The Karnataka High Court held that in contracts where time is of the essence, the time fixed for performance does not get extended by default simply because the agreement was not cancelled.

In that context, the Bench of Justice Anant Ramanath Hegde observed that, "time was indeed the essence of the contract.. This Court has also held that the agreement is not cancelled. Merely because the agreement is not cancelled by the defendant, it ipso facto does not mean that the time fixed for performance gets extended. For such extension, there must be an agreement either oral or documentary. No such agreement extending the time fixed for performance is pleaded."

Counsel Sourabh Sundar and Counsel KL Patil appeared for the appellant, while Senior Counsel SP Shankar appeared for the respondents.

The plaintiff filed a suit seeking specific performance of a contract based on an agreement for sale, alternatively claiming Rs.11,51,000 with interest. The plaintiff asserted that Rs 5 lakhs was paid as an advance, and the remaining Rs.6,51,000 was to be paid at the time of registration, with a stipulated six-month period for completion.

The defendant admitted the agreement but argued that time was essential, and the plaintiff failed to pay the balance within six months. The Trial Court found the agreement proved but declined specific performance, ordering a refund of Rs.5,00,000 with 6% interest. The Trial Court accepted the defendant's oral revocation but rejected the claim that the power of attorney was fabricated.

The plaintiff, aggrieved by the denial of specific performance, appealed. The defendant accepted the refund decree. The plaintiff argued against the Trial Court's view on readiness and willingness, emphasizing the defendant's failure to cancel the agreement or refund the advance amount.

The respondent contended that the plaintiff, having obtained a refund decree, could not challenge it.

The High Court observed that the Trial Court erred in holding that the agreement was revoked, while observing that, "in the absence of any other credible evidence either oral or documentary which evidences the cancellation of the agreement, the agreement is not canceled as contended by the defendant."

Subsequently, while observing that, "though the respondent has failed to prove revocation of agreement, the plaintiff must prove his readiness and willingness to perform his part of the contract before expiry of the time fixed", the High Court held that the plaintiff had failed to prove readiness and willingness to perform his part of the contract.

Awarding compensation, the Court observed that, "Since this Court is awarding the compensation despite the plaintiff not performing his part of the contract, and it is primarily based on the concession by the respondents who left to the discretion of the Court to award a reasonable compensation, this Court is of the view that interest of justice will be met if 60% of the compensation amount of Rs.6,51,000/- claimed i.e., Rs.3,90,600/- which is rounded off to Rs.4,00,000/- is awarded with 7% interest per annum from the date of the suit till realisation of the amount. Thus, the plaintiff/appellant is entitled to Rs.5,00,000/- towards refund of earnest amount and Rs.4,00,000/- towards compensation, and with 7% interest per annum on Rs.9 lakhs from the date of the suit till realisation."


Appellant: Counsels Sourabh Sundar, KL Patil

Respondents: Senior Counsel SP Shankar, Counsels Mamata G Kulkarni, Prashanth S Kadadevar

Cause Title: Mohammed Farughuddin vs Ramachandra Balu Shinde (Through LRs)

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