MRS. SARADAMANI KANDAPPAN v. MRS. S. RAJALAKSHMI & ORS.

SARADAMANI KANDAPPAN v. S. RAJALAKSHMI & 925 ORS. [R.V. RAVEENDRAN, J.]

·deeds for verification and therefore on 2.4.1981 only Rs.25000 A was paid towards the second instalment of Rs.1,00,000 due on 6.4.1981 with the understanding that the balance of Rs. 75,000 towards the second instalment as also the third instalment would be paid only after the production of original title deeds. Therefore the contention was that though time B regarding payment was essence of the contract and the balance consideration of Rs.2,75,000 had to be paid in three instalments of Rs.1,00,000, Rs.1,00,000 and Rs. 75000 on 28.2.1981, 6.4.1981 and 30.5.1981 respectively, there was an alteration in those terms, as per an oral understanding in March, c 1981 to postpone payment of the second and third instalments, till the original documents of title were produced by the defendants. In short the emphasis of the plaintiff was on an oral agreement altering the time schedule and the terms which made time for payment the essence of the contract. Neitherthe D Single Judge nor the Division Bench accepted the claim of · appellant that there were any such discussions or oral understanding in March 1981 leading to variation in terms or that the time for payment was postponed.

30Copy pinpoint30. Before this court there was again a significant shift in the stand of the appellant. Faced with the finding that time for payment was the essence and that there was no change in the terms relating to payment, the emphasis is on a different contention based on section 52 of the Contract Act. The appellant contende~ that the agreement of sale laid down the order in which the reciprocal promises were to be performed; that it first required respondents 1 to 3 as vendors, to furnish the original title deeds and a nil encumbrance certificate to satisfy the appellant about their title; that the appellant had to pay the balance of the sale price only after the vendors discharged their said obligation; that the appellant was entitled to withhold the balance sale price till the vendors discharged their liabilities, secured the original title deed and delivered them to her and satisfied her about their title; and that without performing their obligation by producing the original title deeds, H

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t A the vendors cannot expect performance by the purchaser, to pay the balance price. The appellant contended that courts below failed to appreciate the scope of section 51 to 54 of Contract Act. To appreciate the said contention it is necessary to refer to sections 51 to 53 of the Contract Act. · B

31Copy pinpoint31. Section 51 provides that when a contract consists of reciprocal promises to be simultaneously perfermed, no promisor need perform his promise, unless the promisee is ready and willing to perform his reciprocal promise. For example, if the contract provides that the balance of sale consideration stulll be paid by the purchaser to the vendor against execution of sale deed within a period of three mortths, the purchaser need not pay the balance sale consideration if the vendor was not willing to execute the sale deed. Similarly the vendor need not execute the sale deed unless the purchaser is ready to pay the balance sale consideration.

32Copy pinpoint32. Section 52 relates to the order of performance of reciprocal promises. It provides that where the order in which .. E reciprocal promises are to be performed is expressly fixed by the contract, they shall be performed in that order; and where the order is not expressly fixed by the contract, they shall be performed in that order which the nature of the transaction requires. Let us illustrate with reference to an agreement of sale which provides that the vendor shall make out to the satisfaction of the purchaser a good, marketable and subsisting title and provide all documents as required by the purchaser to satisfy him about the title of the vendor, that the vendor shall obtain a certificate of clearance from a specified authority for the sale, that the sale shall be completed within a period of four months of receipt of the clearance certificate and the purchaser shall pay the balance sale price at the time of registration of the sale. It is evident that the vendor will have first to make out a title by producing the documents required by the purchaser and also obtain the clearance certificate. Only thereafter the sale deed shall have to be executed and payment of the sale H

SARADAMANI KANDAPPAN v. S. RAJALAKSHMI & 927 ORS. [R.V. RAVEENDRAN, J.]

consideration will have to be made at the time of registration A of the sale deed. The vendor cannot seek payment of the balance sale price without performing his obligations as per the agreement.

