31 Oct. 1972
when he found your attitude evasive. After a
couple days he again rang you but with no better
results.
….”
31. Plaintiff No.1‟s response dated 14.11.1972 to the legal
notice dated 06.11.1972, is as under:-
th
“I am in receipt of your notice dated 6
November, 1972 given by you on behalf of Shri
A.A. Rushdie S/o Mohd. Din in connection with
nd
the agreement dated 22 December, 1970,
between him and me about the sale of his
Bangalow No.4 at Flagstaff Road, Civil Lines,
Delhi.
……
According to the agreement Mr.Rushdie was to
obtain at his own cost a Wealth Tax Clearance
Certificate and all other relevant papers for the
purpose of the transfer of the above mentioned
property and was to intimate to me by registered
post of his having obtained the necessary
certificates, delivering a certified copy of the
same to me within 12 months of the date of the
agreement. He was then to execute the sale
deed within three months thereafter, clearing all
the outstandings, against the said property in
regard to property taxes etc. After the
nd
agreement which was executed on the 22
December, 1970 I received no intimation from
your client to the effect that he has applied to
the Income-Tax authorities for the clearance
certificate and to further enquire about the
amount that would be required to be paid to the
Income-tax authority in order to obtain the
RFA (OS) 11/1984 Page 29 of 51
clearance certificate, necessary for the sale of
the property.
Unfortunately, your notice does not throw any
light on the subject and I fear again that your
client is not giving a proper or full information to
you as per the agreement. I am, in fact, to pay to
the Income Tax authorities and not to your client
any amount, to the extent of the balance of the
sale price, to facilitate him to get the required
certificate. I, therefore, need an assurance from
the Income-tax department that the clearance
certificate would be issued for the sale of the
property concerned, if the amount was paid by
me in account of your client. No such request
was ever made by your client to me nor have I
ever been informed about such demand raised
by the Income-tax authorities. It looks that your
client never applied for the certificate.
…..” (Emphasis Supplied)
32. It assumes importance that in the legal notice dated
06.11.1972, the defendant has made a reference of having
delivered letter dated 09.09.1971 to the plaintiff No.1,
containing a request to be paid ` 1,00,000/- to enable him to
furnish a bank guarantee to the income tax authorities. The
learned Single Judge has not adverted to the contents of this
legal notice dated 06.11.1972 and has therefore not
discussed the relevance of said legal notice. We do so. The
suit in question was filed in the year 1977 and surely the
letter dated 09.09.1971 could not have been conceived of
for the first time when defence by way of written statement
was filed. There being a reference to the letter dated
09.09.1971 contemporaneous to the point of time when the
parties were communicating on the subject 5 years prior to
RFA (OS) 11/1984 Page 30 of 51
the suit being filed, leans against the letter being fabricated
after the suit was filed.
33. The learned Single Judge is also in error in not
correctly discussing the requisite inference which was
possible to be drawn with reference to the admitted legal
notice dated 06.11.1972 being sent by the defendant to
plaintiff No.1 and his response thereto on 14.11.1972. We
have noted hereinabove the relevant contents of the 2
documents and suffice would it be for us to highlight that
the defendant‟s positive assertion in his lawyer‟s notice
dated 06.11.1972 that he had demanded ` 1,00,000/- to be
paid to him from out of the balance sale consideration to
facilitate his obtaining income tax clearance certificate has
not even been given a muted response by the plaintiff No.1.
Normal human conduct would be that if plaintiff No.1 had
not received the letter dated 09.09.1971, to have
immediately retorted, that it was a lie to assert in the legal
notice dated 06.11.1972 that the defendant had given any
letter dated 09.09.1971 to the plaintiff No.1 or had ever
asked plaintiff No.1 to pay a sum of ` 1,00,000/-, as claimed
by the defendant in the legal notice dated 06.11.1972.
