The Bombay High Court has held that as a general proposition of law, in case of sale of an immovable property, there is no assumption as to the time being the essence of the contract. However, if parties intend to make time as essence of the contract, it must be expressed in unequivocal language. Any extension of its performance must also be categorical and direct in nature.
- The Plaintiffs had instituted a suit for specific performance in the year 1994 of a contract entered into in January, 1971 for sale of an immovable property agreed to be sold to the Plaintiffs by the Defendants. The contract was for the sale of an immovable property admeasuring 1600 sq. mts.
- As per the contract, part consideration was paid as earnest money at the time of entering into the contract and the balance was to be paid at the time of execution of a sale deed. The contract stipulated that if the sale was not concluded by May, 1971 upon payment of balance consideration, the contract would be terminated and the earnest money would be forfeited.
- The sale deed could not be executed on the decided date on account of fault of the Defendants. This was on the basis that certain litigation had commenced between the Defendants with a third party with regard to a part comprising 50% of the plot area agreed to be sold to the Plaintiffs. The said litigation had come to an end in the year 1984 and that the Defendant had to transfer the said 50% plot area to the third party pursuant to a compromise/ settlement between them.
- At this juncture, the Defendants offered to sell to the Plaintiffs, an alternate plot corresponding to the area that had to be given to the third party at the prevailing market rate. This offer was declined by the Plaintiffs and some other plot was demanded by the Plaintiffs of an area of 1600 square metres at the rate agreed upon in the year 1971.
- In the year 1994 a suit was filed for specific performance for the execution of a sale deed for the balance 50% of the plot that was not affected by litigation and the rights accrued in favour of the Defendants pursuant to the settlement arrived at with the third party for the other 50% of the plot. The suit was dismissed inter alia on the ground of limitation. This was on the basis that the time for performance of the contract was fixed for May, 1971 and the suit was instituted in the year 1994. The Appellate Court upheld the decision of the Trial Court. The Plaintiffs thereafter preferred a second appeal before the Bombay High Court.
- Being aggrieved by the orders of the Trial Court and the First Appellate Court, the Plaintiffs filed a Second Appeal before the Bombay High Court. The Bombay High Court framed the following substantial question of law:-
"Whether the Courts below have committed error of law in holding that the suit instituted by the Appellants is barred by the law of limitation, recording the finding that the suit for specific performance of agreement of sale arrived at on 15/01/1971 ought to have been filed within 3 years from May 1971 (that is the time fixed for execution of sale deed and making balance payment)"
- Before the Bombay High Court, it was contended on behalf of the Plaintiffs that the period limitation stood extended be mutual understanding between the parties leading to the inference that the parties had decided to extend the time for performance of the agreement as the Defendants were unable to perform their part being, the execution of the sale deed as the property was embroiled in litigation.
- This issue was decided by the Bombay High Court by upholding the concurrent findings of the Trial Court and the First Appellate Court. The Bombay High Court held that as a general proposition of law, in the case of sale of immovable property, there is no assumption as to the time being the essence of the contract. In cases where it is not made an essence of the contract, the Court may infer that it is to be performed in a reasonable time if conditions are evident from the expressed terms of the contract, the nature of the property and the surrounding circumstances. In cases where it is specifically stipulated that time will be an essence of the contract or that it clearly emerges so by way of implication, time would be an essence of contract. Such situations are exception to the well accepted principle that in case of sale of immovable property time is never regarded as essence of contract and presumption existing against the same. However, if the parties intend to make time and essence of contract it must be expressed in unequivocal language. Intention to make time the essence, if expressed in writing must be then language which is unmistakable. it may also be inferred from the nature of the property agreed to be sold, conduct of the parties and surrounding circumstances prevailing at the time of the contract. Section 55 of the Contract Act provides for effect of failure to perform the contract at a fixed time when time is of essence. In cases where the time is of the essence of contract and so stipulated and writing the extension if any should and ought to be categorical in nature rather than being vague or based on presumption and wood not contemplate an unilateral extension.1
By - Chaitanyaa Bhandarkar
- 2021(6) Mh.LJ 193 Roque Fredrick Ladinho Collasso and Ors. Vs. Camilo Antonio Aquaviva & Ors.