33Copy pinpoint33. Section 53 provides that when a contract contains 8 reciprocal promises, and one party to the contract prevents the other from performing his promise, the contract becomes voidable at the option of the party so prevented; and he is entitled to compensation from the other party for any loss which he may sustain in consequence of the non-performance of the contract. Let us take by way of illustration an agreement which provides that out of the sale price Rs.10,00,000, Rs.1,00,000 was paid as advance, Rs.4,00,000 was to be paid within one month to enable the vendor to purchase an alternative property and shift his residence from the property agreed to be sold, and the sale deed has to be executed within three months from the date of agreement of sale and vacant possession of the premises should be given, against payment of balance price. If the purchaser failed to pay Rs.4,00,000 within one month and thereby prevented the vendor from purchasing another property and shifting to such premises, the vendor will not be able to perform his obligation to deliver vacant possession. Thus the · contract becomes voidable at the option of the vendor.

34Copy pinpoint34. Section 54 of Contract Act provides that when a contract consists of reciprocal promises, such that one of them cannot be performed, or that its performance cannot be claimed till the other has been performed, and the promisor of the promise last mentioned fails to perform it, such promisor cannot claim the performance of the reciprocal promise, and must make compensation to the other party to the contract for any loss which i;uch other party may sustain by the non- performance of the contract. The agreement in this case provides a good illustration for this section. The purchaser cannot claim that the vendors should produce the original title deeds and satisfy her regarding their title, or claim execution H

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A of the sale deed, unless and until she paid the entire 1 consideration within the time stipulated in clause (4) of the agreement, which would enable the vendors to repay the loans and obtain release of the original title deeds.

35Copy pinpoint35. The appellant contends that clause (3) of the 8 agreement provides that execution of the sale deed shall depend upon the purchaser getting satisfied regarding (vendors') title to the lands and that the property is not subject to any encumbrance; that the said clause precedes clause (4) requiring payment of balance consideration of Rs.2, 75,000 in 1C three instalments; and that shows thatthe intention of parties was that the satisfaction of the purchaser in regard to the vendors' title to the land and· encumbrance, was a condition precedent for payment of the balance consideration. In other 1 words, it is contended that the contract provides the order in which reciprocal promises are to be performed, by placing clause (3) before clause (4), that is the vendors should first satisfy the purchaser regardir.J title of the vendors and only when that promise is performed by the vendors, the question of purchaser performing her promise to pay the balance consideration would arise.

36Copy pinpoint36. The order of performance of reciprocal promises does not depend upon the order in which the terms of the agreement are reduced into writing. The order of performance should be expressly stated or provided, that is, the agreement should say only after performance of obligations of vendors under clause (3), the purchaser will have to perform her obligations under clause (4). As there is no such express fixation of the order in which the reciprocal promises are to be performed, the appellant's contention is liable to be rejected. We have already noticed that the contract contains two different streams of provisions for performance. One relates to payment of the balance consideration by the purchaser in the manner provided, which is not dependent upon any performance of obligation by the vendors. It is significant that clause (4) of the agreement H

SARADAMANI KANDAPPAN v. S. RAJALAKSHMI & 929 ORS. [R.V. RAVEENDRAN, J.]

did not say that the balance of the sale price shall be paid only after the vendors satisfied the purchaser in regard to title or that the purchaser shall pay the balance of sale price only after she satisfies herself regarding title of the vendors to the lands. Nor does clause (3) contain a provision, after stating that execution of the sale deed shall depend upon the purchaser getting satisfied regarding title to the land as also the nil encumbrance, that the payment of sale consideration will also depend upon such satisfaction regarding title and nil encumbrance. As noticed above there is an unconditional promise to pay the balance consideration in three instalments and the said c promise by the purchaser is not dependent upon performance of any obligation by vendors. The contract specifically states that having paid the balance price, if the purchaser is not satisfied about the title and on being intimated about the same if the vendors fail to satisfy the purchaser about their title, all amounts paid towards the price should be refunded to purchaser. This clearly demonstrates that the payment of balance of sale price in terms of the contract was not postponed nor made conditional upon the purchaser being satisfied about the title, but that payment of the balance price should be made to the vendors as agreed unconditionally. In fact if the intention of the parties was that only after the vendors satisfying the purchaser about their title, balance consideration had to be paid, clause (12) would be redundant as the situation contemplated therein would not arise. Further, if that was the intention, the purchaser would not have paid Rs.1,00,000 as further advance on 28.1.1981 and Rs.25,000 on 2.4.1981. It is therefore clear that the contract does not expressly (or even impliedly) specify the order of performance of reciprocal promises, as alleged by the appellant. G

