1990 PLP 443 (MLD)

(Matter is vernacular omitted

Ed.)

9. On this endorsement the thumb‑impression of the plaintiff was taken and it is attested by her husband. The endorsement made by the defendant which is in English reads as follows: "Rs.9,000 (Rupees nine thousand only) on 2‑8‑1977 from Smt. Chintapalli Chellayyamma wife of Sri Chintapalli Venkata Rao towards part payment of balance amount of Rs.30,000 the total cost of the House No.23. It being the colony of Bhaskara Nagar. On the request of the party to extend the agreed time limit of 31‑12‑1976 to 1‑9‑1977 as a final case for full payment of Rs.30,000 (Thirty thousand only) failing which the agreement dated 6‑9‑1976 stands cancelled and the amount of Rs.14,000 so far paid would be returned. Camp: Kakinada Dt. 2‑8‑1977. Sd. Kosana Suryanarayana Reddi (K. S. N. Reddy)"

10. This is also attested by the plaintiff's husband. These endorsements clearly demonstrate that the parties have understood that the time must be the essence of the contract and it further states that the contract shall stand cancelled and the amount paid by the plaintiff will be refunded. The fact that subsequently time is extended would not alter the situation and would not make any‑the‑less the time essence of the contract. Further I am of the opinion that the subsequent event far from nullifying this intention of the parties it only reiterates the intention. Subsequently it is seen under Ex. B‑4 the defendant in fact issued a notice stating that the extended period as per the agreement was thereby cancelled due to default of full payment. This is said to have been replied by the plaintiff under Ex.B‑7 telegram stating "telegram given by you is illegal, agreement in force, reply follows". Both the original telegram Ex.B‑4 and the reply Ex.B‑7 were denied but we have already noticed that the Court below did not agree with this contention of the plaintiff and found that though the name of the plaintiff was misspell in the notice issued, in view of the fact that it was addressed with correct door number it is believed that Ex. B‑4 was addressed to the plaintiff and Ex.B‑7 is the reply given by her. When under the endorsement Ex.A‑4 itself the time is made the essene of the contract and on default by the plaintiff, it was cancelled by issuing a notice under Ex. B‑4 as found by‑ the Court, it is clear that not only the time is made the essence of the contract, but the termination also did take place by issuing the notice. 11.‑ A subsequent event also must be noticed. The plaintiff without stopping with this cancellation further issued a notice Ex.B‑8 extending the time till 1‑12‑1977 stating "failing which the contract must be deemed to have been cancelled." We have already noticed the controversy regarding the receipt of Ex. B‑8 by the plaintiff. The Court below though held that there is no proper proof of receipt of this notice by the plaintiff, it alternatively proceeded to examine the question on the basis that the notice is received by the plaintiff. If not the further discussion will be meaningless. This was clearly established when we look at this discussion in para. 11. "The position that now emerges is that though time is made the essence of the contract under Exs. A‑4 and A‑5 or under Ex. A‑8 notice, the subsequent notice as required under law was not given." Thus the Court below very rightly found that both under Exs. A‑4 and B‑8 the time is made essence of the contract and the finding is clearly sustainable. Further the contract clearly discloses that there is need for the 1st defendant to pay the amount to the Building Society and this is clearly apprised to the plaintiff. Further the finding is clearly supportable as there is need for the lst defendant to pay the amount to the Building Society and the plaintiff is quite aware of the same. In fact he raised the plea that the amount must be paid by the 1st defendant and he must obtain the sale‑deed from the society. It is not as if without the need of receiving the funds from the plaintiff he must clear that and then expect the plaintiff to pay the amount and hence considering the terms of Ex.A‑4 and also the surrounding circumstances, it can be held that time is made the essence of the contract and I accept the finding of the Court below.

