Mere Rise In Price Subsequent To Date Of Contract Or Inadequacy Of Price Not To Be Treated As Hardship Entailing Refusal Of Specific Performance Of Contract: SC
The Supreme Court clarified that mere rise in price subsequent to the date of the contract or inadequacy of price is not to be treated as a hardship entailing refusal of specific performance of the contract. The hardship involved should be one not foreseen by the party and should be collateral to the contract.
The Apex Court made such an observation while considering an appeal against the judgment of the Tripura High Court allowing the appeal filed by the respondents (Original Defendants) and quashing the judgment of the Trial Court granting Specific Performance of Agreement of Sale instituted by the appellant (Original Plaintiff).
The Division Bench, comprising Justice J.B. Pardiwala and Justice R. Mahadevan asserted,“The High Court seems to have overlooked the fact that the question of hardship in terms of Section 20(2)(b) of the Act, 1963 read with explanation (2) bears reference to hardship, which the defendant did not foresee at the time of entering into the contract.”
Senior Advocate Pijush K. Roy represented the Appellants while AOR Ajit Pravin Wagh represented the Respondents.
The appellant (Original Plaintiff) instituted a Case in the Court of Civil Judge praying for a decree for declaration of the entitlement of the Plaintiff to get the possession of the suit land from the Defendants as part performance of the contract following the registered deed of Agreement for Sale. The husband of the respondent no. 1 and father of the respondent no. 2 namely Late Prabha Ranjan Das was the lawful owner of the property. The appellant entered into a registered Agreement of Sale and the total sale consideration was of Rs 17.5 lakh. An amount of Rs 4 lakh was paid to Late Prabha Ranjan Das by the appellant towards earnest money.
Prabha Ranjan Das passed away leaving behind the respondents (Original Defendants) as his lawful heirs. The appellant called upon the respondents to execute the Sale Deed but the respondents declined to execute the Deed.This led to the appellant instituting the suit seeking specific performance of the contract. The Trial Court allowed the suit in favour of the appellant. Thereafter, the respondents’ appeal was allowed by the High Court on the ground that Late Prabha Ranjan Das was unable to foresee the hardship that would be caused to him and the family at the time when he executed the Agreement of Sale with respect to the suit property. The appellant being dissatisfied with the impugned judgment of the High Court, approached the Apex Court.
It was the case of the appellants-original plaintiffs that the Defendants failed to show any circumstance existing at the time of the contract that if the suit land was sold, it would cause hardship to them and they would become homeless. As per the appellants, the Trial Court rightly decreed the suit & directed the Defendants to execute the registered sale deed in favor of the Plaintiff
The respondents-defendants, on the other hand, contended that they are the legal heirs of Late Prabha Ranjan Das (Wife and minor Son). In the written statement filed by the defendants, it was specifically pleaded that if the suit premises were to be handed over to the plaintiff pursuant to the subject agreement for sale, the defendants would be rendered shelter-less and therefore it was a fit case to deny the relief of specific performance.
The Bench made it clear that the relief of specific performance having its roots in equity, the Specific Relief Act, 1963, prior to its amendment has preserved the discretion of the Court not to grant the relief even though the agreement is specifically performable in law. The only fetters imposed by the statute on the exercise of the discretion are that the discretion must not be exercised arbitrarily but soundly and reasonably and guided by judicial principles. “Hardship of the defendant may be one of the grounds which may be taken into consideration for exercising its discretion by the Court in refusing to grant a decree for specific performance of contract”, it said.
It was further clarified that the Court is not bound to grant the relief of specific performance merely because it is lawful to do so. Section 20(1) of the Specific Relief Act, 1963 indicates that the jurisdiction to decree specific performance is discretionary. Yet, the discretion of the court is not arbitrary but is “sound and reasonable”, to be “guided by judicial principles”. The exercise of discretion is capable of being corrected by a court of appeal in the hierarchy of appellate courts.
It further said, “It is necessary to remember that mere rise in price subsequent to the date of the contract or inadequacy of price is not to be treated as a hardship entailing refusal of specific performance of the contract. Further, the hardship involved should be one not foreseen by the party and should be collateral to the contract. In sum, it is not just one factor or two, that is relevant for consideration. But it is the total on various factors which is required to enter into the judicial verdict.”
As per the Bench, the High Court seemed to have been carried away by the fact that in the written statement the defendants did plead that hardship would be caused if they would be asked to execute the Sale Deed of the suit property. The Trial Court had not framed any issue as regards hardship that may be caused to the defendants. Moreover, the High Court concurred with the Trial Court on all other issues but thought fit to reverse the decree only on the ground that if the defendants are asked to execute the Sale Deed of the suit property, i.e., the residential house they would be rendered shelterless.
“In other words, the issue of hardship would come into play only if it is established by cogent evidence that Late Prabha Ranjan Das who executed the Agreement of Sale was unable to foresee the hardship at the time of entering into the contract”, it said while also holding that the High Court committed an error in taking the view that the plaintiff is not entitled to the decree for specific performance. “The explanation elucidates the point of time at which the hardship has to be determined with reference to the circumstances existing at the time of the contract, except where the hardship has been caused from an act of the plaintiff subsequent to the contract”, it said.
There was also nothing to indicate in the pleadings or evidence that there was a hardship of the kind which Late Prabha Ranjan Das did not foresee at the time he executed the Agreement of Sale or that the hardship which the defendants herein would face was the result of an act of the plaintiff based on his supervening acts.
Reference was made to the judgment in K. Narendra v. Riviera Apartments (P) Ltd. (1999) where there is a reference with approval to Chitty on Contracts (27th Edn., 1994, Vol.1 at p.1296), where one of the passages indicate that one of the grounds for refusing specific performance, though they arise from circumstances post-contract, are factors which affect the person of the defendant rather than the subject-matter of the contract, and to which the plaintiff is in no way a contributory.
The facts of the case also suggested that Late Prabha Ranjan Das was not getting along well with his wife and son. His wife and son, i.e., the defendants were residing separately at the parental home of the defendant No. 1. It was only when Prabha Ranjan Das passed away that the defendants tried to take over the suit property. Clarifying that the plaintiff was always ready and willing to perform his part of the contract, the Bench held that the High Court committed an error in setting aside the decree passed by the Trial Court of specific performance.
Allowing the appeal, the Bench enhanced the amount to be paid towards the balance consideration to Rs 20,00,000 considering the fact that the defendants were a widow and her minor son.
The Bench thus disposed of the appeal in the following terms, “The decree of the Trial Court stands modified to the aforesaid extent. In short, the appellant herein (Original plaintiff) shall pay an amount of Rs. 20,00,000/- to the defendants and upon receipt of the same the defendants shall execute the Sale Deed in favour of the appellant (Original plaintiff).”
Cause Title: Parswanath Saha v.Bandhana Modak (Das) and Anr (Neutral Citation: 2024 INSC 1022)
Appearance:
Appellants: Senior Advocate Pijush K. Roy, Advocates Kakali Roy, Anand Kumar Chaurasia, Rajan K. Chourasia
Respondents:AOR Ajit Pravin Wagh