34. From the response dated 14.11.1972, the
contemporaneous conduct of the plaintiff No.1 emerges i.e.
his conduct of not denying having received letter dated
09.09.1971. The bald response that he had not received any
communication from the defendant cannot be read as a
denial of having received the letter dated 09.09.1971, for
the reason normal human response of a person who is being
RFA (OS) 11/1984 Page 31 of 51
falsely accused of being told to do something and charged
for not having done that something, would be to strongly
deny the accusations leveled against him. If a person falsely
alleges having delivered a letter, the response expected of a
reasonable person, who claims not to have received the
letter in question, is to deny the receipt thereof in
unequivocal terms and perhaps call the other person a liar
and a fabricator of documents. It assumes importance that
the subject matter of the legal notice dated 06.11.1972 was
a very hot subject i.e. the subject of the breach of a very
important obligation under the Agreement to Sell. The
response could not be cold, if indeed the accusation was
hot.
35. Any doubt to resolve the controversy had to factor all
relevant evidence on the issue. We have noted hereinabove
the testimony of Lajjya Ram Kapur PW-3. The learned
Single Judge has completely eschewed the same. Lajjya
Ram Kapur, was the witness of the plaintiffs. He was the
broker through whom the agreement in question was
arrived at. As the witness of the plaintiffs, he admitted in no
uncertain words that the defendant was in India in
September 1971 and that the defendant had requested him
i.e. Lajjya Ram Kapur to impress upon the plaintiff No.1 to
pay to the defendant a sum of ` 1,00,000/- from out of the
balance sale consideration, to enable the defendant to
obtain the necessary income tax clearance certificate and
that he conveyed the same to the plaintiff No.1 and that
plaintiff No.1 told him i.e. Lajjya Ram Kapur that he was not
RFA (OS) 11/1984 Page 32 of 51
willing to pay any further sum to the defendant, but was
willing to make a payment directly to the income tax
authorities.
36. Factoring in the discussion, the testimony of Lajjya
Ram Kapur, we have enough reasons to sustain the finding
of fact that there is sufficient evidence to establish
defendant being in communication with the plaintiff No.1 on
the subject of the defendant needing, from plaintiff No.1
` 1,00,000/-, to enable the defendant to obtain the necessary
income tax clearance certificate by obtaining and furnishing
a bank guarantee in the name of the Commissioner Income
Tax.
37. It may be true that the defendant could have led
better evidence, in the form of filing and proving the sale
permission sought by him from the income tax authorities,
towards which a belated attempt was made after parties
had led evidence, but that would not mean that other
relevant evidence on the subject cannot or should not have
been looked into.
38. Parties are guided by legal advice on how should a fact
in issue be proved and in the instant case it appears to be
casual legal advice which has led to defendant not leading
documentary evidence on the subject of obtaining sale
permission from income tax authorities. But, we highlight
once again that Lajjya Ram Kapur‟s testimony and the
response of the plaintiff No.1 vide letter dated 14.11.1972
to the defendant‟s legal notice dated 06.11.1972, leads one,
RFA (OS) 11/1984 Page 33 of 51
as a prudent person would be so led to believe the
existence of the fact that the defendant demanded
` 1,00,000/- from the plaintiff No.1 as asserted by him. We
highlight that under the Indian Evidence Act 1872, a fact is
said to be proved, when after considering the matters
before it, the Court either believes it to exist, or considers
its existence so probable, that a prudent man under the
circumstances of the particular case, to act upon the
supposition that it exists.
39. The reasoning of the learned Single Judge that orders
are passed by the government officials in writing and not
verbally, to hold against the defendant that his stand of
being verbally told by the income tax officer that pending
finalization of calculation of tax dues, necessary sale
permission could be given if bank guarantee in sum of
` 1,00,000/- was furnished in the name of the Commissioner
Income Tax, is too technical a reasoning and in our opinion
is a pedantic approach to an appreciation of a commercial
dealing between parties. It does happen, that when an
application is processed, at a meeting with the government
official, in the process of discussion something is verbally
communicated by the government servant to enable the
individual concerned to overcome an issue which needs to
be sorted out before a formal order is issued by the
government servant. The sale permission had obviously to
be in writing, under the signatures of the concerned income
tax officer. Some tax dues were pending but up to date
assessments had yet to be finalized. Under the
RFA (OS) 11/1984 Page 34 of 51
circumstances the concerned income tax officer finding a
via media and orally suggesting the same to the defendant,
as a course of action to be adopted, was certainly within the
realm of a possibility and certainly needed a discussion on
the subject by the learned Single Judge. We fault the
impugned judgment in not having explored the same.
