Appeal No.324 of 2008,Notice of Motion No.1610 of 2008,Suit No.1272 of 2008,Notice of Motion No.3166 of 2008

16th October, 2008

Petitioner Counsel: Shri. M. S. DOCTOR,M/s. Bachubhai Munim & Co.
Respondent Counsel: Shri. CARL SHROFF,Shri. FERZANA BEHRAM KAMDIN,M/s. FZB

Cases Cited:
Nathulal Vs. Phoolchand, 1969(3) SCC 120 [Para 4,7]
Bharat Barrel and Drum Mfg. Co. Pvt. Ltd. Vs. Hindustan Petroleum Corpn. Ltd., AIR 1989 Bom 170 [Para 6]
Ganesh Prasad Vs. Saraswati Devi, AIR 1982 All 47 [Para 6]
His Holiness Acharya Swami Ganesh Dassji Vs. Sita Ram Thapar, (1996)4 SCC 526 [Para 8]
Umabai Vs. Nilkanth Dhondiba Chavan, (2005)6 SCC 243 [Para 9]
Sh. Raj Kumar Sharma Vs. Smt. Pushpa Jaggi, 2006(128) DLT 96 [Para 10]
P. Govindaswamy Vs. S. Narayanan, 1987 (Suppl.) SCC 58 [Para 11]
Jaikishan Jagwani Vs. Britomatics Enterprises Pvt. Ltd., 1987 (Suppl.) SCC 72 [Para 11]
Balasaheb Dayandeo Naik (Dead) through Lrs Vs. Appasaheb Dattatraya Pawar, 2008 ALL SCR 656 : (2008)4 SCC 464 [Para 14]
Mcdermott International Inc. Vs. Burn Standard Co. Ltd., (2006)11 SCC 181 [Para 15]
Yogesh Mehta Vs. Custodian Appointed under the Special Court, 2007(4) ALL MR 781 (S.C.)=(2007)2 SCC 624 [Para 16]
Chand Rani Vs. Kamal Rani, 2008 ALL SCR (O.C.C.) 33 : (1993)1 SCC 519 [Para 18]

JUDGMENT

SWATANTER KUMAR, C.J.:- The Memorandum of Understanding dated 24th September, 2007 was executed between M/s. Trufit Fasteners Private Limited, a Company duly incorporated under the Companies Act, 1956 as Vendor and M/s. Avdel Tools & Services, a Partnership Firm, registered under the Indian Partnership Act, 1932 as Purchaser, in relation to the Plot No. A-285, Thane Industrial Area, admeasuring 1265 sq. metres at Village Panchpakhadi, within the limits of Thane Municipal Council (hereinafter referred to as "the property inquestion"). The Maharashtra Industrial Development Corporation (hereinafter referred to as the "MIDC") has executed a Lease Deed in relation to the property in question on 27th February, 1979. Vide the Memorandum of Understanding ( hereinafter referred to as "the MOU"), the Vendor had agreed to sell, transfer, alienate and assign the rights, titles and interests, etc. in relation to the property in question in favour of the Purchaser for a total consideration of Rs.1,70,00,000/- (Rupees One Crore Seventy Lakhs Only ). It was understood between the parties that there was no outstanding liabilities against the property in question and the total sale consideration agreed between the parties was to be paid in the following manner.

"(a) Rs.20,00,000/- On or before the execution hereof.

(b) Rs.30,00,000/- On receipt of clearance from MIDC for transfer and before payment of transfer fees by Purchaser to MIDC.

(c) Rs.1,20,00,000/- On or before 30.11.2007 against possession of the said premises by the Vendor to the Purchaser with ten days grace period to either party to honour respective obligation on their part but not beyond 10-12-2007."

2. The sum of Rs.20 lakhs was paid by Cheque on 24th September, 2007. A Consent of MIDC was to be obtained by the parties and it was stipulated that if it is not received within a period of 45 days from the date of the application, the advance of Rs.20 lakhs shall be returned to the Purchaser without any interest within 7 days of the receipt of the denial from MIDC. The Vendor was to hand over vacant and peaceful possession of the property in question before the execution of the document. The MOU also provided for other terms and conditions for completion of transaction. According to the Vendor, the permission was not received within 45 days and thus they terminated the MOU vide letter dated 24th November, 2007 and returned the advance of Rs.20 lakhs by Cheque. However, according to the Purchaser, the contract was never terminated and a sum of Rs.20 lakhs was not paid to them as the parties had agreed to extend the period. There was some dispute between the parties in regard to the documents asked for and furnished by the Vendor as well as the Purchaser. The Vendor declined to fulfill its obligation under the MOU on the ground that the said MOU stood terminated. The Purchaser served a notice dated 12th February, 2008 and called upon the Vendor to comply with the terms and conditions of the MOU and to furnish all necessary documents. The MOU was subsisting and binding and they made it clear that they would be compelled to take action in accordance with law in the event of non compliance, to which a reply dated 28th February, 2008 was sent by the Vendor reiterating the stand that the MOU was terminated and annexed the Cheque dated 24th November, 2007 of Rs.20 lakhs to it. By letter dated 31st March, 2008, the Purchaser sent a reply to the reply dated 28th February, 2008 and returned the cheque of Rs.20 lakhs and called upon Vendor to perform its part of the agreement in terms of the MOU dated 24th September, 2007.

