Supreme Court Bench Delivers Split Verdict In Civil Appeal From Specific Performance Suit

The Supreme Court bench comprising Justices MR Shah and BV Nagarathna delivered a split verdict in a civil appeal arising out of a suit seeking specific performance of an agreement of sale.

 Brief Facts leading to the Civil Appeal with its Judicial History

The brief facts leading to the Civil Appeal are that the plaintiff and the defendants had entered into an agreement to sell dated 07.08.2005 under which the defendants agreed to sell their land for a consideration of Rs. 8,750/- per cent. The plaintiff paid an amount of Rs. 10,000/- as advance towards the part sale consideration amount. This amount was 4% of the total consideration amount. The balance consideration was agreed to be paid by the plaintiff within six months from the date after measuring the property provided the defendants make available the documents of title including the purchase certificate under the Kerala Land Reforms Act.

However, the plaintiff served a legal notice dated 02.11.2006 upon the defendants to execute the sale deed to which the defendants sent a reply and refused to execute the sale deed and cancelled the agreement to sell. Therefore, the appellant, in the civil appeal before the top court, had instituted a Suit before the trial Court for specific performance of agreement to sell and in the alternative return of the plaintiff’s amount with interest.

Terms and conditions of the Agreement

(a) The plaintiff was obligated to measure the property at his own expense;

(b) Prepare the deeds with respect to the plaint schedule property in favour of himself or in favour of his nominees;

(c) The balance consideration was to be paid by the plaintiff to the defendants within six months from the date of agreement.

The agreement also stipulated that the defendants were to:

(a) Handover the above-mentioned deeds as also the anterior documents, possession certification, tax receipt and encumbrance certificate for the last thirteen years, purchase certificate, either in their originals or certified copies to the plaintiff;

(b) On receipt of the balance sale consideration the parties were to execute the sale deed in favour of the plaintiff within six months.

Larger Arguments before the Trial Court

It was denied by the defendants that the plaintiff was ever ready and willing to perform his part of the contract. It was also submitted that the suit was filed after one year from the date of expiry of the agreement. It was specifically argued that the defendant No.1 was a heart patient and he had undergone the surgery on which huge amount was spent which was borrowed from others and therefore to clear off the said liability, the defendants agreed to sell the property in question. The defendants also argued that even though they had approached the plaintiff to pay some more money, the plaintiff was not prepared for the same, thereby the defendants had been compelled to sell gold ornaments and clear their liabilities.

Decision Of The Trial Court

The trial Court decreed the suit for specific performance of agreement to sell dated 07.08.2005. However, at the same time and to do complete justice between the parties, the trial Court directed the plaintiff to pay 25% more amount, over and above the agreed consideration amount. The learned trial Court also directed the plaintiff to deposit the balance sale consideration within a period of two months.

Decision of the High Court

Feeling aggrieved and dissatisfied with the judgment and decree passed by the learned trial Court, the defendants preferred an appeal before the High Court. Without upsetting the findings recorded by the trial Court on execution of agreement to sell dated 7.8.2005; payment of part sale consideration and the other issues held in favour of the plaintiff, straightway the High Court considered Section 20 of the Specific Relief Act and opined that the trial Court was not justified in enhancing the sale consideration and ought not to have exercised the discretion in favour of the plaintiff. By the impugned judgment and order, the High Court, while relying upon and/or considering Section 20 of the Specific Relief Act, set aside the decree of specific performance.

Arguments put forth by the Appellant Plaintiff before the Supreme Court

The Appellant, who is also the Original Plaintiff, put forward a five point submission before the top court.

1. That as per the conditions mentioned in the agreement to sell, the balance sale consideration was required to be paid within a period of six months form the date after measuring the property provided the defendants make available the documents of title including the purchase certificate under Kerala Land Reforms Act, which was yet to be obtained.

2. That even the purchase certificate was issued by the Government during the pendency of the suit.

3. That enhancement of the sale consideration by the learned trial Court could not have been read against the plaintiff.

4. That the relief could not be denied on the ground of insufficiency of sale consideration in light of the fact that the market value of the suit property had increased manifold over a period of time. That denial of the relief of specific performance on such ground was barred by Explanation 1 to Clause (c) of Section 20 (2) of the Act.

5. That in the absence of any proof demonstrative of delay, unwillingness, unreadiness on the part of the plaintiff, the relief of specific performance could not have been denied.

Therefore, the Appellant concluded, “once the execution of agreement to sell is admitted and the part sale consideration is received and it was found that the plaintiff was always ready and willing to perform his part of the contract, the learned trial Court was justified in decreeing the suit for specific performance.”

Arguments put forth by the Original Defendants before the top court 

That agreement to sell was a forced agreement to sell as at the relevant time, defendant no.1 suffered a heart attack and he was in need of money and therefore he was compelled to sell the property in question. They further argued that the price of the property in question has gone very high and therefore it is prayed not to interfere with the impugned judgment and order passed by the High Court. They further added that the defendants needed money urgently when the agreement to sell was carried out and therefore time was the essence of the contract. The balance consideration was to be paid by the plaintiff to the defendants within six months from the date of agreement.

Analysis in Justice MR Shah’s decision

Upholding the judgment of the trial court, Justice M.R. Shah held, "It may be true that at the relevant time the defendants may be in need of money. However, the fact remains that they agreed to sell the property in question for sale consideration mentioned in the agreement to sell...it was the case on behalf of the defendants that they were always ready and willing to perform their part of the contract...it was never the case on behalf of the defendants in the written statement and/or even before the learned trial Court that the agreement to sell was inequitable and/or was a forced agreement to sell."