Venturing into this area, which needs to be ventured into,
keeping in view the testimony of Lajjya Ram Kapur PW-3,
who is the witness of the plaintiffs, there emerges good
evidence that the concerned income tax officer did verbally
tell the defendant that for a crystallized demand which may
come into existence in the future, to secure payment
thereof and at the same time a contemporaneous sale
permission being granted, both situations could be
harmonized by a bank guarantee being furnished. Such
kind of verbal communications, to facilitate formal orders
being issued is not an uncommon event in India where even
official things are done in a most un-officious manner. The
learned Single Judge led himself into error by equating the
income tax officer telling the defendant that he could
furnish a bank guarantee to obtain the necessary income
tax clearance certificate, as equivalent to an order,
inasmuch as said communication was a step in aid to a
formal order being passed, which would have been in
writing. We highlight that a step in aid is different than a
final step which leads to the destination and it is the final
destination which has to be expressed, if it concerns the
government, in a formal written order under the authority of
RFA (OS) 11/1984 Page 35 of 51
the government servant concerned, for only then would the
government be bound.
40. We thus conclude by deciding the said issue in favour
of the defendant and against plaintiff No.1 by holding that
the defendant did ask plaintiff No.1 to give him ` 1,00,000/-
from out of the balance sale consideration to enable him to
furnish a bank guarantee in the name of the Commissioner
Income Tax so that the necessary sale permission could be
obtained.
41. We now deal with the reasoning of the learned Single
Judge that plaintiff No.1 was not obliged to pay any further
money from out of the balance sale consideration to the
defendant and upon the supposition by the learned Single
Judge that if the defendant had so requested, plaintiff No.1
was not in breach of the agreement to sell. The reasoning
of the learned Single Judge is that under clause 7 of the
Agreement to Sell, the obligation of the plaintiff No.1 was to
pay to the income tax authorities such money (not
exceeding the balance sale price of the property) as may be
desired by the defendant against tax dues, to facilitate the
requisite certificate to be issued and not to pay any money
to the defendant, much less money to enable the defendant
to obtain a bank guarantee in favour of the Commissioner
Income Tax.
42. We have noted hereinabove clause 7 of the
Agreement to Sell in para 20 above. It is no doubt true that
the language is that the purchaser agrees to pay to the
RFA (OS) 11/1984 Page 36 of 51
income tax authorities, and literally read, would be in
harmony with the view taken by the learned Single Judge.
43. But, the problem with the reasoning of the learned
Single Judge is that it has read the clause as if a statute was
being read. The clause in question finds place in a
commercial document i.e. in an agreement to sell and thus
needed to be interpreted, not literally, but with business
efficacy. It is settled legal principle that when a court is
required to construe a commercial document the effort
must be to give business efficacy to the commercial
understanding between the parties and not be pedantic.