3. As the Vendor failed to act in accordance with the notice, the Purchaser filed a suit bearing Suit No.1272 of 2008 for specific performance of the MOU dated 24th September, 2007. Along with the suit, a Notice of Motion No.1610 of 2008 was taken out by the present Appellant praying for an injunction restraining the Defendant from selling, transferring, alienating or parting with the possession of the property in question. After hearing the parties, the learned Single Judge vide order dated 25th June, 2008 declined the relief of injunction and dismissed the Notice of Motion. Being aggrieved by the said order dated 25th June, 2008 passed by the learned Singe Judge, the Appellant has filed the present Appeal. It will be useful to refer to the findings recorded by the learned Single Judge while declining the relief of injunction to the Plaintiff/Appellant. It primarily refers to Clause 10 of the MOU. It held that the Respondent in the Appeal was entitled to terminate the MOU if the permission of MIDC for the transfer was not received within 45 days from the date of application, and the Respondent had to return the advance of Rs.20 lakhs received by it to the Appellant within seven days of the receipt of denial from the MIDC. The learned Single Judge did notice that the contention of this nature was raised before the Court but recorded no finding if there was actual valid termination of the MOU. However, it will be useful to refer to portion of the judgment for which injunction has been declined.

"6. Paragraph no.5 of the MOU states that plaintiff had paid to the defendant Rs.20,00,000/- on execution of the agreement and was to pay Rs.30 lakhs more on receipt of clearance from MIDC and further sum of Rs.1,20,00,000/- on or before 30th November, 2007 against possession or in any event on or before 10th December, 2007. Plaintiff was therefore required to have with him Rs.1,50,00,000/- in addition to earnest of Rs.20,00,000/-. On the first occasion when the mater came up before me I orally directed the plaintiff to produce the material on record to show that it had the money of Rs.1,50,00,000/-was able to procure it. No such material has been produced. Learned counsel for the plaintiff submits that it is irrelevant to show that the plaintiff had the money or could have procured the same. Counsel submitted that was irrelevant and the plaintiff was not obliged to plead and prove that he had or could have procured the money. I am unable to agree. Section 16(c) of the Specific Relief Act, plaintiff requires the plaintiff to aver and prove his continuous readiness and willingness to perform his part of the contract. The only part which was required to be performed by the plaintiff, apart from obtaining the permission from MIDC, was to pay Rs.1,50,00,000/-. In any view, therefore it was necessary on the part of the plaintiff to show that he had Rs.1,50,00,000/- or was in a position to procure the money on the relevant date. This has not been done. In my view, therefore plaintiff has failed to prove his readiness and willingness which he was required to aver and prove under section 16(c) of the Specific Relief Act. Plaintiff is therefore not entitled to relief of injunction. Motion is dismissed."

4. The learned Counsel appearing for the Appellant contended that it was not expected of the Appellant to demonstrate the money to show his readiness and willingness to perform his part of the contract. It was sufficient for the Appellant to bring to the notice of the Court that the Appellant possessed and/or could arrange for a fund for the purposes of making the payment to fulfill his obligations under the terms of the contract. Furthermore, these are the matters of evidence and the chance to prove that they were possessed of sufficient means to fulfill their obligations as per the terms of the MOU should have been given to appellant. In this regard, the learned Counsel placed reliance on the judgment of the Supreme Court in the case of Nathulal Vs. Phoolchand, 1969(3) SCC 120.