37Copy pinpoint37. The terms of the contract makes it clear that payment of sale price did not depend on execution of the sale deed. The sale deed was not required to be executed within any specific period. The purchaser had to fulfil her obligation in regard to payment of price as provided in clause 4 and thereafter vendors H

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A were required to perform their reciprocal promise of executing the sale deed, whenever required by the purchaser, either in her name or in the names of her nominees. The sale deed had to be executed only after payment of complete sale consideration within the time stipulated. In these circumstances, section 52 of the Contract Act does not help the appellant but actually supports the vendors-respondents.

Re: Question (iii)

38Copy pinpoint38. Learned counsel for the appellant next submitted that the lands belonging to the first respondent were mortgaged to Bank of India, the lands belonging to the second defendant were mortgaged to one Gulecha, the lands belonging to third respondent were mortgaged to State Bank of Mysore and therefore none of the original title deeds were in the custody of vendors; that having regard to section 55 (1) of Transfer of Propercy Act, 1882 ('TP Act' for short) the vendors were bound to disclose to the purchaser, any mat~iial defect in their title to the property; that the failure of vendors to disclose the existence of the mortgages/encumbrances amounted to fraudulent conduct within the meaning of section 55 of TP Act. It was submitted that the vendors had deliberately failed to disclose the existence of the said encumbrances to the purchaser and thereby committed a fraud which made the purchaser to enter into an agreement of sale and part with a potion of the sale consideration in advance; that when the purchaser got doubts and insisted on production of the original title deeds, the fourth respondent took time to get the original title deeds and agreed that the balance of sale price due may be paid after production of sale deeds. It was submitted that having regard to section G 55 of the TP Act, failure to disclose the encumbrances amounted to fraud; and in view of such fraud by the respondents, the appellant was prevented from performing her part of the contract by paying the balance piice before the agreJd dates and therefore the appellant was entitled to extension of further time for performing her promise to pay the H

SARADAMANI KANDAPPAN v. S. RAJALAKSHMI & 931 ORS. [RV. RAVEENDRAN, J.]

balance price, corresponding to the delay caused by such fraud, A having regard to the provisions of section 34 of the TP Act.

39Copy pinpoint39. Section 55 of TP Act lists the rights and liabilities of the buyer and the seller in the absence of a contract to the contrary. The relevant portion of section 55 reads thus: B "55. Rights and liabilities of buyer and seller -- In the absence of a contract to the contrary, the buyer and the seller of immovable property respectively are subject to the liabilities, and have the rights, mentioned in the rules next · following or such of them as are applicable to the property sold:

(1) The seller is bound-

(a) to disclose to the buyer any material defect in the property or in the seller's title thereto of which the seller is, and the buyer is not, aware, and which the buyer could not with ordinary care discover;

(b) to produce to the buyer on his request for examination, all documents of title relating to the property which are in the seller's possession or power;

(c} to answer to the best of his information all relevant questions put to him by the buyer in respect to the property or the title thereto; x x x x x F Section 34 of the TP Act relied upon by appellant, is extracted below:

"34. Transfer conditional on performance of act, time being specified G

Where an act is to be performed by a person either as a · condition to be fulfilled before an interest created on a transfer of property is enjoyed by him, or as a condition on the non-fulfilment of which the interest is to pass from H

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A him to another person, and a time is specified for the performance of the act, if such performance within the specified time is prevented by the fraud of a person who would be directly benefited by non-fulfilment of the condition, such further time shall as against him be allowed B for performing the act as shall be requisite to make up for the delay caused by such :raud. But if no time is specified for the performance of the act, then, if its performance is by the fraud of a person interested in the non-fulfilment of the condition rendered impossible or indefinitely c postponed, the con~~on shall as against him be deemed to have been fulfilled."