See AIR 1987 Delhi 188 J.R.Enterprises & Ors. Vs. State
Transport Corporation. The underlying idea beneath clause
7 of the Agreement to Sell is the recognition of the fact that
the defendant had no money in India and that if any due
towards income tax was demanded by the income tax
authorities, within the limits of the balance sale
consideration, the plaintiff No.1 would make the necessary
tender at the request of the defendant, to the defendant‟s
account, so that the sale permission as per certificate would
be given. The business efficacy of the term had to be
considered in the then prevailing economic policy of the
government of India i.e. the stringent Foreign Exchange
Remission Legislation i.e. FERA. The era of early 1970‟s was
an era where it was difficult to bring in and take out foreign
exchange, to and fro, from India. Clause 7 recognizes, that
notwithstanding the defendant having a valuable property
in India, he had no liquid cash to clear a tax demand and
RFA (OS) 11/1984 Page 37 of 51
thus the need for the plaintiff No.1 to clear the same, to the
account of the defendant. The parties had set out a time
limit within which the transaction had to be closed i.e. sale
deed executed. They were aware that there was a
possibility of a tax demand being raised. The process to
determine whether tax was due or not, required time and
was a process in which a third party i.e. the income tax
officer had a say, and over whom neither party had a
control. If, within the time frame set by the parties, in
harmony with the ethos of clause 7, an alternative
emerged, within the limits of the obligation of the plaintiff
No.1, we see no reason why, on the principle of business
efficacy the plaintiff No.1 would not be bound to discharge
said obligation. The underlying object of the obligation upon
plaintiff No.1, as per clause 7, is to facilitate income tax
clearance certificate; the obligation is to pay money within
the limit of the balance sale consideration to the account of
the defendant with the income tax authorities, and thus
within the underlying idea the slight deviation of defendant
requiring the money to be credited in his account to enable
his Banker to furnish a bank guarantee in favour of the
Commissioner Income Tax was certainly within the confines
of the obligation of the plaintiff No.1 under clause 7 of the
Agreement to Sell.
44. We have already held hereinabove that there is
sufficient evidence to establish that the defendant in person
and additionally or at least alternatively, through Lajjya
Ram Kapur had required the plaintiff No.1 to deposit money
RFA (OS) 11/1984 Page 38 of 51
in the account of the defendant to enable his Banker to
furnish a bank guarantee to the Commissioner Income Tax
and thus we conclude by holding that by refusing to do so,
the plaintiff No.1 was in breach of his obligation under
clause 7 of the Agreement to Sell and the said breach of the
obligation led to income tax sale permission not being
granted and thus on issues No. 4 to 6 framed in the suit, the
finding has to be that although the plaintiff No.1 had the
requisite means i.e. was in a state of readiness to perform
and discharge his obligations under the agreement, but was
not willing to do so and thus it was plaintiff No.1 who was in
breach of the agreement and not the defendant. We clarify
that readiness and willingness are different concepts. One
may have the money to purchase something and thus it
could be said that one is ready for a purchase, but there
may be lack of willingness to part with the money and
complete the purchase.
45. The suit claiming decree for specific performance must
fail on aforesaid reasoning qua said relief.
46. Notwithstanding our view as above, since before the
learned Single Judge and even before us the issue of
limitation was hotly contested, and as we would be
prepared to lay a bet at a stake of 1:10,00,000 that
whatever view we take the party which loses is bound to
challenge our opinion before the Supreme Court; and our
reason to stake a bet on 1:10,00,000, is the heavy financial
stake involved in the present litigation which would compel
the parties to spend a couple of lakhs more on lawyers fee;
RFA (OS) 11/1984 Page 39 of 51
at stake is land ad-measuring 5373 square yards in Civil
Lines Delhi, we would be failing in our duty if our present
decision lacks the muse on the subject of the suit being
within limitation by granting benefit of sub-Section 5 of
Section 15 of the Limitation Act to the plaintiffs.
47. The Agreement to Sell is admittedly dated 22.12.1970.
Parties were not at variance that the sale has to be
completed within 15 months i.e. within 12 months of the
Agreement to Sell, the defendant to obtain the necessary
sale permission and within 3 months thereafter the plaintiff
No.1 to tender the balance sale consideration to the
defendant, with defendant‟s reciprocal obligation to execute
the sale deed being discharged. The cause of action would
nd
thus accrue on 22 March 1972. Period of limitation to seek
enforcement of an agreement to sell being 3 years,
st
limitation would expire on 21 March 1975. The suit was
admittedly filed on 03.11.1977. The only aid which plaintiffs
could take was under Section 15(5) of the Limitation Act
which reads as under:-
“(5) In computing the period for limitation for
any suit the time during which the defendant has
been absent from India and from the territories
outside India under the administration of Central
Government shall be excluded.”