5. It is a settled principle of law that the Court at this stage of the proceedings while considering application for interlocutory orders is to form a prima facie view and while considering various aspects for grant or decline of injunction the Court has to balance the equity between the parties. In a Suit for specific performance, the Court is vested with wide discretionary powers in terms of Section 20 of the Specific Relief Act. This discretion has to be exercised in accordance with the settled precepts governing the subject and cannot be exercised arbitrarily. This principle would also be of help to the Court while deciding an interlocutory application for grant of injunction. No doubt readiness and willingness of the purchaser is a condition precedent to the grant of relief at final stage or even for that matter at interlocutory stage. Readiness and willingness must exist at all relevant times. But 'readiness and willingness' is a term which has to be construed with certain clarity and has to be given a meaning relatable to the facts and circumstances of a given case. It has been repeatedly held by the Courts that readiness and willingness essentially does not mean exhibition of money by the purchaser. This attains significance and relevance for the reason that grant or refusal of injunction in a Suit for specific performance would essentially depend upon prima facie satisfaction of the ingredients essential for decree for specific performance.

6. Specific performance is equitable relief and is in contrast with remedy by way of damages for breach of contract. The jurisdiction of English Court of Chancery to decree specific performance of contracts was founded on the want of an adequate remedy in law. In the Specific Relief Act of 1877, there was no express provision that averment of readiness and willingness was necessary to enforce suit for specific performance, but this was followed as a law. By the introduction of Section 16(c) of the newly introduced Act, the Specific Relief Act, 1963, it was expected of a plaintiff to make such a statement in the plaint itself. The words 'ready and willing' imply that the plaintiff was prepared to carry out those parts of the contract to their logical end so far as they depend upon his performance. These acts may be of the nature which are to be performed before other side can be called upon to fulfil their promise while others may be to be performed subsequent thereto. Such averment was required to be made in the plaint and was not necessarily to be stated in the notice if at all served by the plaintiff on the defendant. The various Courts have even taken the view that readiness and willingness of a person seeking specific performance in a case where time is provided for performance, means that the person claiming performance has kept the contract subsisting with preparedness to fulfil his obligation and accept performance when the time for performance arrives. However, it may not necessarily mean that he had command of the necessary money throughout the existence of the contract. A purchaser to succeed in a suit for specific performance, need not show that he had the consideration money with him or he had arrangements for it, but he was ready and willing to go through with the contract. This is a question of fact. The Courts have also taken the view that actual tender of money is not a condition precedent for specific performance unless the contract to the contrary specifically states so. Even a Bench of this Court in the case of Bharat Barrel and Drum Mfg. Co. Pvt. Ltd. Vs. Hindustan Petroleum Corpn. Ltd, AIR 1989 Bom 170, took the view that where there might be a dispute as to the true construction of the contract in such a case the plaintiff must aver that he is ready and willing to perform the contract as construed by the Court. It will be relevant to refer to the following dictum stated by the Allahabad High Court in the case of Ganesh Prasad Vs. Saraswati Devi, AIR 1982 All 47 as under:-

"The plaintiff does not have to go about jingling money to demonstrate his capacity to pay the purchase price."

[Reference : Pollock & Mulla - Indian Contract and Specific Relief Acts, Thirteenth Edition].

7. In fact, in face of Explanation I to Section 16 of the Act, there is hardly any doubt as to the true meaning and application of the expression 'readiness and willingness' in cases relating to specific performance. It is not essential for the plaintiff to actually tender to the defendant or to deposit in Court any money except when so directed by the Court. The purpose of this expression obviously is to ensure that the plaintiff is capable of performing the terms which he was expected to do so under the terms of the contract or even under the orders of the Court. The Supreme Court in the case of Nathulal (supra), where breach of contract was pleaded in a suit for possession relating to performance of the contract and capacity to pay, held as under:-

"6. Phoolchand could be called upon to pay the balance of the price only after Nathulal performed his part of the contract. Phoolchand had an outstanding arrangement with his Banker to enable him to draw the amount needed by him for payment to Nathulal. To prove himself ready and willing a purchaser has not necessarily to produce the money or to vouch a concluded scheme for financing the transaction : Bank of India Ltd, and Others Vs. Jamsetji A. H. Chinoy and Messrs. Chinoy and Company, LR 77 IA 76, 91.

11. Nathulal had expressly undertaken to have the revenue records rectified by securing the deletion of Chittarmal's name, and it was an implied condition of the contract that Nathulal will secure the sanction of the collector to the transfer under Section 70(4) of the Madhya Bharat Land Revenue and Tenancy Act 66 of 1950. The first condition was not fulfilled till October 6, 1952, and the second condition was never fulfilled. We are unable to agree with Mr. Shroff that the repeal of the Madhya Bharat Act 66 of 1950 by the Madhya Pradesh Land Revenue Code, 1959, has retrospective operation.

