M/s Siddamsetty Infra Projects Pvt. Ltd v. Katta Sujatha Reddy & Ors.

Neeraj Kishan Kaul, Harin P Raval, Naveen Kumar Pahwa, Sr. Advs., Mohan Rao, S Uadaya Kumar Sagar, Ms. Bina Madhavan, Tushar Singh, Ms. Lavanya Goinka, Ms. Urmi H Raval, Ms. Shreya Bansal, Ms. Shrestha Narayan, Siddharth H Raval, Krishna Kumar Singh, Advs. for the Petitioner. Mukul Rohatgi, Rakesh Dwivedi, Sr. Advs., Mahesh Agarwal, Rishi Agrawala, Ankur Saigal, Ms. Madhavi Agarwal, Divyanshu Srivastava, Ms. Deepsikha Mishra, Yash Jain, E.C. Agrawala, Advs. for the Respondents. Digital Supreme Court Reports [2024] 11 S.C.R. 671 Judgment / Order of the Supreme Court Judgment Dr Dhananjaya Y Chandrachud, CJI Table of Contents* A. Background ........................................................................ B. Judgments of the Trial Court, High Court and this Court ...... C. Submissions ....................................................................... D. Grounds for exercising review jurisdiction .......................... E. Limitation ........................................................................... F. Specific performance ......................................................... G. Lis pendens ....................................................................... H. Relief ................................................................................. 3 7 16 17 19 25 32 36

The petitioner has instituted proceedings under Article 137 of the Constitution read with Order XLVII Rule 1 of the Supreme Court Rules 2013 seeking a review oft he judgment of a three-Judge Bench of this Court dated 25 August 2022. By the judgment, this Court allowed the appeal against the judgment of the High Court of Telangana dated 23 April 2021 by which the suit for specific performance was partially decreed by directing the registration of the suit property in favour of the petitioner proportionate to the extent of the consideration paid. The issue for the consideration of this Court is whether the judgment of this Court dated 25 August 2022 suffers from an error apparent on the face of the record which warrants the exercise of the review jurisdiction. A. Background

On 19 March 1994, Shri Debbad Narayana, Shri Vishweswara Rao (represented by the tenth to twelfth respondents who are his legal representatives), the third respondent, fourth respondent and fifth respondent (“original owners”) entered into an agreement to sell a land admeasuring 127.29 acs to the first, second, sixth, seventh and eight respondents (“vendors”). On the date of the agreement, possession * Ed. Note: Pagination as per the original Judgment. M/s Siddamsetty Infra Projects Pvt. Ltd. v. Katta Sujatha Reddy & Ors. 672 [2024] 11 S.C.R. to the extent of 65.23 acs was delivered to the vendors. Upon the payment of the balance sale consideration, the possession of the entire property was delivered. A sale deed was not executed, though the full sale consideration was paid. However, on 28 March 1994, an irrevocable power of attorney was executed in favour of the vendors.

On 26 March 1997,the vendors executed an agreement to sell in favour of the petitioner. This agreement will be referred to as the “first agreement to sell”. By the agreement, the first and the second respondents offered to alienate the scheduled property of 38.15 acs1 for a sale consideration of Rs. 38,37,500. The agreement notes that the petitioner paid a sum of Rs. 5,30,000 in cash and Rs. 6,00,000 in cheque as advance and earnest money. The relevant clauses of the agreement to sell are extracted below: “3. The purchaser shall pay a sum of Rs. 27,07,200/- (Rupees Twenty Seven Lakhs seven thousand five hundred only) towards the balance sale consideration within three months from this date to the parties of the second part herein and if the purchaser does not honour to pay the balance sale consideration of Rs. 27,07,500/- (Rupees Twenty Seven Lakhs Seven Thousand and Five Hundred Only) within a period of three months from the date of this date, the advance amount paid will be forfeited and this agreement of sale will be cancelled if the vendors fail to furnish the non-encumbrance certificate, income tax exemption certificate, agricultural certificates to the purchaser within three months. […]

The parties of the first part and the parties of the second part herein undertake that they will execute a registered sale deed or deeds or any other nature of documents as desired by the purchaser in favour of the purchaser or its nominee or nominees, after receiving the balance sale consideration. 1

