The Andhra Pradesh High Court, in a significant ruling on contract law, has held that the conduct of parties, such as accepting payments and executing partial sale deeds after a stipulated deadline, effectively waives the “time is of the essence” clause in an agreement for the sale of immovable property. A division bench comprising Justice Ravi Nath Tilhari and Justice Maheswara Rao Kuncheam dismissed an appeal, thereby upholding a trial court’s decree for specific performance of a sale agreement dated December 15, 2008.
The Court affirmed the decree directing the sellers to execute a registered sale deed for the remaining property in favour of the buyer upon receipt of the balance sale consideration.
Background of the Case
The dispute originated from an agreement of sale (Ex.A.1) executed on December 15, 2008, where the plaintiff, P. Ramachandra Reddy, agreed to purchase Ac.10.31 ½ cents of land in Madanapalle Mandal from the defendants, P. Ravi Kumar and two others, for a total consideration of Rs. 41,26,000, calculated at Rs. 4,00,000 per acre. The plaintiff paid an initial advance of Rs. 9,00,000, and the agreement stipulated that the transaction was to be completed on or before April 2, 2009.
According to the plaintiff, he made several subsequent payments in instalments, totaling Rs. 19,50,000, even after the deadline, for which the defendants issued receipts. He contended that he had paid a total of Rs. 28,50,000 and was always ready and willing to pay the remaining balance of Rs. 12,76,000. He alleged that despite his presence at the Sub-Registrar’s office on the stipulated date and subsequent legal notices, the defendants evaded executing the sale deed due to a rise in local land prices.
The defendants contested the suit, arguing that time was explicitly made the essence of the contract. They claimed the plaintiff lacked the funds to complete the sale by the deadline and had failed to perform his obligations. While admitting to extending the deadline multiple times at the plaintiff’s request and receiving further payments, they asserted that the plaintiff’s failure to pay the full balance led them to terminate the agreement via a legal notice on August 2, 2010 (Ex.B.4).
The Trial Court in Madanapalle had decreed the suit in favour of the plaintiff, leading the defendants to file the present first appeal before the High Court.
Arguments Before the High Court
The appellants (defendants) argued that the trial court erred in holding that time was not the essence of the contract, contrary to an express clause in the agreement. They further contended that the suit was not maintainable as the plaintiff had not sought a declaration to set aside their termination of the agreement.
The respondent (plaintiff) countered that the defendants’ own actions—accepting substantial payments and even executing two registered sale deeds for portions of the property after the April 2, 2009 deadline—demonstrated that the timeline was no longer considered essential. He maintained his continuous readiness and willingness to fulfill his contractual obligations.
High Court’s Analysis and Findings
The High Court meticulously analyzed the evidence and legal precedents to adjudicate on three key points: whether time was the essence of the contract, whether the plaintiff was ready and willing to perform his part, and whether the agreement was binding on all defendants.
On ‘Time is the Essence of the Contract’
The bench, speaking through Justice Maheswara Rao Kuncheam, first addressed the issue of time. It referenced the Supreme Court’s established principle that in contracts for the sale of immovable property, time is generally not presumed to be of the essence unless explicitly stated or inferred from circumstances.
However, the Court focused on the parties’ subsequent conduct. It noted, “though in the agreement of sale dated 15.12.2008 (Ex.A.1) it is agreed by the plaintiff and defendants that time is essence of the contract, the conduct of the parties, including the defendants themselves repeatedly agreed to extend the time on multiple occasions and accepted the payments from the plaintiff even after the deadline i.e., 02.04.2009, clearly establishes that the time is not the essence of the agreement.” The execution of registered sale deeds by the first defendant on March 6, 2009 (Ex.A.7) and April 21, 2009 (Ex.A.17) for parts of the suit property further solidified this finding.
On Plaintiff’s ‘Readiness and Willingness’
The Court found that the plaintiff had consistently demonstrated his readiness and willingness. It observed that the plaintiff had specifically pleaded this in his plaint, and the defendants had failed to make a specific denial in their written statement, an omission the Court viewed in light of Order VIII Rule 5 of the Civil Procedure Code. The judgment stated, “the plaintiff has not only pleaded, but also demonstrated his readiness and willingness to perform his part of the contract by paying advance amount at the time of execution of Ex.A.1, paying amounts before 02.04.2009 (cut off date), and he also went to the Sub-Registrar Office, Madanapalle., for the said purpose.”
On the Binding Nature of the Agreement
The appellants had pointed out that the first defendant, P. Ravi Kumar, had not signed the original agreement (Ex.A.1). The Court dismissed this argument as an instance of “Approbate and Reprobate.” It held that the first defendant’s subsequent actions, particularly his execution of two sale deeds for portions of the land covered by the agreement, unequivocally proved his knowledge and acceptance of the contract’s terms, making it binding upon him.
On Maintainability and Unilateral Termination
Finally, the Court rejected the appellants’ argument, raised at the final stage, that the suit was not maintainable without challenging the termination notice. The Court observed that this plea was never raised before the trial court. Citing Supreme Court precedent, it stated that an appellate court should not decide on such issues if new facts and evidence are required. More fundamentally, the Court found the unilateral termination and forfeiture of the advance amount to be invalid, as the agreement contained no forfeiture clause. Quoting the Supreme Court in Satish Batra Vs. Sudhir Rawal, the judgment emphasized that “to justify the forfeiture of advance money… the terms of the contract should be clear and explicit.”
The Final Decision
Concluding that the trial court’s findings were sound, the High Court dismissed the appeal. It confirmed the judgment and decree dated November 26, 2013. The respondent/plaintiff was granted one month to pay the balance sale consideration of Rs. 12,76,000, following which the appellants/defendants were directed to execute the registered sale deed within two months.