40Copy pinpoint40. Whenever a party wants to put forth a contention of fraud, it has to be specifically pleaded and proved. It is significant that the plaint does not allege any fraud by the defendants. Evidence shows that before the agreement was entered, the purchaser's husband and legal advisor had examined the xerox copies of the title· deeds and satisfied themselves about the title of the vendors. The appellant in her evidence clearly admits that xerox copies of the title deeds were shown to her husband. The agreement of sale provided that the sale would depend upon purchaser getting satisfied about the title of the vendors. The manner in which the agreement was drafted by the purchaser shows that the purchaser and/or her husband were made aware of the encumbrances. Firstly there is no provision in the agreement that the lands were not subject to any encumbrances. Secondly, the provision for payment of sale price within a specified time does not link the payment to execution of a sale deed. Thirdly the contract provided that on execution of the agreement the purchaser will take possession as care taker of the suit schedule properties and that on complete payment of the sale price on 30.5.1981, she will be entitled to possession in part performance and that the execution of the sale deed will be whenever required by the purchaser, totally disconnected with either payment of price or delivery of possession. All these provisions demonstrate that

SARADArvjANI Kf'.NDAPPAN v. S. RAJALAKSHMI & 933 -ORS. [R.V. RAVEENDRAN, J.]

the vendors were In urgent need of money, that the purch;;iser was made aware of the encumbrances, that on the purchaser paying the sale price, the vendors had to clear the encumbrances and thereafter convey the property, free from encumbrances. The contention that the vendors deliberately or intentionally suppressed any information regarding the pending encumbrances or the fact that the original documents were not available and thereby committed fraud is neither pleaded nor proved. ·

41Copy pinpoint41. The appellant did not allege in the plaint, any fraud on the part of vendors, in regard to suppression of encumbrances over the property. The entire plaint tried to justify that the plaintiff did not commit breach of contract by not paying the balance instalm_ents ori 6.4.1981 and 30.5.1981, except for a stray sentence that the plaintiff will be entitled to proceed against the third· defendants 1 to 3 for damages, for not performing their part of the contract and not disclosing several prior encumbrances over the property. In the written statement the defendants submitted that the encumbrance certificate upto the year 1980 had been given to appellant's husband, which showed the encumbrance in favour of State Bank of Mysore, E that plaintiff and her husband both knew before entering into the agreement of sale that original documents were with the said bank and that therefore the allegation that the encumbrance was not disclosed was false. It was also disclosed in the written statement, that a document was surreptitiously detained by one F Gulecha. It was stated that the defendants intended to utilise the last two instalments for securing back the original documents by discharging the loans. It is not disputed that the amount due to Gulecha was around Rs.40,000 and the amount due to State Bank of Mysore was around Rs.39,000 and any G of the last two instalments would have been sufficient to discharge the said liabilities. The appellant having committed · default in paying the last two instalments which would have enabled discharging the debts, can not find fault with the vendors by conteoding that they did not secure the original title H

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A deeds. If the mortgage/encumbrance was made known to. appellant's husband and if it had been understood that the same would be cleared from the last of the instalments paid by the appellant, the absence of original title deeds could not be made a ground for not paying the last two instalments. The claim of . B the appellant that the vendors should have cleared all the encumbrances before payment of the last two instalments is not borne out by any evidence. Even in law, the obligation of the vendors is to convey an encumbrance free, good and marketable title subject to contract to the contrary. The stage c of execution of sale deed had not arrived as the appellants did not paid the amount due in terms of the contract.

