Specific Relief Act: s.16 – Bars to the relief of specific performance – Held: s.16 provides certain bars to the relief of specific performance – These include, inter alia, a person who fails to aver and prove that he has performed or has always been ‘ready and willing’ to perform the essential terms of the contract which are to be performed by him, other than terms the performance of which has been prevented and waived by the defendant. Specific performance: Conduct of the parties – Generally in an agreement for sale of immovable property, time is not of the essence – In deciding whether to grant the remedy of specific performance, specifically in suits relating to sale of immovable property, the courts must be cognizant of the conduct of the parties, the escalation of the price of the suit property, and whether one party will unfairly benefit from the decree – The remedy provided must not cause injustice to a party, specifically when they are not at fault – In this case, three decades passed since the agreement to sell was entered into between the parties – The price of the suit property undoubtedly have escalated – In view of the blemished conduct of the respondent-plaintiff in indicating his willingness to perform the contract, grant of the remedy of specific performance of the contract is declined – However, the consideration together with interest at 6% per annum is ordered to be refunded. Specific performance: Willingness to perform the contract – The foundation of a suit for specific performance lies in ascertaining whether the plaintiff has come to the court with clean hands and has, through his conduct, demonstrated that he has always been willing to perform the contract – There is a conspicuous absence in judgment of the trial court of any reference to evidence led by the respondent to indicate his willingness to perform the contract – Trial court merely adverted to “document produced on behalf of the plaintiff” and concluded that he had sufficient means to purchase the suit property – Apart from this observation, trial court did not analyse the terms of the agreement, the obligations of the parties and the conduct of the parties – Plaintiff withdrew the balance consideration deposited by him before the trial court in 2001 – The inconsistency in his conduct, lack of communication with the defendants urging them to discharge the mortgage and in showing his willingness to pay the balance consideration, and delay of about three years from the date fixed for performance of the contract in filing a suit, are all indicative of the plaintiff ’s lack of will to perform the contract.
Specific performance: Burden to prove readiness and willingness to perform contract – Held: The terms of the agreement stipulated that the plaintiff was to pay the balance consideration within a period of six months and “on receipt of the balance consideration”, the defendants were to execute the sale deed “pertaining to the property free from all encumbrances” – It is evident that plaintiff was required to pay the remaining consideration (or indicate his willingness to pay) and only then could have sought specific performance of the contract – Plea of plaintiff that an additional amount of Rs. 10,000 was paid to the defendants to discharge the mortgage – However, the acknowledgment signed by the defendants indicated that the money was to meet urgent family expenses – Since no further details have been provided and no evidence has been adduced by the plaintiff, it cannot be concluded that the money was for discharge of the mortgage – Even assuming that the plaintiff is correct, the agreement still required the plaintiff to pay the balance consideration – The agreement clearly provided that the balance consideration would be paid and then the sale deed would be executed – How the defendant chose to discharge the mortgage was for them to decide – It is an established principle of law that the plaintiff must prove that he is ready and willing to perform the contract – Burden lies on the plaintiff – Plaintiff has not led any evidence that he was ready or willing to perform his obligations under the agreement.
Specific performance: In evaluating whether the respondent was ready and willing to perform his obligations under the contract, it is not only necessary to view whether he had the financial capacity to pay the balance consideration, but also assess his conduct throughout the transaction – Further, the payment of income tax by itself does not show that the plaintiff had sufficient resources to pay for the suit property.
Specific Relief Act: s.20 – Equitable relief – Discretion on court conferred under s.20 of the Act.
Allowing the appeal, the Court
HELD: 1. Section 16 of the Specific Relief Act provides certain bars to the relief of specific performance. These include, inter alia, a person who fails to aver and prove that he has performed or has always been ‘ready and willing’ to perform the essential terms of the contract which are to be performed by him, other than terms the performance of which has been prevented and waived by the defendant. [Para 14][358-F; 359-A-B] JP Builders v. A Ramadas Rao (2011) 1 SCC 429 : [2010] 15 SCR 538; His Holiness Acharya Swami
Ganesh Dassji v. Sita Ram Thapar (1996) 4 SCC 526 : [1996] 2 Suppl. SCR 111; Atma Ram v. Charanjit Singh (2020) 3 SCC 311; P Meenakshisundaram v. P
Vijayakumar (2018) 15 SCC 80 : [2018] 6 SCR 667 – relied on.
