Specific Relief Act | Adequacy Of Bank Balance Not Absolute Prerequisite To Prove Readiness &Willingness To Meet Contractual Obligations: Karnataka HC

The Karnataka High Court has held that though it is relevant to consider the bank balance of a party while considering the issue of his readiness and willingness to execute a sale agreement, it is not an absolute prerequisite to establish the same.

A Single judge bench of Justice Sachin Shankar Magadum said, "A plaintiff's financial constraints, per se, should not be wielded as a prohibitory factor if its actions and expressions manifest a true desire to meet its contractual obligations and therefore, it is not solely contingent on financial largesse but encompasses a broader spectrum of commitment and integrity.”: Totality Of Circumstances To Be Considered Not Only Bank Balance to Ascertain Readiness And Willingness Of Party To Meet His Contractual Oblitation.

The court observed thus while dismissing an appeal filed by Anjinamma and others challenging the appellate court order directing them to execute a sale agreement with the plaintiff Mohammed Sajjad Sait and another.

Sait had instituted a suit for specific performance based on an agreement to sell dated 15.01.2006 executed by defendants 1 and 2 in respect of the land measuring around 2 acres, out of which, one acre was owned by defendant No.1 and the rest was owned by defendant No.2.

Defendants 1 and 2 offered to sell the suit land for a consideration of Rs.2,50,000 and executed an agreement to sell on 15.01.2006 by receiving earnest money of Rs.50,000.

Plaintiff contended that he was ready and willing to perform his part of the contract and the present suit was filed alleging that defendants 1 and 2 already had sold part of the land measuring one acre to defendant No.7 under a registered sale deed dated 29.9.2006, leading to a breach of contract between plaintiff and defendants 1 and 2. 

The defendants admitted the suit agreement executed in favor of the plaintiff.

However, it was submitted that the plaintiff was not ready to perform his part of the obligation and had not shown his willingness to pay the balance sale consideration and get the property registered in his name.

Defendants argued that if relief of specific performance is granted in favor of the plaintiff, it would cause more hardship to them and hence prayed for dismissal of the suit.

The trial court held that the plaintiff had failed to prove his readiness and willingness to perform his part of the contract and directed the defendants to refund earnest money of Rs.50,000, along with interest.

Further, it held that defendant No.7 (subsequent purchaser of the land) had failed to prove that he was a bonafide purchaser and thus directed the defendants to pay compensation of Rs.1,50,000 to the plaintiff.

The bench noted that the trial court while answering the issue of the readiness and willingness of the plaintiff to pay the remaining amount, took note of the plaintiff's bank statement and came to the conclusion that he did not have sufficient money to complete the transaction.

Further, it was found that he had mobilized funds after the expiry of the stipulated period of three months, and the trial Court was of the view that the plaintiff had no sufficient funds till the filing of the suit.

Court said that it was trite law that a plaintiff to demonstrate his financial capacity need not necessarily have sufficient bank balance or cash balance at the relevant time to conclude that he was always ready to perform his part of the contract.

It observed that Section 16(c) of the Specific Relief Act contains the requirement of the plaintiff to exhibit a continuous state of readiness and willingness throughout the litigation process, but an analysis of the same would reveal that adequacy of plaintiff's bank balance, while relevant, is not an absolute prerequisite to establish his readiness and willingness.

It noted that the phrase "sufficient bank balance" must not be read in isolation, but within the context of a specific performance landscape.

"The Courts are bound to scrutinise the totality of the circumstances, evaluating not only the plaintiff's conduct communications and overall engagements with contractual process, but equally the conduct of the defendants who are guilty of laying several obstacles and creating an environment which momentarily compels the plaintiff to take one step backward. This normal reaction of the plaintiff in a contractual process cannot be gathered to draw an inference that plaintiff is not found to be ever ready and willing to perform his part of the contract," it said.

The court held that that apart, there were significant details regarding inconsistencies in the registration process undertaken by the defendant that needed to be looked into and that the defendants had no locus to question the readiness and willingness of the plaintiff.

It observed that the defendants were required to update the records to complete the sale transaction, and instead of performing their part of the contract by securing updated revenue records, they chose to take a false defense that the plaintiff had no financial capacity and he was not ready and willing to perform his part of the contract.

Thus, rejecting the contention of hardships faced by the defendants if the suit is allowed, the court held that the hardship pleaded by the defendants cannot be due to their conduct being grossly unfair, and dismissed the appeals. 

Appearance: Advocate Nagesh S for Appellants.

Senior Advocate P.N.Rajeshwara for Advocate Poonam S Patil for C/R1

Citation No: 2024 LiveLaw (Kar) 38

Case Title: Anjinamma & Others AND Mohammed Sajjad Sait & ANR

Case No: R.S.A NO.808 OF 2023 C/W R.S.A No.1358 OF 2023, R.S.A No.1372 OF 2023

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