42Copy pinpoint42. The appellant contended that the debt due to the Bank of India had been fraudulently suppressed by the vendors. There is no reference to such a mortgage either in the plaint D or the evidence of the plaintiff. No one has been examined from the bank nor any document produced to prove the existence of such mortgage. Appellant attempted to produce some documents relating to the said mortgage with an application under Order 41 Rule 27 CPC which was rejected by the High E Court. Before us, the appellants relied upon the decision in Bank of India v. Vijay Transport [2000 (8) SCC 512] which related to the bank's suit against Vijay Transport of which the first respondent was stated to be a partner. The said decision of this court discloses that proceedings were commenced in the year 1975 against the firm in which the first respondent was a partner, for recovery of Rs.18, 14,817.91 in the Court of Sub- Judge, Eluru; that the partnership firm raised a counter claim of Rs. 34,48,799 against the Bank; and that on 6.7.1976 the Bank's suit was decreed only for Rs.1,00,418/55 whereas the counter claim of the first respondent was decreed for Rs.34,48,799 with costs. The bank filed an appeal before the High Court which was allowed on 20.9.1983 and the Bank's ·suit was decreed for Rs.18,49,209. 70 with interest and the firm's counter claim was dismissed. But what is significant and relevant is the fact that as on the date of the agreement of sale

SARADAMANI KANDAPPAN v. S. RAJALAKSHMI & 935 OR$. [R.V. RAVEENDRAN, J.]

(17.1.1981) the first defendant was not a debtor of Bank of India A but on the other hand the bank itself was a debtor to the extent of more than Rs.33,00,000 with interest. Therefore the contention of the appellant that an encumbrance in favour of Bank of India was in existence and that was not disclosed and the said liability was not disclosed, is wholly untenable. From B the evidence on record as rightly held by the courts below it is not possible to make out either any fraud or any suppression or failure to disclose facts on the part of the respondents.

43Copy pinpoint43. We are therefore of the view that the failure of the appellant to pay the balance of Rs. 75,000 on 6.4.1981 and failure to pay the last instalment of Rs.75,000 on or before 30.5.1981 clearly amounted to breach and time for such payment was the essence of the contract, the respondents were justified in determining the agreement of sale which they did by notice dated 2.8.1981 (Ex. P5). Therefore rejection of the prayer for specific performance is upheld. ·

44Copy pinpoint44. We may next briefly deal with the correctness of the dismissal of the suit for injunction. The appellant was not put in possession of the suit properties in part-performance of the agreement of sale. Under clause 15 of the agreement of sale, she was only entrusted with the suit schedule properties as a caretaker until possession is given on receipt of the entire sale consideration. As neither the entire sale consideration was paid nor possession delivered, the plaintiff remained merely a F caretaker and on cancellation of the agreement of sale by the respondents, the plaintiff became liable to leave the suit schedule properties as the possession continued to be with the defendants. As appellant never had 'possession' she was not entitled to seek a permanent injunction to protect her G possession. We have held that the cancellation of agreement was justified and upheld the rejection of the suit for specific. performance. In the circumstances, the dismissal of the suit for 1

injunction by the learned Single Judge, affirmed by the Division Bench, is also not open to challenge. H

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45Copy pinpoint45. We also find no reason to interfere with the dismissal of the suit for recovery of Rs.1,25,000 from the fourth respondent. The trial court held that the said amount was not paid as commission but was paid as consideration for the movables. The said suit was dismissed by the trial court. In the B High Court the learned counsel for the appellant during arguments clearly stated that the appellant was not pressing for any decree against the fourth respondent in view of the finding that the amount paid was part of the consideration for movables. Therefore the dismissal of suit for Rs.1,25,000 is c also upheld.

