If No Time Is Fixed For Performance, Court Will Have To Determine Date On Which Plaintiff Had Notice Of Refusal On Part Of Defendant To Perform Contract- SC

The Supreme Court held that under Article 54 of Part II of the Schedule to the Limitation Act, 1963 (LA), a suit for specific performance must be filed within three years from the date of performance or from the date when the plaintiff is notified of performance refusal if no specific date is fixed.

The Court disposed of multiple appeals filed by the Appellant and subsequent purchasers of the Suit Property against the order of the Madras High Court, wherein the order of the Trial Court was affirmed. The Trial Court had allowed for specific performance against the Appellant, on the grounds that the Respondent had shown a willingness to purchase. 

The bench comprising Justice Sanjiv Khanna and Justice Bela M. Trivedi observed, “Article 54 of Part II of the Schedule to the Limitation Act, 1963 stipulates the limitation period for filing a suit for specific performance as three years from the date fixed for performance, and in alternative when no date is fixed, three years from the date when the plaintiff has notice that performance has been refused. Section 9 of the Limitation Act, 1963 stipulates that once the limitation period has commenced, it continues to run, irrespective of any subsequent disability or inability to institute a suit or make an application”.

“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 Bench noted.

Senior Advocate C. Aryama Sundaram appeared for the Appellant, and Advocate Anand Sathiyaseelan appeared for the Respondents.

A Civil Appeal was filed challenging thejudgment  of the Madras High Court, wherein the order of the Trial Court was affirmed. The Appellant filed Civil Appeal No. 5342 of 2023, whereas Civil Appeal Nos. 5343 of 2023, 5344 of 2023 and 5345 of 2023 are preferred by S. Jayaprakash and others, A. Jeyakumar and others, and S. Balasubramanian and others, who are subsequent purchasers having purchased portions of the Suit Property.

Brief Background:

The Appellant inherited 11 acres of land in Tiruverambur sub-district from her late husband, Ayyamperumal. The Appellant had agreed to sell a piece of land to Respondent no. 3 for Rs. 2,95,000/- per acre, with an advance payment of Rs. 1,00,000/-. The sale deed execution timeline was extended by 6 months to November 26, 1989. After the extension period, Respondent no. 3 issued a legal notice requesting the Appellant to accept the payment of the balance amount and execute the sale deed within a month. However, the Appellant demanded a higher amount of Rs. 3,00,000/-, which was later refused. The Appellant only agreed to sell half of the land at Rs. 4,17,000/- per acre. Respondent no. 3 facilitated the conversion of 4.40 acres of land belonging to Ayyarmalai Trust and requested the Appellant to settle a partition suit pending in the Tiruchi sub-court. Respondent no. 3 put in great effort to facilitate the conversion of the property into housing units. The partition suit (O.S. No. 787 of 1985) was filed by the first wife of the Appellant's husband. The partition lawsuit was dismissed due to default, and the property demarcation was corrected. Respondent no. 3 assigned his rights under the agreement to sell to respondents no.1 and 2, who filed a lawsuit (O.S. No. 1651 of 1994) seeking a restraint order against the Appellant. However, the injunction was not granted, and the Appellant sold 5 acres of the property to B. Namichand Jain and three others. During the pendency of the lawsuit for a permanent injunction (O.S. No. 1651 of 1994), respondents no. 1 and 2 filed a lawsuit for specific performance (O.S. No. 1126 of 1995 subsequently renumbered as O.S. No. 21 of 2004).

The Bench noted that per Article 54 of Part II of the Schedule to the Limitation Act, 1963 (LA), a suit for specific performance must be filed within three years from the date of performance or from the date when the plaintiff is notified of performance refusal if no specific date is fixed. Additionally, the Court observed that Section 9 of the LA states that the limitation period continues to run once it has commenced, regardless of any subsequent disability or inability to file a suit or application. The Court noted that the time for payment and execution was extended until 26.11.1989 through the endorsement. The Court relied on the case of Pachanan Dhara and Others v Monmatha Nath Mait [(2006) 5 SCC 340] and observed that when no specific time is fixed for performance, the courts must determine the date on which the plaintiff had notice of the defendant's refusal to perform the contract.

The issue dealt with by the Court was :

Whether K. Sriram had notice of A. Valliammai’s refusal or unwillingness to perform her part of the agreement.

The Court held that the 3-year time limit for filing a lawsuit for specific performance began when Respondent no 3 filed a lawsuit for injunction on July 15, 1991. Appellant’s responses were sufficient written notices to Respondent no 3 that she refused to perform the agreement to sell. The 3-year time limit under Article 54, which starts from the date when a party receives notice of the other party's refusal, had already expired when the lawsuit for specific performance was filed on September 27, 1995. Therefore, the lawsuit (O.S. No. 21 of 2004) filed for specific performance was invalid due to the expired time limit.

“For the aforesaid reasons, the 3-year limitation period to file a suit for specific performance commenced as early as when the K. Sriram had filed suit for injunction on 15.07.1991. A. Valliammai’s reply dated 09.08.1991 (Exhibit A-7) or reply to rejoinder dated 16.09.1991 (Exhibit S-14) were again sufficient written notice to K. Sriram of her refusal and unwillingness to perform the agreement to sell (Exhibit A-1). 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. Suit in O.S. No. 21 of 2004 is barred by limitation”, the Bench noted.

Additionally, the Court set aside the decree of specific performance and partly allowed the Civil Appeal preferred by the Appellant. The Court substituted the decree of Rs. 50,00,000/- payable with effect from the date of the judgment along with an interest @ 8% per annum to Respondents no 1 and 2.

Accordingly, the Court allowed the Civil Appeal Nos. 5343, 5344, and 5345 of 2023, set aside the injunction order passed in O.S. No. 1651 of 1994 and dismissed the O.S. No. 21 of 2004.

Cause Title: A. Valliammai v. K.P Murali And Others (2023 INSC 823)

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