Sale Of Property To Third Party During Pendency Of Suit Inequitable To Grant And Enforce Specific Performance: Delhi High Court

The Delhi High Court has refused to grant decree of specific performance against a suit property after noting that the property had been sold to a third party during the pendency of the suit. The court said the said circumstance made it inequitable to grant and enforce the specific performance decree.

The bench of Justice Chandra Dhari Singh reiterated that it is a settled law that specific performance is not granted by the Courts due to the various hardships which may be caused to the third party in case the specific performance is granted. The bench said that while exercising the discretion of granting specific performance, the court has to balance the interests of justice and equity for the parties involved and has to look into the probable consequences of granting such specific performance.

“The MOU in the instant Suit was executed in the year 1998. Since then, almost 25 years have elapsed. The performance of the contract would involve considerable hardship on the parties. The same is being said considering that a third-party interest has been created to such an extent that the revocation of that contract would lead to an increase in hardships warranting unjustified litigations,” the court observed.

The court was further of the view that apart from the ground of equity, the steep increase in the price of the property in dispute was a contributing factor for not granting specific performance; noting that the property price since the year of institution of suit in 2004, had substantially increased to Rs. 60 Crore. The court said the same was a drastic increase in comparison to the value ascertained by the parties at the time of institution of the suit, i.e., Rs 2.5 Crore, and that the Court cannot grant the specific performance by payment of Rs. 2.50 Crore since the price of the property had increased substantially.

The bench held that since the Court had not granted the relief of specific performance, therefore, in terms of Sections 20 and 21 of the Specific Relief Act, 1963, the plaintiffs were entitled for grant of compensation in lieu of specific performance.

“At this juncture, it pertinent to mention that in view of the material which has been placed on record, it is indicated that a third-party interest has been created in the Suit Property against which the specific performance has been sought. Such a circumstance makes it inequitable to enforce the decree of specific performance and for the above reasons a decree for the payment of compensation in lieu of the specific performance would meet the ends of justice,” the court said.

The plaintiffs had filed a suit for specific performance in 2004 against the defendant, seeking a direction to the latter to transfer/ sell the suit property to the plaintiffs as per the MOU executed between the parties. Under the MOU, the defendant had agreed to assign all his interest in the Suit Property to which he was entitled to as the major beneficiary of a Will. Later, the High Court of Madhya Pradesh, in a probate case, had upheld the validity of the Will after the defendant had informed the court that it had rescinded the said MOU.

The court observed that several interim orders had been passed in the Suit directing the defendant not to create any third-party interest in the suit property, by granting a stay. Later, the said stay was made absolute. But the defendant, in gross violation of the Court’s order, had already sold the property to a third party for consideration. The court observed that possession of the suit property had already been taken over by the vendee and a Sale Deed was also executed in his favour by the defendant. Further, the defendant had received the full and final sale consideration which was placed in the custody of the Court.

In view of the same, the court said that third-party interest in the suit property had been created to such an extent that its revocation would lead to an increase in hardships warranting unjustified litigations. Therefore, in such a case, the performance of the MOU would involve considerable hardship on the parties, the court said.

The court added that even otherwise, according to the provisions of Section 12 of the Act, the court should not direct specific performance of a part of the contract when the contract becomes either “wholly or partly incapable of performance”. The court was of the view that specific performance of the part of a contract can be directed only where the part which is left unperformed bears a small portion to the whole in value. “In the present case, the part which is to be left unperformed bears substantial part the whole house, therefore, under the circumstances of the instant case, this Court do not consider it appropriate to pass the decree as prayed, thereby, directing the performance of the MOU,” said the court.

The court further held that even if it was accepted that the plaintiffs had been ready and willing to perform their part of the MOU, the same could not be said about the defendant.

“The law in this regard is settled. The readiness and willingness of both the parties to the Contract has to be continuous and there cannot be any gap in the said conduct, on behalf of either of both the parties. In the instant Suit, it is evident from the conduct of the defendant that there is no continuity in his readiness and willingness which is also supported by the developments that have occurred in regard to the Suit Property,” said the court.

The court further said that the steep increase in the price of the property was a contributing factor for not granting specific performance, noting that the price of the suit property from the year of institution of suit in 2004, had substantially increased to Rs. 60 crores.

It was of the view that though time is not an essence of Contract in case of immovable property, however, in the present days where prices of property increase in a multi-fold manner, time plays an important role.

Case Title: SANGHI BROS (INDORE) PVT. LTD. vs KAMLENDRA SINGH

Citation: 2023 LiveLaw (Del) 817

Counsel for the Plaintiffs: Mr. Arvind Varma, Sr. Advocate with Mr. A. S. Mathur, Mr. Prabal Mehrotra, Mr. Shubhankar, Mr. Umang Kataria, Ms. Mahima Singh and Ms. Smridhi Sharma, Advocates with and Mr. H. Joshi, AR for plaintiff no. 1 and 2 (i)-(iii) Mr. Sankalp Goswami, Advocate for plaintiff no. 2(iv)

Counsel for the Defendant: Mr. Jayant Mehta, Sr. Advocate with Mr. Vijay K. Singh and Ms. Ashita Chhibber, Advocates Mr. Akhil Sibal, Sr. Advocate with Ms. Fareha Ahmad Khan, Advocate

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