Specific Performance Suit - When No Time Is Fixed For Performance, Limitation Runs From Period When Plaintiff Had Notice Of Refusal : Supreme Court

The Supreme Court on Tuesday (12.09.2023) held that, when no time is fixed for specific performance of a contract, then the limitation period for a specific performance suit as per Article 54 of Part II of the Schedule to the Limitation Act, 1963, will run from the date on which the plaintiff had notice of refusal on part of the defendant to perform the contract to determine the period of limitation.

The first part of Article 54 states that the limitation period for filing a suit for specific performance would be three years from the date fixed for performance. However, when no date is fixed, the period of limitation is three years from the date when the plaintiff has notice that performance has been refused, as per the second part of Article 54.

A bench of Justice Sanjiv Khanna and Justice Bela Trivedi in this regard observed that:

“On the interpretation of Article 54, this Court in Pachanan Dhara and Others v. Monmatha Nath Maity [2 (2006) 5 SCC 340], has held that for determining applicability of the first or the second part, the court will have to see whether any time was fixed for performance of the agreement to sell and if so fixed, whether the suit was filed beyond the prescribed period, unless a case for extension of time or performance was pleaded or established. However, when no time is fixed for performance, the court will have to determine the date on which the plaintiff had notice of refusal on part of the defendant to perform the contract. 

The factual background of the matter is that in 1995 the Respondents filed a suit for specific performance based on an agreement for sale. The suit was defended by the Appellant on several grounds, including the ground of limitation. The Trial Court directed specific performance, which was affirmed by the High Court, against which the Appellant approached the Apex Court in appeal.

To decide on the issue of limitation, the Apex Court attempted to determine when the Respondents had notice that performance had been refused by the Appellant.

The Apex Court noted that the 3-year limitation period to file a suit for specific performance had commenced in 1991, when the 3rd Respondent had filed a suit for injunction. The Court also noted that the replies sent by the Appellant to the 3rd Respondent in 1991, were sufficient written notice to the 3rd Respondent of the Appellant’s refusal and unwillingness to perform the agreement. The Court hence concluded that in 1995 when the suit for specific performance was filed, it was already barred by limitation.

“The limitation period of three years under the second part of Article 54, which is from the date when the party had notice of the refusal by the other side, had expired when the suit for specific performance was filed on 27.09.1995.",the Court held.

“The appellants must succeed in this appeal since the suit for specific performance is clearly and without doubt barred by limitation”, the Court said while setting aside the decision of the High Court.

Case Title: A. Valliammai V. K.P. Murali, Civil Appeal No. 5342 of 2023

Citation: 2023 LiveLaw (SC) 777; 2023INSC823

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