All that the agriculture land bearing Sy. Nos. 301 part, 302, 303, 304 part totally admeasuring Ac. 38- 15 guntas situated at Budwel village, the then Hyderabad West Tq., now Rajendernagar Mandar, R.R. District, which is bounded by as under:- East: Sy. No. 381, 380 and 326 West: Sy. No. 54 Village boundary of Irsalgandi North: Sy. No. 381, 380 and 326 South: Sy. No. 300 and 306

Digital Supreme Court Reports [2024] 11 S.C.R. 673 […]

The parties of the first part and the second part herein undertake to execute the documents either registered or un-registered as desired by the purchaser after receiving the balance sale consideration to the extent to the schedule property. […]

The parties of the first part are not at all concerned to the sale consideration agreed by the parties of the second part herein with the purchaser as already they received the agreed sale consideration from the parties of the second part herein as per the agreement dated 19th March 1994. […]

The parties of the second part herein undertake on any pretext they will not make any claim for enhancing the agreed sale consideration.” (emphasis supplied)

The first agreement to sell refers to the “original owners” as the “parties of the first part”. The agreement refers to the “vendors” as the “parties to the second part”. The petitioner is referred to as the “purchaser”. It must also be noted that the recital to the first sale agreement states that the “parties of the first part and parties 1,3,5 and 6 of the parties of the second part” have been made a party to the agreement only to ensure that there is no “cloud over the title”.

On 27 March 1997, an agreement to sell was executed by the first and second respondents in favour of the petitioner to sell the scheduled property of 1.33 Acs2 for a consideration of Rs. 1,82,500. This agreement will be referred to as the second agreement to sell.

6. On 8 February 2000, the petitioner issued a legal notice (“first legal notice”) to the first and second respondents calling upon them to 2

All that the agricultural land bearing Sy. Nos. 304 part totally admeasuring Ac. 1.33 guntas situated at Budwel village, the then Hyderabad West Tq. Now Rajendernagar mandal, R.R. District, which is bounded by as under:- East: Sy. No. 308 West: Sy. No. 3030 North: Sy. No. 326 South: Sy. No. 305

. M/s Siddamsetty Infra Projects Pvt. Ltd. v. Katta Sujatha Reddy & Ors. 674 [2024] 11 S.C.R. receive the balance sale consideration and execute the sale deed. On 14 April 2000, the second respondent responded to the legal notice claiming to not have received the part-payment and refusing to execute a sale deed in the petitioner’s favour. On 6 July 2002, the petitioner issued another legal notice (“second legal notice”) to all the respondents calling upon them to execute the sale deed upon the receipt of the balance consideration. The first and second respondents replied to the legal notice by a letter dated 22 July 2002 claiming that (a) the execution is barred by limitation; (b) they were ready with the documents required under Clause 3 of the first agreement to sell but the petitioner was not willing to pay the balance consideration; and (c) the first legal notice dated 8 February 2000 was ante-dated to overcome limitation. The first legal notice was posted on 30 March 2000 by registered post.

On 9 August 2002, the petitioner instituted a suit seeking a decree for specific performance of the first and the second agreements to sell. The case of the petitioner in the suit was: a. Rs.34,70,000 towards the sale consideration for the first agreement and Rs. 10,850 as advance for the second agreement was paid. Thus, of the aggregate sale consideration of Rs. 40,20,000, Rs., 34,80,850 was paid and only a balance of Rs. 5,39,150 remained outstanding; b. The possession of the suit land was delivered under the agreement; and c. The petitioner has always been ready and willing to perform his part of the agreements. Both the agreements required the respondents to furnish the petitioner with necessary permissions and certificates, which they failed to do.

The petitioner prayed for a decree for specific performance upon the receipt of the balance sale consideration of Rs. 5,39,150. The petitioner sought alternative reliefs of (a) delivery of possession of the suit land; or (b) a direction to refund the consideration of Rs. 34,80,850 paid with interest of 36% per annum. B. Judgments of the Trial Court, High Court and this Court

By a judgment dated 12 December 2010, the Additional District Judge dismissed the suit instituted by the petitioner. The Trial Court held Digital Supreme Court Reports [2024] 11 S.C.R. 675 that the petitioner is not entitled to a decree or specific performance for the following reasons: a. The respondents did not dispute the execution of the two agreements to sell. There is also no dispute over the identity of the property. The petitioner is only required to prove that he was always willing to perform his part of the agreement; b. It can be inferred from the evidence on record that the petitioner does not have possession of the suit property and that a false plea that possession has been delivered has been made because: i. ii. The alternative prayer of the petitioner in the suit was to put him in possession of the property if, for any reason, the Court concludes that the possession of the suit property was not delivered.

