1. This is an appeal by the Plaintiff in a suit to enforcespecific performance of a contract for sale of land and machineries 43described in the schedule to the plaint. On the 25th June 1917, the firstDefendant entered into an agreement with the Plaintiff to convey to him theproperties in suit for a sum of Rs. 6,000. Rs. 51 was paid as earnest money andthe residue was agreed to be paid at the time of the execution of theconveyance. The vendor undertook to deliver to the Attorney for the purchaserwithin one week from the date of agreement all documents of title in hispossession. The agreement next provided as follows: (a) "the purchaseshall be completed within three weeks from the date hereof, (6) should thepurchaser fail to complete the contract within the time and in mannerhereinbefore mentioned, notwithstanding that a good title had been made out,the vendor would be at liberty to cancel the agreement, forfeit the earnestmoney and claim either damages or specific performance of the contract."On the 1st August 1917, the first Defendant sold the land and the machineriesto the second Defendant. Two days later the Plaintiff instituted the presentsuit for specific performance of the contract. The first Defendant pleaded thatthe Plaintiff was in default and was not entitled to a decree for specificperformance. The second Defendant pleaded that he was a bond fide purchaser forvalue without notice. The Subordinate Judge found upon the evidence that thesecond Defendant had notice of the prior agreement and could not consequentlyclaim the protection accorded by a Court of Equity to a bond fide transfereefor value without notice. He held, however, that time was of the essence of thecontract and that there was default on the part of the Plaintiff. In this viewhe dismissed the suit with costs. On the present appeal no serious effort hasbeen made to dispute the conclusion of the Subordinate Judge that the secondDefendant was not a bond fide purchaser for value. At the time of his purchase,the title deeds were, not in the possession of the first Defendant and if hehad made an enquiry like an ordinary prudent purchaser, he would havediscovered the existence of the prior contract. In these circumstances it isunnecessary to determine whether he had actual knowledge of the agreementbetween the Plaintiff and the first Defendant. The substantial question forconsideration is whether time was of the essence of the contract and whetherthere had been such default on the part of the Plaintiff as to disentitle himto a decree for specific performance. The agreement for sale was made on the25th June 1917. The title deeds were to be delivered to the Attorney for thepurchaser on or before the 2nd July and the transaction was to be completed notlater than the 16th July. The title deeds were not delivered on the appointedday, for although two documents were made over to the purchaser on the date ofthe agreement, two others were not sent till the 11th July. The draft of theconveyance was submitted on the 19th July and the time for its execution wasextended to the 24th July. On the 23rd July, one of the officers of thePlaintiff went to see the land and the machineries of the oil-mill which stoodthereon. He found that instead of 600 plates mentioned in the agreement forsale, only 532 were on the spot, and that one of the wheels was broken. Hereported to his attorney the next day that the requisite number of plates hadnot been found and that the machinery was not in a sound condition. On thatvery day, the 24th July, the vendor went to the office of the purchasersattorney probably before the latter had received intimation of the defects justmentioned. As the purchaser did not appear, the vendor left after stating thatthe time for completion was further extended by 24 hours. On the 26th July theattorney for the Plaintiff wrote to the solicitor for the Defendant andinformed him of the defects which had been found. He stated that the officer ofhis client had not been allowed to inspect all the parts of the machinery andexpressed his willingness to complete the transaction as soon as the vendorcarried out his part of the agreement. A reminder was sent two days later buton the 28th July the attorney for the vendor wrote to the solicitor for thepurchaser that the allegations of his client were unfounded and that as hisclient had failed to perform his part of the agreement on the date fixed, thecontract had been cancelled and the earnest money forfeited, he accordinglyasked for the return of the documents of title. It now transpires that thevendor had meanwhile entered into negotiation with the second Defendant to sellthe properties to him and that an agreement for sale in favour of the latterwas actually executed on the 25th July. On the 30th July, the attorney for thepurchaser tendered the balance of the purchase money. This was not accepted bythe vendor who sold the properties to the second Defendant on the 1st Augustfor Rs. 6,400. We have now to consider, whether in these circumstances, timewas of the essence of the contract.

