Express time clause, seller's NOC delay and specific performance
On 12 March 2023, Ramesh, the owner of a 2,400 sq ft shop in Pune, signed an agreement to sell it to Sana for ₹96,00,000. Sana paid ₹9,60,000 as earnest money; the balance was payable at registration within 60 days. Clause 9 stated that time was of the essence and that if Sana failed to pay, the earnest money would be forfeited. Sana's bank sanctioned a home loan on 25 April 2023, but disbursement required Ramesh's no-objection certificate. Ramesh delayed the NOC for five weeks. On 5 June 2023, before the 60-day period expired, Ramesh refused to execute the sale deed, saying prices had risen and Sana had not tendered the balance. Sana sent a legal notice on 20 June offering to pay the balance within 10 days and filed a suit for specific performance. Ramesh argues that the express time clause and Sana's failure to tender the balance bar the suit.
1. Is the clause making time of the essence decisive against Sana? Apply the Indian Contract Act, 1872 and the Specific Relief Act, 1963.
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Issue: Whether Ramesh can rely on Clause 9 after he delayed the NOC required for the buyer's disbursement.
Rule: Under Section 55 of the Indian Contract Act, 1872, an express term may make time of the essence, but the party relying on the breach must not itself have prevented performance. A party cannot take advantage of its own wrong. For immovable property, courts also start from the position that time is ordinarily not of the essence unless the agreement and surrounding facts clearly show otherwise.
Application: Clause 9 is express, so it is a relevant factor. But Ramesh delayed the NOC for five weeks. Sana's bank sanction was conditional on that NOC. Until the NOC came, Sana could not complete the disbursement and tender the balance. Ramesh then refused on 5 June, before the 60-day period expired. His refusal made tender unnecessary. The clause therefore cannot be used by Ramesh to convert his own obstruction into a buyer default.
Conclusion: The time clause does not defeat Sana. Ramesh's conduct prevented performance and he cannot rely on the clause to forfeit the earnest money or to resist the suit.
2. Was Sana 'ready and willing' under Section 16(c) of the Specific Relief Act, 1963, even though she had not tendered the balance before filing suit?
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Issue: Whether readiness and willingness requires actual tender of the balance before suit.
Rule: Section 16(c) of the Specific Relief Act, 1963 requires the plaintiff to aver and prove that she has performed, or has always been ready and willing to perform, the essential terms of the contract. Actual tender is not an invariable condition. Where the seller has refused to perform, tender would be futile. The court looks at the buyer's conduct, capacity and continued willingness.
Application: Sana pleaded readiness and willingness. Her bank had sanctioned the loan on 25 April 2023. Disbursement was held up only because Ramesh delayed the NOC. On 20 June she sent a notice offering to pay the balance within 10 days. She did not rescind, did not set up an inconsistent case, and did not lack funds. Her inability to tender earlier was caused by Ramesh's refusal and NOC delay.
Conclusion: Sana satisfies Section 16(c). A buyer is not required to make a futile tender to a seller who has already refused to execute the sale deed.
3. What relief should the court grant, and what is the effect of the forfeiture clause?
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Issue: Whether Sana should get specific performance or only refund, and whether Ramesh can forfeit the earnest money.
Rule: After the Specific Relief (Amendment) Act, 2018, Section 10 makes specific performance the general rule, subject to Sections 14 and 16. Section 14 excludes, inter alia, contracts dependent on personal qualifications, determinable contracts, and contracts involving continuous duties the court cannot supervise. A forfeiture clause operates only against a party in default.
Application: This is a sale of a shop, not a personal-service or determinable contract. Sana has proved readiness and willingness. Ramesh is in default because he refused to execute the sale deed after delaying the NOC. The forfeiture clause is therefore not triggered against Sana. If the court grants specific performance, the earnest money is adjusted towards the price; if for any reason specific performance is refused, Sana would still be entitled to refund and compensation, not forfeiture.
Conclusion: The court should decree specific performance, direct Sana to pay the balance within a fixed period, and direct Ramesh to execute and register the sale deed. The forfeiture clause cannot be enforced against Sana.