26.3.1997

26.3.1997

26.3.1997

9.4.1997 Rs. 5,40,000 (cheque dated 2.4.1997 which was dishonoured) Rs. 11,30,000 (Rs. 5,30,00 by cash and Rs. 6,00,00 by cheque) Rs. 13,00,000 by cheque Rs. 5,00,000 by cheque d. Clause 3 of the sale agreements states that the petitioner is required to pay the balance consideration and the respondents must furnish certificates within three months. The clause prescribes a consequence for non-payment, that the agreement would be cancelled. However, the clause does not prescribe any consequence if the respondents fail to furnish the necessary certificates within three months. It cannot be concluded that time is of the essence only because the agreement requires the petitioner to pay the balance consideration within three months. The respondents had not obtained the permissions and certifications required under Clause 3 and they did not inform the petitioner about any steps taken to obtain them. The cross-examination of DW-1 (first respondent) indicates this.

Thus, time is not of essence in the agreement; e. The petitioner claims that he issued the first legal notice on 8 February 2000. However, the postal cover and postal certificate indicate that it was registered on 31 March 2000. Thus, the petitioner ante-dated the legal notice to overcome limitation; f. The petitioner is not entitled to the discretionary relief of specific performance if a false plea is made. In this case, the petitioner made three false pleas; g. The petitioner has been unable to prove that he was willing to perform his part of the contract within three years from the sale agreements and specifically, within three months according to the agreement. If the petitioner was able to perform his part, a notice would have been issued earlier or the balance would have been deposited in the bank; Digital Supreme Court Reports [2024] 11 S.C.R. 677 h. The first part of Article 54 of the Schedule to the Limitation Act 1963 applies to the facts of the case.

The petitioner was required to pay the balance consideration within three months from the date of the sale agreement. The suit should have been filed on or before 26 June 2000 (three years from the date fixed for the performance). However, the suit was filed on 9 August 2002, nearly two years after the limitation expired. Thus, the suit was time barred; and i. The suit was barred by time for recovery of the advance amount in terms of Article 47 of Schedule to the Limitation Act.

The petitioner preferred an appeal before the High Court against the judgment of the Additional District Judge. By a judgment dated 23 April 2021, the High Court partly allowed the appeal for the following reasons: a. The Trial Court did not distinguish between the time fixed for payment of sale consideration and the time for the performance of the contract. The first part of Clause 3 of the agreements only fixes the time for the payment of sale consideration. The performance of the contract hinges on the respondents furnishing the documents. The agreements do not fix a time for the performance of the contract. Thus, the second part of Article 54 of the schedule to the Limitation Act applies. The limitation begins from the date of refusal of performance. The suit was filed on 30 July 2002, which is within three months of 14 April 2000 (the date when the respondents’ responded to the first legal notice).

Proceedings under Article 136 were instituted against the judgment of the High Court. By a judgment dated 25 August 2022, a three-Judge Bench consisting of Chief Justice NV Ramana, Justice Krishna Murari and Justice Hima Kohli allowed the appeal. This Court referred to the judgment in Chand Rani v. Kamal Rani,4 in which it was held that there is no presumption that time is of essence in a contract for a sale of immovable property and the Court may infer if it was of essence based on (a) the express terms of the contract; (b) the nature of the property; and (c) surrounding circumstances such as the object of the contract. Relying on the judgment, this Court held that in the facts of the present case, time is of essence for the following reasons: 4 [1992] Supp. 3 SCR 798 : (1993) 1 SCC 519 M/s Siddamsetty Infra Projects Pvt. Ltd. v. Katta Sujatha Reddy & Ors. 680 [2024] 11 S.C.R. a. Both the vendors’ and the purchaser’s obligations in Clause 3 of the sale agreements were required to be completed within the stipulated time period of three months. The consequences of (in)actions are different. There are no consequences if the vendors do not produce the certificates and permissions. However, the clause spells out a consequence of forfeiture of the advance amount if the purchaser does not pay the balance consideration; and b. According to Clause 21 of the sale agreements, the parties had entered into an earlier agreement to sell dated 19 March 1994. This agreement did not materialize and the agreed price was no longer applicable. Fresh agreements were entered into “to provide a last opportunity to successfully enter into a sale-purchase agreement.” This intention of the parties is also clear from Clause 23 of the agreement.