12. In considering whether a person is willing to perform his part of the contract the sequence in which the obligations under a contract are to be performed must be taken into account. The argument raised by Mr. Shroff that Nathulal was bound to perform the two conditions only after the amount of Rs.21,000/- was paid is plainly contrary to the terms of the agreement. By virtue of Section 4 of the Transfer of Property Act the chapters and sections of the Transfer of Property Act which relate to contracts are to be taken as part of the Indian Contract Act, 1872. If, therefore, under the terms of the contract the obligations of the parties have to be performed in a certain sequence, one of the parties to the contract cannot require compliance with the obligations by the other party without in the first instance performing his own part of the contract which in the sequence of obligations is performable by him earlier."

8. In the case of His Holiness Acharya Swami Ganesh Dassji Vs. Sita Ram Thapar, (1996)4 SCC 526, the Supreme Court clearly stated the distinction between readiness and willingness to perform the contract. Readiness may be meant to be the capacity of the plaintiff to perform the contract which includes his financial position to pay the purchase price. For determining whether purchaser is ready and willing to perform his part of the contract, this conduct has to be properly scrutinized. The factum of readiness and willingness to perform plaintiff's part of the contract has to be judged with reference to the conduct of the party and the attending circumstances. The Court may infer from the facts and circumstances whether the plaintiff was ready and was always ready and willing to perform his part of the contract.

9. The true nature of the transaction must be examined and determined having regard to the intention of the parties as well as the circumstances attending thereto as also wording used in the documents in question. (Refer : Umabai and another Vs. Nilkanth Dhondiba Chavan, (2005)6 SCC 243). Readiness and willingness, therefore, is a matter of fact to be gathered from the pleadings of the parties and from the evidence led at final stage. At this stage of the proceedings, where the Court has to form a tentative view primarily the averments made in the plaint need to be noticed. The Plaintiff/Appellant, after referring to the facts in a great detail in paragraph 26 of the Plaint, has specifically averred that the Plaintiff has at all material times been ready and willing and is still ready and willing to further perform all its obligations under the said MOU. It is also averred that the Defendant had accepted from the Plaintiff part consideration in respect of the premises and thereafter has attempted to wriggle out of its obligations and it was only due to the failure or neglect on the part of the Defendant, the part of contract could not be concluded. It is also averred that because of the rise in the price of the property in question, the Defendant is trying to wriggle out of the obligations placed upon it under the MOU dated 24th September, 2007. Even in the Notice dated 12th February, 2008, Exhibit-J to the Plaint, the Plaintiff had averred that it is ready and willing to comply with its obligations. In this notice, a reference was even made to the increased demand raised by the Defendants representatives in the meeting. These averments had also been made in the affidavit in support of the Notice of Motion. In our considered view, it could be determined only after taking the evidence as to whether the Plaintiff was ready and willing to perform its obligations or not against the MOU. As far as capacity of the Plaintiff for discharging material obligations in regard to the payment or amount is concerned, it was not expected of the Appellant to demonstrate by actual deposit of money and/or show that it had means by which it could pay amounts payable under the MOU. That in fact may amount to prejudging the issue which is bound to be framed in the suit ultimately. However, in the present Appeal, the Notice of Motion No.3166 of 2008 has been taken out to which an affidavit has been filed and even the copies of the documents have been annexed thereto to show that the partner of the Partnership concerned of the Appellant and in fact who has signed the Plaint and the affidavit is possessed of more than the required sum. Shri Govind G. Bulchandani is stated to be the owner of the Equity Funds viz. SBI-MSFU-Contra-F-dr and RL-Division Power Sector F-dr, both to the extent of Rs.2,48,09,080/-. Besides this, Advocates statement of Reliance Mutual Fund has been placed on record showing the current cost of Rs.12,033,239.76 ps. It is averred by the Appellant that these funds are available to the Appellant for payment in the event it was called upon to pay consideration of the property in question. The Defendant in the reply to the Notice of Motion had specifically stated. "In view thereof, the Defendants state that the enhanced price would be Rs.2,31,00,000/- being the discounted price of the then prevailing market price being offered by another party to the Defendants."

