Where time not the essence of contract, Parties thereto must perform their part within a reasonable time #indianlaws

The legal position suggests that in the case of agreement of sale relating to immovable property, time is not of the essence of the contract unless specifically provided to that effect. However, this does not mean that any and every suit for specific performance of the agreement, not providing specifically that time is of the essence of the contract, should be decreed.

The Limitation Act gives three years to take necessary legal recourse for seeking decree of specific performance. What would be the situation where time is not the essence of contract (in respect of immoveable property). This issue came up before the Apex Court in the matter of K.S. Vidyanadam & Ors. vs. Vairavan, decided on 06.02.1997 (AIR 1997 SC 1751 = JT 1997 (2) SC 375)

Dispute in the present matter was in regard to specific performance of an agreement to sell. A legal notice (after about two and a half years of agreement) was served upon the seller alleging that time was never agreed as the essence of contract and also the property proposed to be sold was in occupation of the tenant. In fact, the buyer allegedly kept on buying time on the pretext that property is yet to be vacated by the tenant. Buyer, then also stated that although vacant possession of the property was agreed to be delivered, but since it could not be vacated by tenant, buyer was willing to purchase the property with tenant and accordingly sellers were asked to execute the sale deed on the agreed date.

The notice was replied stating that time was the essence of the contract. Tenant being relative of the seller, was always willing and ready to vacate the property and in fact it was the buyer who was not ready and willing to complete the transaction and interest to buy had developed only when buyer noticed rising prices in the locality.
A suit for specific performance of the agreement was filed also praying alternatively for refund of the amount paid with interest, which however was dismissed on the ground that buyer though ready was not willing to perform his part of the contract. Refund of earnest money was directed. Division Bench of the High Court in appeal reversed the judgment of the Trial Court and also held that time was not the essence of the contract.

Appellant in appeal before the Apex Court contended that the buyer was not entitle to specific performance on account of the delay on his part and also because he was not ready and willing to perform his part of the contract. Buyer on the other hand contended that once it has been held that time was not the essence of the contract and when the suit has been filed within the period of limitation prescribed by law, there was no reason for not decreeing specific performance.

The legal position suggests that in the case of agreement of sale relating to immovable property, time is not of the essence of the contract unless specifically provided to that effect. The period of limitation prescribed by the Limitation Act for filing a suit is three years. However, this does not mean that any and every suit for specific performance of the agreement, not providing specifically that time is of the essence of the contract, should be decreed provided it is filed within the period of limitation notwithstanding the time limits stipulated in the agreement for doing one or the other thing by one or the other party.

In the case of sale of immovable property there is no presumption as to time being the essence of the contract. The court should look at all the relevant circumstances including the time-limits specified in the agreement and determine whether its discretion to grant specific performance should be exercised.

While exercising its discretion, the Court should also bear in mind that when the parties prescribes certain time-limits for taking steps by one or the other party, it must have some significance and the said time-limits cannot be ignored altogether on the ground that time has not been made the essence of the contract [relating to immovable properties].
The present case was held to be not just of mere delay but also a case of total inaction on the part of the buyer for two and a half years in clear violation of the term of agreement. The delay also saw substantial rise in prices of property- between the date of agreement and the date of suit notice and the said delay had also brought about a situation where it would be inequitable to give the relief of specific performance to the buyer.

What becomes important to note here is that where time is not of the essence of the contract, the parties thereto must perform their part of the contract within a reasonable time, which should be determined by looking at all the surrounding circumstances including the express terms of the contract and the nature of the property.
The present appeal was allowed and the decree as passed by the High Court was set aside.