Specific Performance Suit Not Maintainable For Cancelled Sale Agreement Without Seeking Declaration Against Cancellation : Supreme Court

The Supreme Court held that a suit for the specific performance of an agreement to sell, filed after its cancellation, is not maintainable unless it includes a prayer for declaratory relief (under Section 34 Specific Relief Act) challenging the validity of the cancellation.

The Court reasoned that declaratory relief challenging the validity of the cancellation was essential when seeking specific performance of the agreement to sell, as the suit could not be sustained without a valid and subsisting agreement.

“this Court is of the opinion that absent a prayer for declaratory relief that termination/cancellation of the agreement is bad in law, a suit for specific performance is not maintainable.”, the court observed.

The bench comprising Justice Dipankar Datta and Justice Manmohan heard the case where the seller had cancelled the agreement to sell entered with the buyer and had returned the earnest money deposit to the buyer in the form of four demand drafts.

The suit for specific performance of the agreement to sell was filed by the buyer against the seller without seeking a declaratory relief challenging the validity of the cancellation of the agreement to sell. In the meanwhile, after the filing of the suit, the buyer had encashed the demand drafts sent by the seller along with the letter conveying the cancellation of the agreement to sell.

The Trial Court and High Court held in the buyer's favor, prompting the seller to approach the Supreme Court.

The question was whether the Courts below had erred in allowing the suit for the specific performance of an agreement to sell, despite the fact that the agreement had been cancelled by the seller and the buyer had not sought any declaratory relief to challenge the validity of that cancellation.

Setting aside the High Court's decision, the judgment authored by Justice Manmohan observed that unless a declaratory relief for setting aside the cancellation of the agreement to sell was not prayed along with the suit for the specific performance of an agreement to sell, then the suit would not be maintainable.

“This Court further finds that the seller had admittedly issued a letter dated 7th February 2008 cancelling the Agreement to Sell dated 25th January 2008, prior to the filing of the subject suit on 5th May 2008. Even though the demand drafts enclosed with the letter dated 07th February, 2008 were subsequently encashed in July, 2008 (After Suit's institution), yet this Court is of the view that it was incumbent upon the Respondent No.1-buyer to seek a declaratory relief that the said cancellation is bad in law and not binding on parties for the reason that existence of a valid agreement is sine qua non for the grant of relief of specific performance.”, the court observed.

Reference was drawn to the case of I.S. Sikandar (Dead) By LRs. v. K. Subramani and Others, (2013) 15 SCC 27, where it was held that in the absence of a prayer for declaratory relief that the termination of the agreement is bad in law, the suit for specific performance of that agreement is not maintainable.

“Since in the present case, the seller had issued a letter dated 07th February, 2008 cancelling the agreement to sell prior to the institution of the suit, the same constitutes a jurisdictional fact as till the said cancellation is set aside, the respondent is not entitled to the relief of specific performance.”, the court observed.

Since the trial court in this case didn't consider the issue of the maintainability of the suit, the Court referring to the recent case of R. Kandasamy (Since Dead) & Ors. v. T.R.K. Sarawathy & Anr. said that it would not trim away the powers of the Appellate Courts/High Court to examine whether the jurisdictional fact did exist for grant of relief as claimed, provided no new facts were required to be pleaded and no new evidence led.

In terms of the aforesaid, the Court allowed the appeal holding that the Court below had erred in decreeing the suit for specific performance of agreement to sell despite non-existence of the agreement to sell.

Case Title: SANGITA SINHA VERSUS BHAWANA BHARDWAJ AND ORS.

Citation : 2025 LiveLaw (SC) 378

Click here to read/download the judgment

Appearance:

For Petitioner(s): Mr. S. B. Upadhyay, Sr. Adv. Ms. Indu Kaul, Adv. Mr. Rajiv Kumar Sinha, AOR Mr. Raj Kumar, Adv. Mr. Abhinav Kathuria, Adv.

For Respondent(s): Mr. Mungeshwar Sahoo, Sr. Adv. Mr. Samrandra Kumar, Adv. Mr. Vivek Kumar Srivastva, Adv. Mr. Pawan Kumar, Adv. Mr. Ravi Bhushan Upadhyay, Adv. Mr. Ramesh Kumar Mishra, Adv. Mr. Shivam Tiwary, Adv. Mr. Vishal Arun Mishra, AOR Mr. Ardhendumauli Kumar Prasad, Sr. Adv. Mr. Ramesh Kumar Mishra, AOR Mr. Shivam Tiwary, Adv. Ms. Anusha Rathore, Adv. Mr. Shivank S. Singh, Adv.