2. Sec. 55 of the Indian Contract Act provides that when aparty to a contract promises to do a certain thing at or before a specifiedtime and fails to do any such thing at or before the specified time, thecontract or so much of it as has not been performed becomes voidable at theoption of the promisee, if the intention of the parties was that time should beof the essence of the contract. If it was not the intention of the parties thattime should be of the essence of the contract, the contract does not becomevoidable by the failure to do such thing at or before the specified time butthe promisee is entitled to compensation from the promisor for any lossoccasioned to him by such failure. As was said in Harakh Singh v. Saheb Singh(1907) 6 C. L. J. 176 what is to be ascertained is whether, in fact,performance of the contract by one party was meant to depend on the otherpartys promise being fulfilled by the day named therefor, or whether a day wasnamed merely in order to secure performance within a reasonable time. It iswell-settled that the mere fact that a date has been mentioned for theperformance of the agreement does not conclusively prove that time was intendedto be of the essence of the contract, [Hearne v. Tenent [1807] 13 Ves. 287,Roberts v. Berry [1852] 16 Beav. 31; [1853] 3 DeG. M. & G. 284 and Parkinv. Thorold [1854] 16 Beav. 59; [1851] 2 Seni. N. S. 1]. The Court has todetermine whether from an express promise to that effect or because such apromise is to be implied from a consideration of the real intention of theparties inferred from the nature of the contract, time is to be deemed of theessence of the contract. The principles applicable to cases of this characterwere considered by the Judicial Committee in the case of Jamshed v. Burjorji I.L. R. Bom. 289 : 20 C. W. N. 744 (P. C.) (1915) where their Lordships reversedthe decision of the Court of Appeal of the Bombay High Court in the case ofBurjorji v. Jamshed I. L. R. (1913) 38 Bom. 77 and restored the judgment of Mr.Justice McLeod. Viscount Haldane observed as follows :-- " Under the lawof England, equity which governs the rights of the parties in cases of specificperformance of a contract to sell real estate looks, not at the letter but atthe substance of the agreement, in order to ascertain whether the parties,notwithstanding that they named a specific time within which completion was totake place really and in substance intended more than that it should take placewithin a reasonable time. In support of this view, reference was made to thedecision of Lord Redesdale in Lennon v. Napper [1802] 2 Sch. & Rep. 682, ofKnight Bruce, L. J., in Roberts v. Berry [1852] 16 Beav. 31 : [1853] 3 DeG. M.& G. 284, of Lord Cairns in Tilley v. Thomas [1867] L. R. 3 Ch. App. 61,and of Lords Atkinson and Parker in Stickney v. Keeble [1915] App. Cas. 386.The doctrine is concisely stated in the language used by Lord Cairns in Tilleyv. Thomas [1867] L. R. 3 Ch. App. 61, "A Court of Equity will, indeed,relieve against and enforce specific performance, notwithstanding a failure tokeep the dates assigned by the contract either for completion or for the stepstowards completion, if it can do justice between the parties and if there isnothing in the express stipulation between the parties, the nature of theproperty, or the surrounding circumstances which would make it inequitable tointervene and modify the legal right. This is what is meant, and all that ismeant, when it is said that in equity time is not of the essence of thecontract. Of the three grounds mentioned by Turner, L. J., in Roberts v. Berry[1852] 16 Beav. 31 : [1853] 3 DeG. M. & G. 284 express stipulation requiresno comment, the nature of the property is illustrated by the case ofreversions, mines or trades, the surrounding circumstances must depend on thefacts of each particular case." The special jurisdiction of equity todisregard the letter of the contract in ascertaining what the parties to thecontract are to be taken as having really and in substance intended as regardsthe time of its performance, may thus be excluded by any plainly expressedstipulation, but to have this effect the language of the stipulation must showthat the intention was to make rights of the parties depend on the observanceof the time-limits prescribed in a fashion which is unmistakable. The languagewill have this effect if it plainly excludes the notion that these time-limitswere of merely secondary importance in the bargain, and that to disregard themwould be to disregard nothing that lay at its foundation. Prima facie, equitytreats the importance of such time-limits as being subordinate to the mainpurpose of the parties, and it will enjoin specific performance notwithstandingthat from the point of view of a Court of Law the contract has not been literallyperformed by the Plaintiff as regards the time-limit specified. This is merelyan illustration of the general principle of disregarding the letter for thesubstance.