48. With reference to the decisions reported as Turner
Morrison & Co Ltd v Hunger Investment Trust AIR 1972 SC
1311, Atul Kristo Bose v Lyam & Co Ltd 14 Cal 457, Dial
Singh & Ors v Devinder Singh AIR 1933 Lahore 741, Pariva
Akkaoali Shetty v Rethinagiri Chetty & Ors AIR 1945 Madras
RFA (OS) 11/1984 Page 40 of 51
315, P.C. Muthia Chettiar v F.S. Shanmugham Chettiar
(dead) & Anr AIR 1969 SC 552 the learned Single Judge has
held that since when cause of action accrued to the
plaintiffs, the defendant was in a foreign country, the
plaintiffs would be entitled to the benefit of sub-Section 5 of
Section 15 of the Limitation Act 1963. The reasoning of the
learned Single Judge would reveal that the parties litigated
and probably argued on the expression „absent from India‟
which finds a mention in sub-Section 5 of Section 15. The
plaintiffs had contended that irrespective of the nature of
suit, the entire period during which defendant was absent
from India had to be excluded while computing limitation
and the defendant„s plea was that said Sub-section had no
role in a suit for specific performance where decree could
be enforced without defendant requiring to execute the sale
deed in person and alternatively the said sub-Section had
no play when the defendant was not in India when the suit
was filed. It is relevant to note following portion of the
impugned judgment:-
“6. ISSUE NO.1
“Whether the suit is within time”.
Under Article 54 of the Limitation Act, 1968 the
period for limitation for filing a suit for specific
performance of contract is three years from the
date fixed for the performance, and if no such
date is fixed, then the period of limitation
commences from the date when the performance
nd
is refused. The agreement is dated 22
December, 1970. The defendant was to execute
the sale deed within a period of fifteen months
after obtaining tax clearance certificate and other
RFA (OS) 11/1984 Page 41 of 51
papers. The period of limitation would thus
nd
commence from 22 March, 1972. The suit was
rd
filed on 3 November, 1977. Part III of the
Limitation Act provides for computation of period
of limitation. Section 15 of the Act provides for
exclusion of time while computing the period of
limitation. Sub-section (5) of section 15 of the
Limitation Act, 1963 is as under:
…..
7. The defendant was residing in London both
before and after entering into the agreement. He
had acquired British Nationality in 1963 and since
then he has been a resident of United Kingdom.
After referring to his entries in his passport the
defendant as D.W.1 has deposed that he was in
th th
India from 24 September, 1970 to 15 October,
th th
1970, 17 December, 1970 to 28 December,
th th
1970, 16 August, 1971 to 11 September, 1971,
th th nd
20 October, 1972 to 10 November, 1972 and 2
st
September 1977 to 1 October, 1977. In other
words, he was in London and absent from India
th
during the periods from 20 December, 1971 to
th th
15 August, 1971, from 12 September 1971 to
th th
28 October, 1972, from 11 November 1972 to
st nd
1 September 1977 and from 2 October, 1977 till
rd
the filing of the suit on 3 November, 1977. The
Learned Counsel for the plaintiff submits that the
defendant was absent from India for a period of
six years seven months and twenty eight days
between the date of execution of the agreement
and the date of institution of the suit and the
period of his absence from India is to be excluded
under Section 15(5) of the Limitation Act for
computing the period of limitation. After excluding
the period of his absence from India the suit has
been filed within a period of four months and
twelve days from the date of the agreement,
although the plaintiff was entitled to institute the
suit within a period of three years from the date of
its performance. The learned counsel for the
RFA (OS) 11/1984 Page 42 of 51
plaintiff therefore submits that the suit is within
time.
…..