46Copy pinpoint46. The division bench to do broad justice and work out the equities, took note of the offer of the defendants in their written statement to refund the amount paid as advance and directed the defendants to refund the sum of Rs.2,25,000 paid D to defendants 1 to 3 under the agreement and Rs.1,25,000 paid to the fourth respondent, in all, Rs.3,50,000 with interest at 9% per annum for the period when the appellant was not acting as a care taker till date of payment. We find no reason to interfere with the direction to refund Rs.3,50,000 with interest. We E however propose to make a modification in regard to the rate of interest and the period for which interest is payable. The High Court has awarded interest on the sum of Rs.3,50,000 at 9% per annum for the period in which the appellant had not acted as caretaker till the date of payment. As noticed above, the agreement of sale does not provide for forfeiture of the amounts paid as advance under any circumstances and on the other hand, specifically provides that if the plaintiff was not satisfied with the title of the defendants, the amounts received as advance would be refunded. In fact, the respondents, in their written statement, offered to refund the amount. Therefore, the High Court ought to have granted interest from the date of cancellation of the-agreement (2.8.1981) to date of payment. The High Court was not justified in restricting the interest to only for the period during which the appellant had not acted as IH caretaker. The liabi~ity to refund the advance has nothing to do

SARADAMANI KANDAPPAN v. S. RAJALAKSHMI & 937 ORS. [R.V. RAVEENDRAN, J.]

with the appointment of the plaintiff as caretaker or the A obligation of the plaintiff to return the property on cancellation of the agreement. Having regard to the facts and circumstances, we are of the view that the rate of interest shall be increased to 12% per annum instead of 9% per annum. B Re : Question No. (iv)

47Copy pinpoint47. The appellant contended that none of the three vendors (defendants 1, 2 and 3) stepped into the witness box to give evidence and therefore an adverse inference should be drawn against them that the case put forth by them is incorrect. C Reliance was also placed on the decisions of this court in Vidhyadhar v. Mankikrao & Anr. (1999) 3 SCC 573 and Balasaheb Dayandeo ·Naik (Dead) through LRs. and Ors. v. Appasaheb Dattatraya Pawar (2008 ) 4 SCC 464 in that behalf. There were four defendants in the suit. Defendants 1,2 D and 3, who were the owners of the lands were respectively the wife, son and daughter of the fourth defendant. It is an admitted position that the entire transaction )Vas done on behalf of the defendants 1,2 and 3 by defen-dant No.4 who alone had complete knowledge of the entire transaction. Fourth defendant E has given evidence on behalf of all the other defendants. When one of the defendants who is conversant with the facts has given evidence, it is not necessary for the· other defendants to be examined as witnesses to duplicate the evidence. The legal position as to who should give evidence in regard to the matters. F involving personal knowledge have been laid down by this court in Man Kaur (dead) by LRS. v. Hartar Singh Sangha (2010) 10 SCC 512. This court has held that where the entire transaction has been conducted through a particular agent or representative, the Rrincipal has to examine that agent to prove G the transaction; and that where the principal at no point of time had personally handled or dealt with or participated in the transaction and has no personal knowledge of the transaction, and where the entire transaction has been handled by the agent, · necessarily the agent alone can give evidence in regard to the H

938 SUPREME COURT REPORTS [2011] 8 S.C.R.

A transaction. This court further observed:

"Where all the affairs of a party are completely managed, transacted and looked after by an attorney (who may happen to be a close family member), it may be possible to accept the evidence of such attorney even with B reference to bona fides or 'readiness and willingness'. Examples of such attorney holders are a husband/wife exclusively managing the affairs of his/her spouse, a son/ daughter exclusively managing the affairs of an old and infirm parent, a father/mother exclusively managing the c affairs of a son/daughter living abroad."

Therefore the evidence of the fourth defendant (examined as DW2) was sufficient to put forth the case of the defendants and there was no need to examine the other three defendants who D did not have full or complete knowledge of the transactions. In the circumstances we find no merit in the contention that the suits ought to have been decreed, as defendants 1,2 and 3 did not step into the witness box.