Justice Shah further adds, "The HC has not commented upon and/or set aside any of the findings of the learned trial Court, recorded while passing a decree for specific performance. Straightway, the High Court has considered Section 20 of the Specific Relief Act and has observed and held that by enhancing the amount of sale consideration, the learned trial Court has wrongly exercised the discretion in favour of the plaintiff."

Justice Shah finally adds, "As such, the learned trial Court was absolutely justified in compensating the defendants by paying some more amount while passing a decree for specific performance. Therefore, in the facts and circumstances of the case and more particularly when the learned trial Court exercised the discretion in favour of the plaintiff after having observed and recorded the findings on the execution of the agreement to sell by the defendants and that the part sale consideration was paid by the plaintiff which was accepted by the defendants and thereafter the finding that the plaintiff was always ready and willing to perform his part of the contract, the learned trial Court was absolutely justified in passing the decree for specific performance."

Analysis in Justice BV Nagarathna’s verdict

Justice Nagarathna, in her dissent, framed two important issues for consideration.

i)  Whether the plaintiff’s conduct demonstrates readiness and willingness on his part to carry out his obligations under the agreement of sale dated 7th August, 2005?

ii)  Whether the plaintiff, by not paying consideration above 4% of total sale consideration within the period stipulated in the agreement, had defeated the purpose of the agreement to sell executed by the defendants?

Discussion on Section 20 of the Specific Relief Act

Justice Nagarathna, in her dissenting judgment, states, "That even in the absence of discretionary power under Section 20 to deny the relief of specific performance, the plaintiff was not entitled to claim such relief as a matter of right. The position of law...remains that the provisions of Section 16 of the Act have to be mandatorily complied with by the party seeking the relief of specific performance. The relief of specific performance cannot be granted in favour of a party who has not performed his obligations under the contract. It is therefore necessary to ascertain whether, the plaintiff had complied with the statutory prerequisites under Section 16 (c) of the Act, before claiming the relief of specific performance."

Reflecting on Section 16(c) of the Act, Justice Nagarathna states, "Clause (c) of Section 16 of the Act, which is relevant in the instant case...clearly states that unless the plaintiff establishes his readiness and willingness to perform his part of the contract, he would not be entitled to a decree of specific performance...Thus, both readiness as well as willingness have to be established by the plaintiff on whom the burden is cast in a suit for specific performance of an agreement. Therefore, the question would arise as to whether the plaintiff discharged such burden in the instant case."

Holding that the Plaintiff has not discharged the burden cast on him under the law, Justice Nagarathna held, "Nothing was brought on record by the plaintiff to demonstrate that positive steps were taken by him in pursuance of the agreement of sale. It is trite that the relief of specific performance cannot be granted in favour of a party who has not performed his obligations under the contract. The only exception to such rule is that a party is not required to perform those obligations, as are prevented or waived by the other party to the contract. In the present case, it is an admitted fact that the plaintiff had paid an amount, which constituted merely 4% of the consideration. The Trial Court itself recorded findings to the effect that neither party had initiated timely steps to perform their respective obligations under the contract. Although the defendants did not make available the title deeds of the schedule property to the plaintiff, it could not be said that the conduct of the defendants had prevented the plaintiff from tendering the balance sale consideration, within the stipulated date, or at any time before filing the suit for specific performance as the whole object of the intended sale was to garner funds for discharging a debt which was ultimately done by the defendants by selling family jewellery."

She further added, "defendants had applied for the purchase certificate in the year 2005 itself, i.e., soon after entering into the agreement of sale. The same was obtained on 31st May, 2007. This fact would suggest that there was no delay on the part of the defendant in acting in pursuance of the agreement. The fact that the purchase certificate was granted by the concerned authority only on 31st May, 2007, was beyond the control of the defendants and such delay could not be attributed to the defendants. Delay in securing relevant documents from the concerned authorities could not absolve the plaintiff of his obligations under the agreement of sale." 

On the aspect of time being the essence of the contract between the parties, Justice Nagarathna added, "Further, the Court has to be mindful of circumstances which compelled the defendants to enter into the agreement of sale. The time limit stipulated in the agreement is significant in this case. Having regard to the urgency of the financial need of the defendants, which need had prompted them to sell rights over the suit property, it must be held that time stipulated in the agreement was the essence of the contract."

Therefore, Justice Nagarathna held, "it is held that the plaintiff, having paid no more than 4% of the sale consideration, and having not done even as much as getting the property measured within the period of six months stipulated under the agreement, cannot, at a belated date, claim specific performance of the agreement dated 7th August, 2005 to the disadvantage and hardship of the defendants."

In the absence of compliance with the elementary requirements of Section 16 of the Act, enhancement of compensation cannot be employed as a device to allow specific performance in cases where the plaintiff has not performed his obligations under the contract as in the instant case.

Case Title: C. Haridasan Versus Anappath Parakkattu Vasudeva Kurup & Others CIVIL APPEAL NO. 4072 OF 2022

Citation : 2023 LiveLaw (SC) 31

For Appellant(s) Mr. Mks Menon, Adv. Ms. Usha Nandini V., AOR Mr. Biju P Raman, Adv. Mr. Shashank Menon, Adv. Mr. Ravi Lamod, Adv. Mr. Arun Kumar Jaiswal, Adv.

For Respondent(s) Mr. Raghenth Basant, Adv. Ms. Rashmi Nandakumar, AOR Ms. Roopali Lakhotia, Adv

Specific Relief Act 1963- Suit for specific performance of agreement to sell -Supreme Court bench comprising Justices MR Shah and BV Nagarathna delivers a split verdict on whether the plaintiff is entitled to the decree of specific relief.

Read the Judgment Here