9. In the instant case the defendant was
present in India when the agreement was
nd
executed on 22 December, 1970. He stayed in
India for the periods detailed above, and he had
not been residing in India on other dates……
I am, therefore, of the opinion that to exclude time
under Section 15(5) of the Limitation Act, 1963 it
is immaterial whether the defendant is an Indian
or a foreigner; whether the suit is instituted in a
court having jurisdiction under Section 16 or 20 of
the Code of Civil Procedure and also whether the
suit relates to immovable property or for recovery
of money. The section provides that the period
during which the defendant has been absent from
India is to be excluded in computing the period of
limitation for instituting any type of suit and in any
court. After excluding the period during which the
defendant was absent from India the present suit
is held to be within time.” (Emphasis Supplied)
49. The origin of sub-Section 5 of Section 15 of the
Limitation Act 1963 can be traced to the rule of private
th
international law as discussed in Dicey‟s Conflict of Laws, 5
nd
Edition (Page 398) and Halsbury‟s Laws of England 2
Edition (Vol. VI Page 256) that Courts of any country would
have jurisdiction to entertain actions in personam in respect
of any cause of action or relating to contract wherever the
cause might have arisen or wherever the contract was
made, provided that at the commencement of the action
the defendant was resident or present in that country and
the provisions of the Statute of Limitation in force in the
country where the action is instituted i.e. „Lex Fori‟ would
RFA (OS) 11/1984 Page 43 of 51
apply to such actions and for which the period during which
the defendant was not present in the country where action
was initiated would be excluded while computing limitation.
Those were the days when means of communication were
poor and it was difficult to serve a party. We highlight that
when aforesaid jurisprudence was developed, there was no
internet, there was hardly any postal facility, transportation
to foreign shores was by ships which would sail on the
oceans and the seas with painfully slow speed. It was in
that era that aforesaid jurisprudence relating to exclusion of
time while computing limitation was conceived of.
50. We shall be reflecting more on the relevance, in
today‟s context where the globalized world has shrunk to a
village in the era of telecommunication, to sub-Section 5 of
Section 15 of the Limitation Act 1963, but we proceed with
our discussion, whether in the instant case, the plaintiffs
would be entitled to the benefit thereof.
51. Sub-Section 5 of Section 15 of the Limitation Act 1963
was examined in detail by the Madras High Court in the
decision reported as Rajamani v Meenakshisundaram
(1999) 3 MLJ 757. The facts of the said case were that the
appellant/defendant borrowed 2000 Singapore dollars from
one R.S.Sundaram at Singapore, on 09.11.1975, promising
to repay the same on demand to him with interest @ 18%
per annum and executed a promissory note Ex.A-5 in said
regards. On 03.07.1979, the promissory note Ex.A-5 was
assigned in favour of the plaintiff, and on 11.07.1979 the
plaintiff issued a notice to the defendant intimating to him
RFA (OS) 11/1984 Page 44 of 51
the factum of the said assignment and demanding the
payment of entire dues to him. When the defendant did not
pay the amount the plaintiff filed a suit for recovery of
money. All this while, the defendant was residing in
Singapore and did not visit India even once and was not
present in India when the suit was instituted. On behalf of
the defendant it was contended that the suit is barred by
limitation. Per contra, it was submitted on behalf of the
plaintiff that since the defendant was absent from India, the
period of absence in its entirety had to be excluded while
computing limitation as per Sub-Section 5 of Section 15 of
the Limitation Act 1963. Holding that the presence of the
defendant in India on the date when the suit was filed is a
sine qua non for the application of Sub-Section 5 of Section
15 of the Limitation Act 1963, the suit was held to be barred
by limitation and the reasoning is as under:-
“15. So, it has to decided whether the plaintiff
can sustain the suit, though the defendant had not
returned to India on the date of filing of the suit. In
the present case, admittedly, the cause of action
had arisen in foreign country when the defendant
was in Singapore. Even according to the plaintiff,
the defendant was in Singapore on the date of the
filing of the suit. The plaintiff himself has given the
Singapore address of the defendant in the plaint.
The Full Bench of this Court in Muthukannai v
Andappa Pillai AIR 1955 Mad 96 has found in this
regard that “the Courts in a country have
jurisdiction to entertain action in personam in
respect of any cause of action or wherever the
contract has been made provided that at the
commencement of the action the defendant was
resident or present in that country.” Again in the
conclusion, the same has been insisted by the Full
RFA (OS) 11/1984 Page 45 of 51
Bench of this Court. Moreover, the words used in
Section 15(5) of the Limitation Act themselves
suggest that the defendant should be present in
India on the date of filing of the suit. Otherwise,
the question of computing the period of limitation
taking into consideration of the defendant‟s
absence would not arise. If the defendant
continues to be absent such a calculation is
impossible for the purpose of limitation…….