10. In light of these circumstances, it cannot be said that the Appellant was not possessed of sufficient means or was incapable of discharging its obligations for performing its part of the contract. We have already referred to the various judgments indicating the interpretation which needs to be given to the term readiness and willingness. We may also refer to the judgment of the Delhi High Court in the case of Sh. Raj Kumar Sharma Vs. Smt. Pushpa Jaggi and Others, [2006(128) DLT 96], where the Court held as under:

"Ready and willingness are to be gathered from the evidence of the parties and the capacity to pay. PW-1 has specifically stated in his statement that he had a part of the money in his different bank accounts and the balance he would arrange within no time. PW-1 is a property dealer and thus would be fully aware of such dealings. Plaintiff claiming the relief of specific performance, is not required to exhibit the currency notes to show his readiness and willingness. He should be capable and should have the capacity to pay on demand the sale consideration whether from his account or after arranging the same from reliable sources. The law does not impose an obligation on a party requiring it to exhibit its means by physical demonstration. Suffice it to say for a party that it possess and/or is capable of gathering sufficient means to perform its part of the contract by paying the balance sale consideration. Readiness and willingness have various ingredients and one of them is that party to an agreement should be able to fulfill its obligations in regard to payment of the sale consideration. The purchaser need not establish that he had the required money with him or arrangements have been made for financing the transactions. What is required of him is to show that he was ready and willing to fulfill his terms of the agreement. A party would be well within its rights to say that he was in a position to arrange the payment of the requisite amount within the prescribed time. Demonstrable possession of means is no sine qua non to satisfy the principle of ready and willingness. Every action follows its prescribed course and so a buyer should be able to show before the Court that he either possesses or can arrange the requisite funds for payment of the balance sale consideration within the stipulated period. Obviously the fruits of this act fall in favour of the party only on completion of the act in accordance with the directions of the Court founded on the agreement between the parties. Fleri non debuit sed factum valet would normally apply to this aspect of ready and willingness on the part of the claiming party. In the case of Mulla Badruddin Vs. Master Rufail Ahmed, 1963 MP 31, the Court held as under: -

"In the case reported in Bank of India Vs. J.A.H. Chinoy, AIR 1950 PC 90, in the context of the plaintiff being ready and willing to perform his part of the contract though it was stated by plaintiff No.1 that he was buying for himself and that he had no sufficient ready money to meet the price and that no arrangements had been made for finding it at the time of repudiation but when it was further made clear that he was in a position to arrange the payment of requisite amount, it was observed by their Lordship:

"But in order to prove himself ready and willing a purchaser has not necessarily to produce the money or to vouch a concluded scheme for financing the transaction. The question is one of fact and in the present case the appellate Court had ample material on which to found the view it reached."

11. We may at the cost of repetition notice that it is a settled principle of law that in interlocutory proceedings, the court can express only its tentative view, which always is subject to final decision and does not cause any prejudice to the concerned party. This was stated by the Supreme Court in the case of P. Govindaswamy and Anr. Vs. S. Narayanan and Ors., 1987 (Suppl.) SCC 58 and Jaikishan Jagwani and Ors. Vs. Britomatics Enterprises Pvt. Ltd. And Ors. 1987 (Suppl.) SCC 72.

12. The second argument in relation to which a prima facie finding or otherwise has not been recorded by the learned Single Judge but vehemently argued before us is with regard to breach of conditions of the MOU by the Appellant and the fact that the time was essence of the contract. According to the Respondent, the MOU dated 24th September, 2007 had been terminated and the time was essence of the contract which the Appellant failed to adhere to, thus was not entitled to the relief of injunction. It cannot be disputed that respective party to a contract is expected to fully discharge its obligations in terms of the Agreement. Furthermore, besides being ready and willing to perform its part of contract, it also should ensure that the conditions which are fundamental or are essence of the contract should be adhered to ad are duly performed. Adherence to fundamental condition to transaction requires strict compliance. A fundamental condition is such in the absence of which the contract cannot proceed. Fundamental term of a contract cannot be equated to simplicitor term of a contract. Non-performance of any of them would result in different legal consequences. The general rule is that performance of a contract must be precise and exact. The party is expected to perform the obligation under the contract exactly and within the time frame set by the contract. Standard by which such performance is to be examined would be strict in some cases while liberal in the others. Whether the time is essence of the contract or not is again a fact which has to be construed with reference to the terms of the contract and circumstances of the case. For this purpose, contract has to be construed as a whole and not with reference to a particular clause. The breach of which is complained of. One way to examine such complained breach is to find whether it goes to the root of the contract and also whether such a term places onus solely on a party or the term required performance which was divisible, in the sense, that clause partially imposes obligations on one and partially on the other party. Thus, whether it is an act of mutuality, and what was the conduct of the parties in relation to such a clause is an important consideration to find whether breach is of fundamental term of contract. ( Ref: Anson's Law of Contract, 28th Edition, by J. Beatson ).