3. The Respondent has contended that an intention to treattime as essential in the case before us may be inferred from the circumstancethat the agreement for sale not only specifies the day for completion but alsocontains an additional provision that in the event of default on the part ofthe purchaser, the vendor will be at liberty to cancel the agreement andforfeit the earnest money. Reliance has been placed on the case of Hudson v.Temple [1860] 29 Beav. 536 where liberty had been reserved to the vendor torescind if the purchase was not completed by the date specified. Our attentionhas also been invited to the decision in Seaton v. Mapp [1846] 2 Collyer 556 atp. 564 where, referring to the liberty reserved to the vendor to cancel theagreement on default of the purchaser, Knight Bruce, V. C., observed that theplain proposition is that the purchaser shall be held by a cable and thevendors by a skein of silk and Uppeton v. Nicolson [1871] 6 Ch. App. 436 wheretime was specified to be of the essence in the case of the purchasersobligation but not of the vendor. It has further been argued that an intentionto treat time as essential may be inferred from the nature of the contractwhich was for the sale of land to be used directly for the purpose of trade andcommerce and reference has been made to the decision in Wright v. Howard [1823]1 Seni. & Strew. 190. Finally it has been argued that the claim cannotpossibly succeed as the transaction was not completed within the extendedperiod [Barclay v. Messenger 43 L. J. Ch. 449; (1874) 22 W. R. 522, Stewart v.Smith (1824) 6 Hare 222 and Fakir Mahomed v. Sheikh Abdullah I. L. R. (1887) 12Bom. 658, 673]. We are of opinion that these contentions are not well-founded.

4. In Jamshed v. Burjorji I. L. R. (1913) 38 Bom. 77 : I. L.R. 40 Bom. 289: 20 C. W. N. 744 (1915) the agreement for sale specified a datefor completion of the purchase and contained an additional covenant that shouldthe purchaser not pay the residue of the purchase money within the fixedperiod, the earnest money would stand forfeited and the vendor would haveauthority to sell the property to another. Mr. Justice Macleod held that timewas not of the essence of the contract. Scott, C. J., and Chandravarkar, J.,overruled him and observed that they had not been able to discover theauthority for the sweeping statement that the clause providing that uponnon-completion within the fixed period, the earnest money would be forfeitedand the vendor would be at liberty to resell had never been considered by theCourts as making time of the essence of the contract. The Judicial Committeerepudiated this doctrine and held that there was nothing in the language or inthe subject-matter of the agreement to displace the presumption that for thepurposes of specific performance time was not of the essence of the bargain.They added that the subject-matter of the character of the lease sold was notsuch as to take the case out of the class to which the principle of equityapplies. In our opinion the case before us is amply covered by the decision ofthe Judicial Committee and we hold accordingly that time was not of the essenceof the agreement.

5. The next question which requires consideration is whetherthe purchaser has been guilty of unnecessary delay and has thereby forfeitedhis right to claim specific performance of the contract. It is well-settledthat although in a contract for the sale of land the time fixed for completionis not initially of the essence of the contract either party may be guilty ofsuch unnecessary delay as entitles the other to serve upon him a noticelimiting a time at the expiration of which he will treat the contract as at anend, the reasonableness of the time so limited is determined by the Court withreference not merely to what remains to be done at the date of the notice butall the circumstances of the case including the previous delay of the party indefault and the attitude of the other side in relation to it. [Stickney v.Keeble [1915] App. Cas. 386, McMurray v. Spicer (1868) L. R. 5 Eq. 527, Webb v.Hughes (1870) L. R. 10 Eq. 281, Patrick v. Milner (1877) L. R. 2 C. P. D. 342and Nokes v. Kilmorey [1847] 1 DeG. & S. M. 444]. The facts stated make itabundantly clear that there was no unnecessary delay on the part of thepurchaser in this case and that the extension of time allowed by the vendor onthe 24th July was not reasonable. The inference follows that at the date of theinstitution of the suit the contract was specifically enforceable at theinstance of the purchaser. The result is that this appeal is allowed, thedecree of the Subordinate Judge set aside and the suit decreed. The Plaintiffwill be called upon to deposit in the Court below the balance of the purchasemoney within one month after the arrival of the record in that Court, thereuponthe Defendants will execute a conveyance in favour of the Plaintiff. The sumdeposited will be paid out to the second Defendant. The Plaintiff is entitledto his costs both here and in the Court below.

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Mahadeo Prosad Agarwala vs. Narain Chandra Chakravarti andOrs. (04.08.1919 - CALHC)