16. In view of the above, the respondent/plaintiff
cannot take advantage of the provisions of Section
15(5) of the Limitation Act, 1963 for the purpose
of computing the period of limitation, and to say
that the suit is not barred by limitation.”
(Emphasis Supplied)
52. In the instant case, the suit was admittedly filed on
03.11.1997, on which day the defendant was not present in
India. (See the testimony of plaintiff No.1 Bhikhu Ram Jain
noted in para 13 above). In view of the fact that the
defendant was not present in India on the date when the
suit was filed, it has to be held that the plaintiff was not
entitled to the benefit of Sub-Section 5 of Section 15 of the
Limitation Act 1963.
53. Before bringing down the curtain on the subject, we
need to note that the learned Single Judge has ignored that
after the cause of action accrued, which we have noted
hereinabove, accrued on 22.3.1972, the defendant was in
India on 29.10.1972 till 10.11.1972. The cause of action
having accrued, limitation had to continuously run as per
the mandate of Section 9 of the Limitation Act 1963, which
provision reads as under:-
RFA (OS) 11/1984 Page 46 of 51
“9. Continuous running of time.—Where once time
has begun to run, no subsequent disability or
inability to institute a suit or make an application
stop it :
Provided that, where letters of administration to
the estate of a creditor have been granted to his
debtor, the running of the period of limitation for a
suit to recover the debt shall be suspended while
the administration continues.”
54. Though not relevant for the present decision, but may
be for the benefit of the executive, we think that we should
reflect upon the continued relevance of sub-Section 5 of
Section 15 of the Limitation Act 1963. In today‟s era of
globalization and means of communication and serving
parties, what is the relevance of the jurisprudence
underlining sub-Section 5 of Section 15 of the Limitation Act
1963?
55. The Superior Court of Los Angeles County, in the
decision reported as O‟ Laskey v Sortino (1990) 224 Cal.
App. 3d 241, 273 Cal. Rptr. 674, while dealing with Section
351 of Code of Civil Procedure of California, which Section is
pari-materia with sub-Section 5 of Section 15 of the
Limitation Act 1963 observed as under:-
“For the record, we also note that but for the
anachronism of section 351 of the Code of Civil
Procedure, O‟ Laskey‟s complaint would have
been untimely as a matter of law. We agree with
the concurring opinion of Justice King in Mounts v
Uyeda (1990) 223 Cal. App. 3d 474 [272 Cal. Rptr.
876]: “I….write separately to suggest that the
Legislature repeal Code of Civil Procedure section
351. This section, adopted in 1872, may have
RFA (OS) 11/1984 Page 47 of 51
made sense when there was no long-arm statute
and no ability to serve an absent defendant by
substituted service or by publication. It makes no
sense today and should be repealed.” (Emphasis
Supplied)
56. Likewise, in its report dated 02.11.1995, California Law
Revision Commission also recommended the repeal of
Section 351 of Code of Civil Procedure of California. The
relevant portion of the recommendation of California Law
Revision Commission reads as under:-
“This recommendation proposes the repeal of
Code of Civil Procedure Section 351, which tolls
statutes of limitations when the defendant is out
of the state. Section 351 is based on outdated
notions of personal jurisdiction and service of
process, and it is unconstitutional as applied to
cases involving interstate commerce. Repeal of
Section 351 would further the policies underlying
statutes of limitation, protect courts from having
to adjudicate stale claims lacking any meaningful
connection to the state, and eliminates inequities
that may arise when tolling is applied to brief
periods of absence.”
57. We dwell no more on the subject. It is for the
Legislature to take appropriate action in said regard.