13. Both the objections with regard to breach of the terms of the contract as well as the time being essence of the contract can be discussed together as the facts giving rise to these issues are common. The law is consistent that in cases relating to transfer of immovable property normally the time is not the essence of the contract unless it is so specifically stipulated in the contract. Even if the contract provides such a term then while answering such a question, the Court would have to examine the conduct of the parties subsequent to entering into the contract, the intention of the parties, whether the time specified was extended and thereafter the parties reasserting their intention of treating the time as essence of the contract. In other words, it would depend upon the terms and conditions of the contract, conduct of the parties and attending circumstances thereto.

14. In the case of Balasaheb Dayandeo Naik (Dead) through Lrs. and others Vs. Appasaheb Dattatraya Pawar, (2008)4 SCC 464 : [2008 ALL SCR 656], the Supreme Court reiterated with approval these settled principles and stated as under :-

"10. In Chand Rani Vs. Kamal Rani, (1993)1 SCC 519 : [2008 ALL SCR (O.C.C.) 33] a Constitution Bench of this Court has held that in the sale of immovable property, time is not the essence of the contract. It is worthwhile to refer the following conclusion : (SCC pp.525; 527 and 528, paras 19, 21 and 23)

"19. It is a well-accepted principle that in the case of sale of immovable property, time is never regarded as the essence of the contract. In fact, there is a presumption against time being the essence of the contract. This principle is not in any way different from that obtainable in England. Under the law of equity which governs the rights of the parties in the case of specific performance of contract to sell real estate, law looks not at the letter but at the substance of the agreement. It has to be ascertained whether under the terms of the contract the parties named a specific time within which completion was to take place, really and in substance it was intended that it should be completed within a reasonable time. An intention to make time the essence of the contract must be expressed in unequivocal language.

* * *

21. In Govind Prasad Chaturvedi Vs. Hari Dutta Shastri, (1977)2 SCC 539 following the above ruling it was held at pp. 543-44; (SCC para 5)

'5. ... It is settled law that the fixation of the period within which the contract has to be performed does not make the stipulation as to time the essence of the contract. When a contract relates to sale of immovable property it will normally be presumed that the time is not the essence of the contract. [Vide Gomathinayagam Pillai Vs. Pallaniswami Nadar, AIR 1967 SC 868, (at p.233)] It may also be mentioned that the language used in the agreement is not such as to indicate in unmistakable terms that the time is of the essence of the contract. The intention to treat time as the essence of the contract may be evidenced by circumstances which are sufficiently strong to displace the normal presumption that in a contract of sale of land stipulation as to time is not the essence of the contract.

23. In Indira Kaur Vs. Sheo Lal Kapoor, (1988)2 SCC 488 in para 6 it was held as under: (SCC p.495)

'6. ... The law is well settled that in transactions of sale of immovable properties, time is not the essence of the contract.'" (emphasis in original)

11. 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.

8. ... even where the parties have expressly provided that time is of the essence of the contract such a stipulation will have to be read along with other provisions of the contract ....; for instance, if the contract were to include clauses providing for extension of time in certain contingencies or for payment of fine or penalty for every day or week, the work undertaken remains unfinished on the expiry of the time provided in the contract, such clauses would be construed as rendering ineffective the express provision relating to the time being of the essence of contract.

In the case on hand, though the parties agreed that the sale deed is to be executed within six months, in the last paragraph they made it clear that in the event of failure to execute the sale deed, the earnest money will be forfeited. In such circumstances, the abovementioned clauses in the last three paragraphs of the agreement of sale would render ineffective the specific provision relating to the time being the essence of contract.

12. This Court in Swarnam Ramachandran Vs. Aravacode Chakungal Jayapalan, (2004)8 SCC 689, has once again reiterated that time is not the essence of contract relating to immovable property. The following statement of law in para 12 are rightly applicable to the case on hand : (SCC pp. 694-95)

"12. That time is presumed not to be of essence of the contract relating to immovable property, but it is of essence in contracts of reconveyance or renewal of lease. The onus to plead and prove that time was the essence of the contract is on the person alleging it, thus giving an opportunity to the other side to adduce rebuttal evidence that time was not of essence. That when the plaintiff pleads that time was not of essence and the defendant does not deny it by evidence, the court is bound to accept the plea of the plaintiff. In cases where notice is given making time of the essence, it is duty of the court to examine the real intention of the party giving such notice by looking at the facts and circumstances of each case. That a vendor has no right to make time of the essence, unless he is ready and willing to proceed to completion and secondly, when the vendor purports to make time of the essence, the purchaser must be guilty of such gross default as to entitle the vendor to rescind the contract."

..... ..... .....