12. Now on the second question the learned counsel for the plaintiff argued that no notice is issued terminating the contract for non‑compliance of Ex. B‑8 and hence on the strength of the judgment of this Court in Tandra Venkata Subhramanyam v. Vegesana Viswanadharaj. AIR 1968 Andh. Pra. 190 the contract cannot be said to have been terminated and the defendant cannot resist the suit. This is the view taken by the trial Court. In fact the trial Court on the strength of this judgment held that the plaintiff has to issue further notice terminating the contract as per the above decision. I am clearly of the opinion that the trial Court has misread the above judgment and that is not the true effect of the judgment. In that case the contention was that due to the default on the part of the purchaser the contract was terminated and hence the suit filed by the purchaser is not maintainable‑as there is no subsisting agreement. In answering that question the Court had to examine two questions: (1) Whether the time is made the essence of the contract? (2) Whether due to the default on the part of the purchaser the contract was terminated?

13. As per the terms of the notice issued in that case it only asked the plaintiff to pay the balance within 15 days and get the sale‑deed executed. It further proceeded to state "otherwise, he will sell the suit property to other". Construing these terms of the notice it was held that the said notice neither makes the time the essence of the contract nor does it conditionally or otherwise put an end to the contract. No doubt while discussing the question the learned Judge held that even though the original agreement does not make time the essence of the contract the parties can make the time essence of the contract by a subsequent agreement. The learned Judge further held: "The contract does not automatically get determined. He has to further expressly or in unambiguous words determine the contract under S.64 of the Contract Act. It is not in dispute that subsequent to Exh. A‑5, the 1st defendant did not issue any notice cancelling the contract. His previous as well as subsequent conduct brings out prominently the fact that he had never any intention to make time the essence of contract. The irresistible conclusion therefore is that Exh. A‑5 neither makes time the essence of contract nor does it conditionally or otherwise put an end to the contract."

14. Thus it is seen, the learned Judge gave both the findings that the notice did not in fact make the time the essence of the contract and also did not cancel the contract. The observation of the learned Judge that in fact no other subsequent notice was issued cancelling the contract cannot be construed that in every case where time is made the essence of the contract a subsequent notice mutt be issued cancelling the contract when default is committed. In fact I do not find such requirement of law. Once the condition is not fulfilled as contemplated by the terms of the agreement when the time is made the essence of the contract originally or subsequent thereto, the failure to perform the contract within the stipulated time gives a right to avoid the contract. That is the true effect of S.55 of the Contract Act. But such a right can be exercised while making the time essence of the contract, or subsequent thereto. S.64 of the Contract Act simply envisages that a person at whose option the contract is voidable can rescind it by issuing a notice. But there is no requirement of law that a notice must be issued only after the default was committed but not in the notice making time the essence of the contract. In fact the dicta of the Supreme Court in Gomathinayagam Pillai v. Palaniswami Nadar AIR 1967 SC 868 makes the position clear. In that judgment, Shah, J., delivering the majority judgment held (at P.872): "It is true that even if time was not originally of the essence, the appellants could by notice served upon the respondent call upon him to take the conveyance within the time fixed and intimate that in default of compliance with the requisition the contract will be treated as cancelled." In support of this judgment in Stickney v. Keeble, 1915 A C 386 was relied on wherein it was ruled: "Where in a contract for the sale of land the time fixed for completion is not made of the essence of the contract, but the vendor has been guilty of unnecessary delay, the purchaser may serve upon the vendor a notice limiting a time at the expiration of which he will treat the contract as at an end."

15. A passage from Halsbury's Laws of England, 4th Edition, para. 485 may be noticed usefully. "

485. Notice making time of the essence:‑‑In cases where time is not originally of the essence of the contract, or where a stipulation making time of the essence has been waived, time may be made of the essence, where there is unreasonable delay, by a notice from the party who is not in default fixing a reasonable time for performance and stating that, in the event of non‑performance within the time so fixed he intends to treat the contract as broken." (Emphasis added).