E Re : Contempt Petition (C) Nos.28-29/2009 :

48Copy pinpoint48. The appellant has filed these contempt petitions praying that respondents 1 to 4 be punished for committing contempt of the order dated 11.11.2002 made in C.A. Nos.7254-7256/2002. The appellant filed the said appeals aggrieved by the common judgment dated 19.6.2002 passed by the Division Bench of the High Court, affirming the dismissal of the three suits of appellant for injunction, for specific performance and for refund of Rs.1,25,000/-. This Court on 11.11.2002 while granting leave in the special leave petitions, made an interim order that the respondent shall not encumber the property in any manner.

49Copy pinpoint49. The appellant alleges that one Jeevanandam filed three suits against respondents 1 to 3 in the years 2007 and H 2008 for injunctions and other reliefs, alleging that he had

SARADAMANI KANDAPPAN v. S. RAJALAKSHMI & 939 ORS. [R.V. RAVEENDRAN, J.] A entered into three Memorandum of Understanding (MOU for short) dated 5.7.2002 with them, under which they had agreed to enter into agreements of sale in regard to the suit schedule properties; that he had paid advances to each of them on 5.7.2002, and that he had further paid to respondents 1 to 3 in the years 2004 and 2005, a sum of Rs.1,50,00,000. The 8 appellants contend that the alleged act of receiving Rs.1,50,00,000 in the years 2004 and 2005 by respondents 1 to 3 from Jeevanandam, amounted to creating an encumbrance over the suit property and thereby respondents 1 to 3 have committed contempt of the order dated 11.11.2002 of this C Court. The appellant also wants this court to hold an enquiry and hold that the MOUs were actually entered subsequent to the interim order dated 11.11.2002, but deliberately anti-dated to get over the interim order and therefore the execution of the said MOUs also amounts to creating an encumbrance. It is not D Recessary for us to examine the question whether the MOUs were anti-dated as the said question is not relevant as will presently be seen, apart from the fact that no material has been produced by the appellant to establish the said allegation. E

50Copy pinpoint50. An 'encumbrance' is a charge or burden created by transfer of any interest in a property. It is a liability attached to the property that runs with the land. [See National Textile Corporation vs. State of Maharashtra - AIR 1977 SC 1566 and State of H.P. vs. Tarsem Singh - 2001 (8) SCC 104). Mere execution of an MOU, agreeing to enter into an agreement to sell the property, does not amount to encumbering a property. Receiving advances or amounts in pursuance of an MOU would not also amount to creating an encumbrance. The MOUs said to have been executed by respondents 1 to 3 provide that agreements of sale with mutually agreed terms and conditions will be entered between the parties after clearance of all pending or future litigations. Therefore the MOUs are not oven agreements of sale. In these circumstances, it is not possible to hold that the respondents have created any encumbrances or violated the order dated 11.11.2002. Hence, these contempt H

940 SUPREME COURT REPORTS (2011] 8 S.C.R.

A petitions are liable to be rejected.

51Copy pinpoint51. We make it clear that nothing stated in this order on the contempt petitions will be construed as an expression of al)y opinion on the merits of the dispute between Jeevanandam and respondents 1 to 3, and necessarily any pending litigation 8 between them will have to be decided on the merits of the respective cases.

CIVIL APPEAL NOS. 7254-7256 OF 2002

c 52. These appeals are filed by the vendors - defendants 1 to 3 (who are respondents 1 to 3 in C.A. Nos.7254-7256/ 2002). They are aggrieved by the judgment and decree of the Division Bench in O.S.A. No.12/1992 (arising from the specific performance suit) and O.S.A.No. 148/1999 (arising out of the D money suit) whereby the Division Bench directed defendants 1 to 3 to jointly repay Rs.3,50,000 with interest at 9% per annum during the period the plaintiff was not acting as a caretaker till the date of payment. Defendants 1 to 3 urge the following contentions : E (a) In their written statement (filed in the specific performance suit), their offer was to repay the amount advanced was a conditional offer subject to the plaintiff not obstructing the defendants from interfering with the property or filing any frivolous, mischievous or vexatious suit and voluntarily handing over the possession of the property. They had not unconditionally agreed to repay the sum of Rs.3,50,000. As the plaintiff failed to hand over the possession and obstructed the defendants from selling the property, the offer to return the advance had stood withdrawn.