15. It is true that the defendant in his written statement has made a bald claim that the time was the essence of contract. Even if we accept the recital in the agreement of sale (Ext.18) that the sale deed has to be executed within a period of six months, there is an express provision in the agreement itself that on failure to adhere to the time, the earnest money will be forfeited. In such circumstances and in view of recital pertaining to forfeiture of the earnest money makes it clear that time was never intended by the parties to be of essence. The Constitution Bench decision in Chand Rani Vs. Kamal Rani also makes it clear that mere fixation of time within which contract is to be performed does not make the stipulation as to the time as the essence of contract. Further, we have already pointed out that the defendant has not bothered to prove his claim on oath before the Court to the effect that it was the plaintiffs who avoided performing their part of contract. All the abovementioned material aspects were correctly appreciated by the trial court and unfortunately the High Court failed to adhere to the well-known principles and the conduct of the defendant."

15. Even in the case of Mcdermott International Inc. Vs. Burn Standard Co. Ltd. and others, (2006)11 SCC 181, the Supreme Court clearly stated the principle that in terms of Section 55 of the Indian Contract Act, the question whether time is essence of the contract is to be determined from the intention of the parties to be gathered from the terms of the contract. It is a pure question of fact and thus has to be accordingly determined. Such questions largely depend upon the language of the terms and conditions of the contract and what was the intention of the parties at the time of execution of the said document.

16. In the case of Yogesh Mehta Vs. Custodian Appointed under the Special Court and others, (2007)2 SCC 624 : [2007(4) ALL MR 781 (S.C.)], the Supreme Court while dealing with the terms of the contract where balance of amount of consideration was to be paid within sixty days from grant of sanction of offer by the Special Court, stated that since the price was to be accepted by the Court and the liability to pay the balance price was depending upon such fixation, the payment of the balance amount within the stipulated time was not the essence of the contract and the earnest money could not be forfeited.

17. The Court has to form a prima facie opinion at this stage of the proceeding and all these issues will have to be examined by the Court after issues are framed and parties are permitted to lead evidence to discharge the onus of their respective issues. At this stage, the material before the Court is pleadings of the parties, documents and affidavits filed in support of the Notice of Motion. Where in such a Suit the Defendants pleads breach of contract, it is for them to show that the record ex facie show breach of the terms of the contract of such a nature that it should disentitle the Plaintiff from seeking interim injunction. It is for the Plaintiff to satisfy the Court in regard to existence of the stated ingredients for grant of interlocutory order of injunction at this stage of the proceedings, namely, prima facie case, balance of convenience and irreparable loss.

18. In the case of Chand Rani Vs. Kamal Rani, (1993)1 SCC 519 : [2008 ALL SCR (O.C.C.) 33], in paragraph 22 the Supreme Court also discussed this aspect observing that the term "time is the essence" means that a breach of the condition as to the time for performance will entitle the innocent party to consider the breach as a repudiation of the contract. The parties may expressly provide that time is the essence of the contract and where there is power to determine the contract on a failure to complete by the specified date then such a term is fundamental to the contract. While keeping these principles in mind, the Court while considering the application for grant of injunction has to balance the equities so as to avoid irretrievable prejudice to any of the parties as declining of injunction on the one hand may result in frustrating the entire suit or creating such complications which can hardly be resolved at a subsequent stage. While on the other, it may cause irreparable loss to the Defendant if injunction is granted. These are basic fundamental precepts which are to be examined by the Court of competent jurisdiction and then to draw a balance keeping in view the facts and circumstances of a given case.

19. Clauses 9 and 10 are the clauses of the Memorandum of Understanding between the parties around which the basic controversy in the present case revolves. They read as under:-

"9) Immediately upon execution of these presents, the Vendor and the Purchaser shall apply under the prescribed Rules to the MIDC for obtaining requisite consent for transfer of the leasehold rights in respect of the said plot in favour of the purchaser herein. The Vendor doth hereby declare that after obtaining requisite clearance from MIDC and on receiving Rs.30,00,000/- (Rupees Thirty lakhs only) as stated herein above from the Purchaser, it shall clear off all the outstanding liabilities and remove all the encumbrances, if any, vis-a-vis the said plot and building standing thereon by 30.11.2007 and hand over quiet, vacant and peaceful possession of the said premises against the balance consideration of Rs.1,20,00,000/-.

10) The Vendor doth hereby further declare that if the requisite consent from MIDC is denied or is not received within a period of 45 days from the date of application, the advance of Rs.20,00,000/- (Rupees Twenty lakhs only) received hereof from the Purchaser shall be returned to them without any interest within seven days of the receipt of denial from MIDC/expiry of 45 days from date of application and shall be entitled to terminate the presents herein."

