The Bombay High Court has held that as a general proposition of law, in the case of the sale of an immovable property, there is no assumption as to time being the essence of the contract. However, if parties intend to make time as an essence of the contract, it must be expressed in unequivocal language. Any extension of its performance must also be categorical and direct in nature.
Case facts
The plaintiffs had instituted a suit for specific performance in 1994 of a contract entered into in January, 1971, for the 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 measuring 1,600 square metres.
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, on 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 the fault of the defendants. This was on the basis that certain litigation had commenced between the defendants with a third party regarding a part comprising 50% of the plot area agreed to be sold to the plaintiffs. The litigation had come to an end in 1984, and the defendant had to transfer the 50% plot area to the third party pursuant to a settlement between them.
The defendants then 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 another plot was demanded by the plaintiffs of an area of 1,600 sqm at the rate agreed on in 1971.
In 1994, a suit was filed for specific performance for the execution of a sale deed for the 50% balance 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 grounds 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 1994. The appellate court upheld the decision of the trial court. The plaintiffs then preferred 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 three years from May 1971 (that is the time fixed for execution of the sale deed and making balance payment)”.
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 the 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. However, if the parties intend to make time an essence of contract it must be expressed in unequivocal language.
The dispute digest is compiled by Numen Law Offices, a multidisciplinary law firm based in New Delhi & Mumbai. The authors can be contacted at support@numenlaw.com. Readers should not act on the basis of this information without seeking professional legal advice.