16. In support of the contention. that the very notice making the time essence of the contract can also state that the contract will he cancelled, the learned Editors of the 4th Edition relied on the decision in Stickney v. Keeble, 1915 A C 386 as in that case the notice emanated from the promisee and proceeded to state that in the event of non‑performance of the agreement within the time so fixed, the contract will be cancelled. The learned counsel relied on M/s. Hindu Construction Contractors v. State of Maharashtra A I R 1979 S C 720 where the Court had occasion to consider the validity of the rescission of the contract made by one contracting party, which is a Government in that case. 1n that case the Court having construed the terms of the contract held: "The rescission of such a contract on the part of the State Government without fixing any further period making time the essence and directing the Contractor to complete the work within such period, was clearly illegal and wrongful and, thereby, the State Govt., committed a breach of the contract with the result that the security deposit of the contractor could not be forfeited."

17. It is seen in these cases two questions always arise. Whether notice by one party making the time the essence of the contract is reasonable or not, and on such non‑compliance the contract is validly terminated. No question of validity of the rescission or the reasonableness of the notice was raised in this case. Similarly the learned counsel relied on an unreported judgment C.C.C.A. No.50 of 1980 where on a difference of opinion between two learned Judges of this Court the matter was referred to a third Judge. The appellant before the High Court is a Limited Company who suffered a decree at the instance of Andhra Pradesh State Electricity Board for damages for non‑performance of the contract of supplying transformers to the Electricity Board. Ramachandra Raju, J., took the view that the contention of the appellant that the notice fixing 15 days time for performance is not a reasonable period cannot be accepted as the Company has forfeited its right to be given a reasonable time as it refused to supply the transformers at the rate agreed between the parties. The other learned Judge, Punnayya, J., took the view that in order to hold that one party committed breach of the contract when time is made the essence of the contract, the time must be reasonable and the time given in that case was held to be unreasonable and irrespective of the demand made by the Company for higher rates, and the failure to give a reasonable time was fatal to the plaintiff's case and the rescission consequent thereof cannot be justified. Raghuvir, J. (as he then was) accepted the view of Punnayya, J. Thus it is seen in that case the controversy is more about the reasonable time required on the facts of the case for making the time the essence of the contract. No such question arises in this case for two reasons. The plaintiff denied the receipt of both Exs. A‑4 and B‑8 and no question of reasonable time granted by the first defendant was raised. However, I must hold that the time granted under Ex.A‑4 and B‑8 is quite reasonable. Under Exs. A‑4 and B‑8 time I of one month was granted on each occasion and hence I hold that when the time is made the essence of the contract the party can indicate in the very notice making the time essence of the contract that the contract will be terminated in the event of default. It is no doubt true that if a rescission is made under S. 64 the validity of the rescission can be examined by the Court when such question is raised. But it cannot be said as a matter of law that the rescission under S.64 should be made only after the default is committed, and the notice making the time as essence of contract cannot embody the term cancelling the contract.

18. On the third question I must say that it was not necessary in all cases where a person who has got option to avoid the contract should issue a notice under S.64 terminating the contract. If no notice is issued the contract may be treated as alive. But however, a person who committed default of non‑compliance cannot seek the relief of specific performance when there is undue delay on his part once time is made the essence of the contract. Hence I hold irrespective of the validity of the rescission of the contract the Court can examine the question whether the plaintiff is entitled to the relief of specific performance while he committed default when the time is made the essence of the contract.

19. Now the alternative contention raised by the learned counsel for the plaintiff is assuming time is made the essence of the contract under Ex. A‑4 the plaintiff even after cancelling the contract under Ex.B‑4, voluntarily extended the time for performance under Ex. B‑8 and hence he cannot rely upon Ex.A‑4 making the time as essence of the contract or the cancellation of the agreement under Ex. B‑4 as found by the Court below. I must say the extension of time by a party once the time is made the essence of the contract would not operate as waiver of essential condition as to time. We may also notice a passage in Halsbury's Laws of England, Fourth Edition, para. 486 which reads as follows:‑‑ "

486. Effect of agreed extensions:‑‑Where time is of the essence of the contract and one party waives the right to insist on performance by the stipulated time and allows an extension, his act does not operate as an entire waiver of the essential condition as to time, but merely has the effect of substituting the extended time for that originally fixed."