This Court held that the suit was barred by limitation since the suit had to be instituted within three years of the time fixed for completing the performance (which was three months from the sale agreements). The three years ended in June 2000 and the suit ought to have been instituted within that period to not be barred by limitation.

This Court also held the following on merits: a. Section 10 of the Specific Relief Act is not procedural but substantive. Thus, the 2018 amendment to the provision does not apply retrospectively to pending proceedings; b. Under the unamended provision, the Court’s power to grant specific performance was discretionary. This discretion ought not to be exercised arbitrarily.5 The purchaser must be vigilant to enforce his right. Clause 3 of the agreements was drafted to provide “one last opportunity for the purchaser to make good their lapse which had happened on the earlier occasion.” The time for performance of the contract, including payment lasted till June 1997; c. The plaintiff was not ready and willing to perform the contract. The purchaser did not voluntarily adhere to the time stipulated under the contract. However, the vendors fulfilled their obligation 5 Saradamanikandappan v. S. Rajalakshmi (2011) 12 SCC 18 Digital Supreme Court Reports [2024] 11 S.C.R. 681 to provide documentation. DW-1 averred that all documents were available and that the petitioner entered into an agreement only after he was satisfied with the title. Specific performance cannot be enforced in favour of a party who has not proven that he was always ready and willing to perform his part of the contract; d. The Trial Court’s reasoning on the question of whether the petitioner has possession of the suit property is correct; and e. Section 12 of the Specific Relief Act does not apply to situations where the inability to perform the contract arises out of the party’s own conduct.6 In the instant case, there was no inability on the part of the parties to perform the contract. The petitioner was not willing to perform the contract after entering into a “time-sensitive agreement”.

This Court directed the respondents/vendors to repay the sale consideration received with an interest of 7.5 percent from the date on which the payment was made till the time the entire amount is paid back. The payment was directed to be made within six months.

The petitioner filed a review petition against the judgment of this Court. C. Submissions

Mr Neeraj Kishan Kaul, senior counsel submitted that the judgment of this Court suffers from the following apparent errors that warrants the exercise of the review jurisdiction: a. Clause 21 of the agreements to sell refers to the sale agreement executed by the original owners in favour of the vendors in 1994. Though petitioner was not a party to that agreement, this court has proceeded on the incorrect premise that the 1994 agreement was between the parties; b. The Trial Court, after analysing the evidence on record, concluded that the vendors did not produce certificates and permissions as required by Clause 3 of the sale agreements. This finding was not challenged before the High Court. This Court wrongly records that the vendors produced the certificates without referring to the direct evidence on record to the contrary; and 6 Jaswinder Kaur v. Gurmeet Singh, (2017) 12 SCC 810 M/s Siddamsetty Infra Projects Pvt. Ltd. v. Katta Sujatha Reddy & Ors. 682 [2024] 11 S.C.R. c. Clause 3 does not state that the agreement will be cancelled if the petitioner does not pay the balance amount within three months.

Mr Rakesh Dwivedi and Mr. Mukul Rohatgi, senior counsel for the respondents argued that this is not a fit case for the exercise of review jurisdiction. It was submitted that the judgment of this Court was sound, independent of the (mis)reference to the 1994 agreement. The learned counsel further submitted that the suit property was alienated after the judgment of this Court and before the review petition was registered. It was argued that the doctrine of lis pendens does not apply when the petition was in the registry in a defective state. D. Grounds for exercising review jurisdiction

Before proceeding with the analysis, we will refer to the grounds for exercising review jurisdiction. Order XLVII of the Supreme Court Rules 2013 states that an application for review must be filed on the grounds mentioned in Order XLVII Rule 1 of the Code of Civil Procedure 1908 (“CPC”). Order XLVII Rule 1 of CPC lays down the following grounds for review: a. Discovery of new and important matter or evidence, which after the exercise of due diligence was not within their knowledge or could not be produced by them at the time the decree was passed; b. Mistake or error apparent on the face of the record; and c. Any other sufficient reason.

This Court has laid down the following principles on the exercise of review jurisdiction7: a. Review proceedings are not by way of appeal and have to be strictly confined to the scope and ambit of Order 47 Rule 1 CPC; b. Error on the face of record must be an error which must strike one on a mere perusal and must not on a long drawn process; c. The power of review must not be exercised on the ground that the decision was erroneous on merits; 7