(b) During the pendency of the Original Side Appeals, the plaintiff was permitting to continue in possession as Receiver of the suit properties and she had reaped a huge benefit of more than Rs.37,00,000 due to continuing in H

SARADAMANI KANDAPPAN v. S. RAJALAKSHMI & 941 ORS. [R.V. RAVEENDRAN, J.]

possession for about 15 years. As the plaintiff was A permitted to retain the said benefit, no further benefit ought to have been given by directing refund of the sum of Rs.3,50,000 with interest.

53Copy pinpoint53. The fact that defendants 1 to 3 received Rs.2,25,000 8 out of the sale price of Rs.3,75,000 is not in dispute. Similarly, there is no dispute that the fourth defendant had received a sum of Rs.1,25,000 from the plaintiff and agreed to refund the said amount if the sale remained unconcluded or if the agreement of sale was cancelled. The division bench of the High Court found fit to award the said amount, after affirming the decision rejecting the prayer for specific performance, in view of the offer made by defendants 1 to 3 in their written statement to repay the amounts received towards the sale consideration. We have held that the time stipulated for payment of the balance price by the plaintiff was the essence of the contract and when the same was not paid, defendants 1 to 3 were justified in cancelling the sale agreement. But, we also found that there was no provision in the agreement for forfeiture of the amounts already paid, even in the event of breach by the purchaser. On the other hand it provides that if the vendors did not satisfy the purchaser in regard to their title, the amounts received would be refunded. The consistent case of the plaintiff was that the defendants 1 to 3 failed to satisfy her about their title.

54Copy pinpoint54. Further, defendants 1 to 3 in their written statement filed in the specific performance suit had agreed to refund all amounts received by them from the plaintiff. It is true that the offer was conditional upon the plaintiff not creating any hindrance in the way of the defendants by filing false, frivolous and mischievous suits. Though we have affirmed the decision of the learned Single Judge and the Division Bench that the plaintiff is not entitled to the relief of specific performance, it cannot be said that the plaintiff had filed false, frivolous and mischievous suits. In view of the above, in terms of the agreement and in terms of its offer, the plaintiff was entitled to 1

942 SUPREME COURT REPORTS (2011] 8 S.C.R.

A recover the amounts paid by her. A sum of Rs.2,25,000 was paid under the agreement of sale to defendants 1 to 3. The finding of the learned Single Judge that the sum of Rs.1,25,000 paid by the plaintiff to the fourth defendant was also the consideration for the movables in addition to the consideration B of Rs.3,75,000 under the agreement of sale, was not been challenged by the defendants. In the circumstances, the Division Bench was justified in granting a decree in favour of the plaintiff for Rs.3,50,000 with interest. These appeals are therefore liable to be dismissed.

C Conclusion :

55Copy pinpoint55. In view of the foregoing the appeals and contempt petitions are disposed of as follows:

D (i) C.A. Nos.7254-7256/2002 are allowed in part only in regard to the rate of interest and period for which interest is payable, with respect to the decretal amount of Rs.3,50,000/-. We direct that respondents 1 to 3 shall refund the sum of Rs.3,50,000/- to appellant as directed by High Court, with interest at 12% per annum from E 2.8.1981 to the date of payment. Subject to the aforesaid modification in regard to the period for which interest is payable and rate of interest, the judgment of the Division Bench of the Madras High Court is upheld in its entirety.

F (ii) Contempt Petition Nos.28-29/2009 are dismissed.

(iii) C.A. Nos.4641-4642/2003 are dismissed.

(iv) Parties are directed to bear their respective costs.

G As a consequence, CS No. 170/1984 and CS No. 302/ 1989 stand dismissed. CS No. 95/1984 is decreed in part in favour of the appellant for Rs.3,50,000 with interest at 12% per annum from 2.8.1981 to date of payment.

H D.G . Matters disposed of.