2.1 In the present case, the respondent and the appellants entered into an agreement to sell the suit property on 7 February 1990. Further, on 8 March 1990, the appellants issued a receipt for an additional sum of Rs. 10,000 as advance from the respondent. The terms of the agreement indicate that the suit property was to be sold for a total consideration of Rs. 1,25,000, out of which the appellants had received Rs. 25,000 as advance. On 8 March 1990, a further sum of Rs. 10,000 was given as advance to the appellants “for [their] urgent family expenses”. The agreement stipulated that the respondent shall pay the balance consideration within a period of six months, that is, by 7 August 1990 and shall bear the cost of stamp duty. On receipt of the balance sale consideration, the appellants were required to execute the sale deed free from all encumbrances. By 19 December 1990, the respondent did not pay the balance consideration to the appellant and thus, the appellant rescinded the contract and forfeited the advance money. The respondent sent a reply on 26 December 1990 demanding that the appellants execute the sale deed free from encumbrances. The appellants alleged that there was a mortgage of Rs. 6,000 on the suit property that the respondent agreed to discharge from the sale consideration. However, the respondent did not show any interest in getting the sale deed executed. In 1991, the respondent filed a suit for mandatory injunction. On 17 June 1992, the appellant discharged the mortgage debt, and a year after that the respondent instituted a suit for specific performance. [Paras 19-21][363-A, F, G-H; 364-A-C]
2.2 The trial court analysed the notice issued by the appellants and held that the appellants made no demand from the respondent to discharge the mortgage liability. Thus, the appellants’ plea that the respondent-plaintiff had to pay the loan and only thereafter, could the appellants execute the sale deed was rejected. The court also accepted the respondent’s argument that the advance amount of Rs. 10,000 was paid to discharge the mortgage. Further, the trial court observed that the documents submitted by the respondent indicate that he had sufficient means to purchase the suit property. The judgment of the trial court was upheld by the first appellate court and, in a second appeal, by the High Court. [Para 24][365-A-C]
2.3 All the three courts, including the High Court, grossly erred in the manner in which they have adjudicated upon this dispute in a suit for specific performance. In the first instance, the trial court failed to frame an issue on whether the respondentplaintiff was ready and willing to perform his obligations under the contract and instead assessed whether he is entitled to the relief of specific performance. In doing so, the trial court viewed the legal issue from an incorrect lens. The foundation of a suit for specific performance lies in ascertaining whether the plaintiff has come to the court with clean hands and has, through his conduct, demonstrated that he has always been willing to perform the contract. There is a conspicuous absence in judgment of the trial court of any reference to evidence led by the respondent to indicate his willingness to perform the contract. The trial court merely adverted to “document produced on behalf of the plaintiff” and concluded that he had sufficient means to purchase the suit property. Apart from this observation, the judgment fails to analyse the terms of the agreement, the obligations of the parties and the conduct of the respondent or the appellant. In evaluating whether the respondent was ready and willing to perform his obligations under the contract, it is not only necessary to view whether he had the financial capacity to pay the balance consideration, but also assess his conduct throughout the transaction. [Paras 25, 26][365-C-G]
3. The terms of the agreement stipulated that the respondent was to pay the balance consideration within a period of six months and “on receipt of the balance consideration”, the appellants were to execute the sale deed “pertaining to the property free from all encumbrances”. It is evident from the agreement that the liability to deliver the property free from any encumbrance was on the appellants. However, this obligation is prefaced by the condition that the appellants would be required to execute the sale deed free from encumbrance on the receipt of the balance consideration. Thus, the agreement did not specify when the appellants should discharge their mortgage- before the expiry of six months, after receipt of the advance amount, or after receipt of the balance consideration. It only obligated them to ensure that after the balance consideration is received, the sale deed executed should be free from encumbrances. Based on a plain reading of the agreement, the respondent’s