20. The reading of these Clauses shows that if the permission of MIDC was not received within 45 days from the date of the application, the advance of Rs.20 lakhs would be returned to the purchaser without any interest and the Vendor shall be entitled to terminate the contract. It is not in dispute before us that both parties were to submit application to MIDC for grant of this approval/ consent. Certain correspondence was exchanged between the parties and it appears that the application was made on 28th September 2007. In the E-mail dated 1st December, 2007 it was stated as under:-

"Apropos the discussions we had with you in our office on 26th November 2007 & further to our request letters sent to MIDC, Thane, we give below requirements pending from your side, in order to complete and submit our application to MIDC in their prescribed format.

1) NOC letter from Commissioner of Labour regarding full & final settlement of your labour dues.

2) Copy of Permanent SSI Registration of M/s. Trufit (self attested copy).

3) Copy of Memorandum and Articles of association of Trufit Fasteners Pvt. Ltd. (self attested copy).

In order to expedite the transfer, we request you to comply with the above and send the documents to us at your earliest."

21. Another letter was also addressed on 20th December, 2007 to the Respondents. In the said letter, meeting held between the parties was referred and it was stated as under:-

"2. Mr. Asarkar therefore suggested an alternative, so that our application with MIDC is not held up, the format of which was already handed over to you during the meeting. For this purpose, Mr. Asarkar also suggested some of your Sales/Purchase Bills for Sep.07/Oct. 07 be made available from MIDC's scrutiny."

In this letter, it was also stated that various documents were required from the Respondents. In the meeting, the so-called notice of termination dated 24th November, 2007 was not given effect to nor the cheque of Rs.20 lakhs was given and/or encashed by the Appellant. However, the termination was reiterated by the Respondents in their letter dated 28th February, 2008. After the issuance of the letter dated 24th November, 2007 and till its reiteration in February, 2008, the parties had various meetings had discussed matters and a cheque of Rs.20 lakhs as alleged was neither given nor encashed by the Appellant. The correspondence placed on record including letters dated 20th December, 2007, 12th February 2008, 28th February, 2008 and 31st March, 2008 clearly show that parties were at serious dispute with regard to the termination of the contract and its consequences. It is a matter which has to be answered finally only after the parties have been permitted to lead evidence. Prima facie, in the facts and circumstances of the case, it is difficult for us to accept that the impact of Clause 10 was essence of the contract and the termination have been so validly effected that it would disentitle the applicant for grant of an interim injunction. Not only that the parties held meetings, but the consultants and representatives of each of the party participated in those meetings. The conduct of the parties does create some kind of doubt regarding intention of giving finality to the letter of termination dated 24th November, 2007.

22. In terms of Section 55 of the Indian Contract Act, effect of failure to perform at fixed time does provide benefit to a party as it becomes voidable at the option of the promisee provided the intention of the parties was and for the relevant time is to treat the term as essence of the contract. In other words, this should be so fundamental that without due performance of which such a right can accrue to the party concerned. Both parties were to perform respective obligations to fulfil the requirement of Clause 10, of course, at a later stage each one of them is blaming the other for non-performance. This gives rise to a serious issues which is required to be determined upon regular trial.

23. We are unable to accept the contentions raised on behalf of the Respondents and sustain the order passed by the learned Single Judge. We are also of the considered opinion that in the facts and circumstances of the case, the Appellant has also to be put to terms in order to balance the equities between the parties and to ensure that none of the parties suffer any prejudice as a result of pendency of the proceedings before the Court. The Appellant has made out a prima facie case and has also shown that there can be irreparable loss to the Appellant if the interim relief is not granted. The minutes of the meeting between the parties as placed on record also shows that the Respondents in the Appeal had emphasized the factor of increase in price which does cast a cloud of doubt on the plea of valid termination in terms of Clause 10.

24. For the reasons aforestated, we set aside the impugned judgment and order dated 25th June, 2008 passed by the learned Single Judge in Notice of Motion No.1610 of 2008 in Suit No.1272 of 2008 and while allowing the Appeal, we restrain the Respondents from alienating, transferring or parting with the possession of the property in dispute subject to the condition that the Appellant shall deposit the entire sale consideration in Court within four weeks from the date of pronouncement of this Judgment. We make it clear that any observations made in this Judgment would not affect the rights and contentions of the parties and the Court trying the Suit would in no way be influenced by this Judgment.

25. Appeal accordingly disposed of. No order as to costs.

26. In view of the disposal of the Appeal, nothing survives in Notice of Motion No.3166 of 2008 and the same is disposed of accordingly.

Ordered accordingly.