Party Cannot Claim Equity To Escape Consequences Ensuing Out Of Breach Of Contract - Supreme Court

The Supreme Court has observed that a party cannot claim equity to escape the consequences ensuing out of a breach of a contract.

The Bench of Chief Justice NV Ramana, Justice Krishna Murari and Justice Hima Kohli held thus "…when a condition of a contract is breached and the consequences ensue for that breach, a party cannot claim equity to escape such consequences".

The case pertains to a civil suit whereby the purchaser had sought specific performance of an agreement directing the vendors to execute a registered sale deed in favor of the purchaser in respect of the suit land.

The Trial Court had held that the purchaser is not entitled for specific performance of the agreements of sale and that the parties never intended to treat time as an essence of the contract. The Trial Court held that the suit was barred by limitation.

This decision was challenged before the High Court and the Court partly allowed the appeal and directed the vendors to register the suit property in favour of the purchaser to the extent of the amount paid by the purchaser.

Aggrieved by the Judgment, both the vendors and the purchaser approached Supreme Court.

Senior Advocates Dushyant Dave and Harin P. Rava appeared on behalf of the purchaser whereas Senior Advocates Mukul Rohatgi and Harish Salve appeared for vendors.

At the outset, the Court perused Clause 3 of the agreements to sell, which were in two parts. The first part provides for the purchaser's obligation, while the second part details the obligation of the vendors to provide the requisite certificates.

The Court observed that no consequences were spelt out for non-performance of obligations on the vendors. Whereas the obligation on the purchaser, was to make the complete payment of the sale consideration within three months. The clause further mandated forfeiture of the advance amount if the payment obligation was not met within the time period stipulated therein.

While observing clause 23 of the agreement to sell which freezes any enhancement of the agreed sale consideration, the Court noted that the contract was strictly conditioned on a time frame.

The Court observed that "…it is clear that Article 54 of the Limitation Act mandates that in this case at hand, the date fixed for payment of consideration was three months from the date of the agreements (i.e. 26.03.1997 and 27.03.1997). In any case, the time period for filing the suit had commenced from 26/27.6.1997 and would have expired after three years, i.e., in the end of June 2000."

The Court held that the purchaser's contention that the legal notice issued by them in March 2000, would be sufficient to get past the bar of limitation cannot be sustained as the party cannot claim equity to escape the consequences upon breach of the condition of the contract.

The Court pointed out that only when the time period for performance is not fixed that the purchaser can take recourse to the notices issued and the vendors' reply thereto. The Court held that the aforesaid circumstances did not apply in the present case.

Therefore, the Court held that the suit filed by the purchaser was barred by limitation and that no amount of payment of advance could have remedied such a breach.

The Court also rejected the ruling of the High Court that 2018 amendment to Section 10 of the Specific Relief Act ought to be given retrospective effect.

The Court held that the 2018 Amendment Act is prospective and cannot be applied to the present set of facts.

The Court further emphasised that the purchaser should have taken immediate steps to complete the transaction and if such steps were immediately completed then the purchaser would have a clear right for seeking enforcement for 3 years reckoned from the last date decided for completion of the contract.

The Court also noted that the purchaser was not ready or willing to perform his part of the contract within the time stipulated and accordingly, specific performance cannot be granted for the entire contract.

"We are of the firm opinion that the contract was breached due to the conduct of the plaintiff/purchaser, who were not willing to perform the contract after entering into a time sensitive agreement. In any case, it is an admitted fact that plaintiff had paid only part consideration. Though there is a forfeiture clause in the agreement, this Court with a view of rendering complete justice between the parties, deems it appropriate to direct the vendors/appellants to repay the said amount with interest @ 7.5% p.a. from the date such payment was made by the purchaser to the vendors, till the entire amount is paid back. We further direct the vendors to pay the entire amount to the credit of the suit account within six months from the date of receipt of a copy of the order.", the Court held while disposing of the appeal.

Cause Title- Katta Sujatha Reddy & Anr v. Siddamsetty Infra Projects Pvt. Ltd.& Ors.

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