plea cannot be accepted that he was willing to perform his obligations under the contract. It is evident that he was required to pay the remaining consideration (or indicate his willingness to pay) and only then could have sought specific performance of the contract. The respondent has also urged that the additional amount of Rs. 10,000 was paid to the appellants to discharge the mortgage. The acknowledgment signed by the appellants indicates that the money was to meet urgent family expenses. Since no further details have been provided and no evidence has been adduced by the respondent-plaintiff, it cannot be concluded that the money was for discharge of the mortgage. Even assuming that the respondent is correct, the agreement still required the respondent to pay the balance consideration. [Para 28][366-B-G]
4.1 The respondent has failed to provide any documents or communication which would indicate that he called upon the appellants to perform their obligations or discharge the mortgage within the time period stipulated in the contract. Even after the expiry of the six months, the respondent did not reach out to the appellants. It is only in response to the appellants’ legal notice that the respondent demanded performance of their obligations. Merely averring that he was waiting with the balance consideration and believed that the appellants would clear the encumbrance is insufficient to prove that the respondent-plaintiff was willing to perform his obligations under the contract. [Para 29][367-A-C]
4.2 The respondent withdrew the balance consideration deposited by him before the trial court in 2001. The inconsistency in the respondent’s conduct, the lack of communication with the appellants urging them to discharge the mortgage and showing his willingness to pay the balance consideration, and the delay of about three years from the date fixed for performance of the contract in filing a suit, are all indicative of the respondent’s lack of will to perform the contract. The ‘readiness’ of the respondent to perform his obligations refers to whether he was financially capable of paying the balance consideration. Both the trial court and the first appellate court have observed that the respondent was ready to pay the balance consideration as (i) he was paying income tax since 1988 and (ii) his bank passbooks indicate that he had sufficient funds. The payment of income tax by itself does not show that the respondent had sufficient resources to pay for the suit property. Moreover, the bank passbooks submitted in evidence by the respondent were for accounts opened after the expiry of the period written in the contract. The first appellate court despite noting this, has chosen to hold that the respondent was ready and willing to perform the agreement. The respondent however did not lead any evidence to indicate that in the year 1990 he had the money to pay the balance consideration. The first appellate court shifted the burden on the appellants to prove that the respondent-plaintiff was incapable of paying the balance consideration. It is an established principle of law that the plaintiff must prove that he is ready and willing to perform the contract. The burden lies on the plaintiff. The respondent has not led any evidence that he was ready or willing to perform his obligations under the agreement. [Paras 30, 31][367-D-H; 368-A-C] Zarina Siddiqui v. A. Ramalingam (2015) 1 SCC 705 : [2014] 14 SCR 456; Satya Jain v. Anis Ahmed Rushdie (2013) 8 SCC 131 : [2013] 3 SCR 319; KS Vidyanadam and others v. Vairavan (1997) 3 SCC 1 : [1997] 1 SCR
993 – relied on.
Nirmala Anand v. Advent Corporation (P.) Ltd. and Others (2002) 8 SCC 146 : 2002 (2) Suppl. SCR 706 – followed.
5. Generally speaking, time is not of the essence in an agreement for the sale of immoveable property. In deciding whether to grant the remedy of specific performance, specifically in suits relating to sale of immovable property, the courts must be cognizant of the conduct of the parties, the escalation of the price of the suit property, and whether one party will unfairly benefit from the decree. The remedy provided must not cause injustice to a party, specifically when they are not at fault. In the present case, three decades have passed since the agreement to sell was entered into between the parties. The price of the suit property would undoubtedly have escalated. Given the blemished conduct of the plaintiff in indicating his willingness to perform the contract, in any event grant of the remedy of specific performance of the contract is declined. However, the consideration together with interest at 6% per annum is ordered to be refunded. [Para 36][372-A-D]
As published in the Supreme Court Reports, Supreme Court of India. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
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