20. Thus it is seen mere extension of time even though after the time is made the essence of the contract would not operate as a waiver of the essential condition as to time.

21. Let us apply the above legal position to the facts of this case. Under Ex. A‑4 when the second payment is made both parties made endorsements. A close reading of the endorsements clearly demonstrates that time is made the essence of the contract. Hence irrespective of the fact whether the 1st defendant exercised the right of rescission or not, the plaintiff cannot obtain the relief of specific performance when he is grossly negligent in complying with the terms of the contract till he issues the notice on 3‑7‑1980. Secondly the notice issued under Ex. B‑4 clearly constitutes termination of the contract for non‑compliance. The learned counsel for the appellant argued that this cannot be given effect to because even on the defendant's own saying he has voluntarily extended the time under Exh. B‑8 and hence he can no longer rely on it. The plaintiff cannot have the advantage both the ways. He cannot have the cake and eat it too. The plaintiff denied categorically that he never received Ex.B‑

8. The trial Court held that the receipt of Ex.B‑8 is not properly proved but proceeded to examine the case on the basis that Ex.B‑8 was received. However, it overruled the defence on the sole ground that he has not issued a separate notice terminating the contract. This I have already held as wholly an incorrect view. I have held that simultaneous notice making the time as essence of the contract and terminating the same in the event of default is valid. I have already held that even assuming that Ex. B‑8 does not operate as rescission of the contract within the meaning of S.64, the plaintiff is not entitled to the relief as the time is made essence of the contract and he is grossly and deliberately guilty of non‑compliance and hence he is not entitled to the relief of specific performance.

22. I am inclined to hold that Ex. B‑8 was received by the plaintiff .on the same parity of reasoning given by the trial Court in respect of Ex. B‑4, that is to say, though the name of the plaintiff was misspelt the door number of house was correctly given and it is also attested by the plaintiffs husband. Though further steps of examining the postman and the signature of the plaintiffs husband were not established, the preponderance of probabilities would go to show that Ex. B‑8 was received: If Ex. B‑8 was received, it constitutes a fresh notice extending the time and also notice terminating the contract on default. Alternatively I must hold that if Ex. B‑8 is excluded. from consideration, Exh.B‑4 is enough to put an end to the contract as under Exh. A‑4 the time is made the essence of the contract. The Court below held that the contention of the plaintiff that he has not received Ex. B‑4 and the reply issued by Ex. B‑7 is not true cannot be accepted. If Exs. B‑4 and B‑7 are accepted as true the contract stood cancelled by virtue of Ex. B‑4 irrespective of the proof of the receipt of the notice Ex. B‑

8. Therefore, I must hold that the contract stood cancelled by operation of Ex.B‑4 even if we exclude Ex. B‑8 from consideration.

23. Further, irrespective of the rescission of the contract. under S.64 of the Contract Act I am clearly of the opinion that once the time is made the essence of the contract, if there is undue delay on the part of the plaintiff, the Court can refuse the enforcement of the contract irrespective of the fact that the promisee has terminated the contract or not by rescission. If rescission did take place under S.64 of the Contract Act, the contract becomes unenforceable. However, the Court can see even though the contract is not rescinded, whether the plaintiff is entitled to the relief of specific performance when the time is made the essence of the contract. In this case, the plaintiff is grossly negligent in seeking relief and he, deliberately withheld the performance even though the time is made the essence of the contract. Hence the suit claim is clearly unsustainable and the plaintiff is not entitled to the relief of specific performance.

24. In the result, the appeal is allowed with costs throughout and the decree for specific performance is set aside and there shall be a decree for money for refund of the amount of Rs.14,000 (Rupees fourteen thousand only) which shall carry interest from the date of decree at 6% per annum. M.B.A./194/F.J. Appeal allowed.