58. To complete our decision on all the issues and upon
the supposition that the suit was within limitation and that
the plaintiffs were not in breach of the agreement to sell
and that it was the defendant who was in breach of his
obligation, merely because the suit was filed within
limitation would not entitle the plaintiffs to a decree for
specific performance as the remedy is discretionary. The
agreement to sell was executed on 22.12.1970 and the suit
RFA (OS) 11/1984 Page 48 of 51
was filed after 7 years thereof on 3.11.1977. The value of
property had risen considerably and it would be iniquitous
to decree specific performance. This is the view taken by
the Supreme Court in the judgment reported as K.S.
Vidyanadam v Vairavan (1997) 3 SCC 1 wherein it was
observed:-
“10. It has been consistently held by the courts in
India, following certain early English decisions,
that in the case of agreement of sale relating to
immovable property, time is not of the essence of
the contract unless specifically provided to that
effect. The period of limitation prescribed by the
Limitation Act for filing a suit is three years. From
these two circumstances, it does not follow that
any and every suit for specific performance of the
agreement (which does not provide specifically
that time is of the essence of the contract) should
be decreed provided it is filed within the period of
limitation notwithstanding the time-limits
stipulated in the agreement for doing one or the
other thing by one or the other party. That would
amount to saying that the time- limits prescribed
by the parties in the agreement have no
significance or value and that they mean nothing.
Would it be reasonable to say that because time is
not made the essence of the contract, the time-
limit(s) specified in the agreement have no
relevance and can be ignored with impunity? It
would also mean denying the discretion vested in
the court by both Sections 10 and 20. As held by a
Constitution Bench of this Court in Chand Rani v.
Kamal Rani: (SCC p. 528, para 25)
„... it is clear that in the case of sale of immovable
property there is no presumption as to time being
the essence of the contract. Even if it is not of the
essence of the contract, the court may infer that it
is to be performed in a reasonable time if the
conditions are (evident): (1) from the express
RFA (OS) 11/1984 Page 49 of 51
terms of the contract; (2) from the nature of the
property; and (3) from the surrounding
circumstances, for example, the object of making
the contract.‟
In other words, the court should look at all the
relevant circumstances including the time-limit(s)
specified in the agreement and determine whether
its discretion to grant specific performance should
be exercised. Now in the case of urban properties
in India, it is well-known that their prices have
been going up sharply over the last few decades —
particularly after 1973.” (Emphasis Supplied)
59. Referring to the principle that mere rise in prices is no
ground for denying the specific performance, the Supreme
Court emphasized the need of being alive to the realities of
life and inflationary tendencies judicially noticeable and
observed:-
“Indeed, we are inclined to think that the rigor of
the rule evolved by courts that time is not of the
essence of the contract in the case of immovable
properties — evolved in times when prices and
values were stable and inflation was unknown —
requires to be relaxed, if not modified, particularly
in the case of urban immovable properties. It is
high time, we do so.”
60. The view aforesaid was reiterated by the Supreme
Court in the decisions reported as M. Meenakshi & Ors v
Metadin Aggarwal (2006) 7 SCC 470 and K. Narendra v
Riviera Apartment (P) Ltd (1999) 5 SCC 77.
61. The net result of the above discussion is that the suit
of the plaintiffs must fail. Not only would the plaintiff be not
entitled to specific performance of the agreement to sell,
but in the view taken by us of the suit being barred by
RFA (OS) 11/1984 Page 50 of 51
limitation, would not be entitled to the alternative relief of
refund of the earnest money paid with interest thereon. But
since during arguments learned senior counsel appearing
for the defendant/appellant made a concession that by way
of good will and to keep pure the conscience of the legal
heirs of the deceased appellant they would have no
objection to refund ` 50,000/- to the plaintiffs with interest @
12% per annum from 22.12.1970 when deceased appellant
received said sum from the plaintiff No.1, we dispose of the
appeal setting aside the impugned judgment and decree
dated 5.10.1983 and dispose of the suit by passing a
decree in sum of ` 50,000/- against the defendant and in
favour of the plaintiffs together with interest @ 12% per
annum from 22.12.1970 till payment is made and we leave
the parties to bear their own costs all throughout.
(PRADEEP NANDRAJOG)
JUDGE
(SURESH KAIT)
JUDGE
October 31, 2011
mm
RFA (OS) 11/1984 Page 51 of 51