K.S. Manjunath and Others vs Moorasavirappa @ Muttanna Chennappa Batil, Since Deceased by His Lrs and Other

Held: Unilateral termination of the agreement to sell by one party is impermissible in law except in cases where the agreement itself is determinable in nature in terms of s.14 – If such unilateral termination of a non-determinable agreement to sell is permitted as a defence, then virtually every suit for specific performance can be frustrated by the defendant by placing an unfair burden on the plaintiff, who despite performing his part of the obligations and having showcased readiness and willingness, would require to also seek a separate declaration that the termination was bad in law – In such cases, the burden cannot be casted upon the plaintiff to challenge the alleged termination of agreement – If a contract itself gives no right to unilaterally terminate the contract, or such right has been waived, and a party still terminates the contract unilaterally then that termination would amount to a breach by repudiation, and the non-terminating party can directly seek specific performance without first seeking a declaration – In the event it is found that the termination of agreement to sell by the defendant was not valid, then such an agreement to sell will remain subsisting and executable – In the present case, ATS was devoid of any clause enabling termination for convenience or otherwise empowering either party to terminate unilaterally – ATS being non-determinable in nature, no unilateral expression of termination could have lawfully extinguished the obligations undertaken thereunder – Neither of the grounds assigned in the notice of termination constituted a valid basis for terminating the ATS – Grounds cited in the notice of termination, namely, the subsistence of a status quo order and the death of one of the original vendors cannot be said to be based on any default or breach by the original vendees – Original vendees performed their part by paying a substantial amount and were also ready and willing to perform the terms of ATS – Termination of ATS vide notice of termination was unilateral and also not bona fide – Termination was invalid – ATS continues to remain alive, subsisting, and executable – Once the alleged termination of agreement in question is found to be not bona fide and being done in a unilateral manner, no declaration challenging the alleged termination is required. [Paras 43, 54, 55, 61, 66] Specific Relief Act, 1963 – s.19(b) – Requisites to claim protection under – Bona fides of the subsequent purchasers in purchasing the subject land – If can claim protection/s.19(b): Held: To claim protection u/s.19(b), the purchaser must show three things: (a) purchase for value, (b) payment in good faith, and (c) absence of notice of the earlier contract – Subsequent purchasers cannot take shelter u/s.19(b) – They had sufficient notice of the facts that an ATS dated 28.04.2000 existed; the names and addresses of the original vendees; that an earnest money amounting to Rs.2,00,000/- had been paid by the original vendees to the original vendors; that the original vendors had sought to terminate the ATS due to their inability to execute the sale deed in favour of the original vendees on account of a status quo order; that the date of actual termination could not have coincided with the date of notice; and that deemed termination would have arose only if the original vendees had failed to claim the earnest money within one month; and that despite the issuance of the notice of termination in 2003, the original vendees continued to contest the impleadment application in the Original Suit No. 30 of 2001 until 2005 – These circumstances should have reasonably aroused suspicion or at the very least prompted further inquiry by any prudent bona fide purchaser – Yet the subsequent purchasers despite having ample opportunity to become aware of these facts abstained from making any such inquiries – A subsequent purchaser who relies merely on the assertions of the vendor or who chooses to remain content with his own limited knowledge while consciously abstaining from making further inquiry into the subsisting interests in the property cannot escape the consequences of deemed notice – Thus, a purchaser who has before him a document which on its very face shows the termination to be unilateral and rooted in the vendors’ inconvenience cannot by shutting his eyes claim the benefit of “good faith” – s.2(11) of the BNS. – s.3(22) of General Clauses Act, 1897. [Paras 78, 81]

Specific Relief Act, 1963 – Unilateral termination of the agreement to sell (ATS) by original vendors – If there was a requirement of seeking a declaration from the court as regards the legality and validity of the purported termination of the ATS by the notice of termination issued by the original vendors: Held: Once the alleged termination of a non-determinable agreement in question is found to be not for bona fide reasons and being done in a unilateral manner on part of the defendant, it cannot be said that any declaration challenging the alleged termination was required on part of plaintiff – In the present case, the termination of ATS vide notice of termination was unilateral and also not bona fide – Neither of the reasons assigned in the notice of termination constituted a valid basis for terminating the ATS – Termination was invalid – ATS continues to remain alive, subsisting, and executable. [Paras 43, 54, 61]

Specific Relief Act, 1963 – s.16 (c) – Readiness and willingness of the Original Vendees to perform the Agreement to Sell (ATS): Held: s.16(c) requires that a plaintiff must both plead and prove that he has either performed, or has always been ready and willing to perform, the essential terms of the contract incumbent upon him – A party seeking enforcement of a contract must establish that all conditions precedent have been satisfied, and that he has either discharged or stood prepared and willing to discharge his obligations under the contract – Original vendees had performed their part of the contract to the extent required, and had consistently been ready and willing to perform their remaining obligations under the ATS – Appellants directed to execute a sale deed in respect of the subject land in favour of the Respondent Nos. 15 to 22, respectively & the Respondent Nos. 1 to 5, respectively, and also hand over vacant and peaceful possession of the subject land to them within six months from the date of this judgment, subject to the fulfilment of directions issued – Further directions issued. [Paras 82, 86, 90] Specific Relief Act, 1963 – Law on unilateral termination visà-vis determinable contracts, discussed. [Paras 45-51] Specific Relief Act, 1963 – Failure to challenge the legality and validity of termination of ATS in the suit – Subsequent purchasers argued that the Suit filed by the original vendees inter alia seeking specific performance of ATS was not maintainable because the original vendees failed to also seek a declaration from the court in respect of whether the notice of termination of the ATS was bad in law or invalid: Held: The same would not preclude this Court to determine if the suit for specific performance filed by the original vendees was not maintainable for want of such declaration – Views adopted by the High Courts on failure to seek declaration, discussed – Principles of law enumerated. [Paras 30, 43]