Plaintiffs' Failure To Comply With Essential Terms Of Agreement & To Take Necessary Steps Within Stipulated Time Is Fatal To Their Claim For Specific Performance: SC
The Supreme Court observed that plaintiffs' failure to comply with the essential terms of the agreement and to take necessary steps within the stipulated time is fatal to their claim for specific performance.
The Court observed thus in a civil appeal filed against the judgment of the Orissa High Court by which it reversed the judgment of the Civil Judge and decreed the suit for specific performance.
The three-Judge Bench comprising Justice Vikram Nath, Justice Pankaj Mithal, and Justice Prasanna B. Varale remarked, "Section 16(c) of the Specific Relief Act, 1963, mandates that a plaintiff seeking specific performance of a contract must aver and prove that they have performed or have always been ready and willing to perform the essential terms of the contract which are to be performed by them. This requirement is a condition precedent and must be established by the plaintiff throughout the proceedings. The readiness and willingness of the plaintiff are to be determined from their conduct prior to and subsequent to the filing of the suit, as well as from the terms of the agreement and surrounding circumstances. The rationale behind this provision is to ensure that a party seeking equitable relief has acted equitably themselves."
The Bench said that the specific performance is a discretionary relief, and the plaintiff must come to the court with clean hands, demonstrating sincerity and earnestness in fulfilling their contractual obligations. It added that, any laxity, indifference, or failure to perform the part of the contract can be a ground to deny such relief.
“The relief of specific performance under the Specific Relief Act, 1963, is discretionary in nature. Section 20 of the Act (applicable to this case as it predates the 2018 amendment) explicitly stated that the court is not bound to grant such relief merely because it is lawful to do so. The discretion must be exercised judiciously and based on sound principles, ensuring that granting specific performance is just and equitable in the circumstances of the case”, emphasised the Court.
The Bench noted that Section 20 of the SRA prior to the amendment by Act No. 18 of 2018, categorically provided that the relief of specific performance is discretionary in nature and the Court is not bound to grant such relief merely because it is lawful to do so.
“But the discretion of the court has to be on sound and reasonable principles”, it added.
Advocate Umakant Misra represented the appellants while Senior Advocates S.R. Singh and A.C. Pradhan represented the respondents.
Factual Background -
Late Surendranath Banerjee was the original owner of the suit property situated in Baripada, Odisha. Upon his demise in 1980, the property devolved equally among his five heirs i.e., defendants. In 1993, an oral agreement was entered into between all the co-owners and the appellants wherein the co-owners collectively agreed to sell the property to the appellants for a total consideration of Rs. 4,20,000/-. This agreement was the culmination of mutual discussions and a longstanding understanding between the parties, reflecting the genuine intent of all co-owners to transfer the property to the appellants. Meanwhile, the plaintiffs (respondents) who were dealers operating a petrol pump on the suit land under a dealership agreement with Hindustan Petroleum Corporation Limited (HPCL), allegedly entered into an agreement to sell for the purchase of the suit property for Rs. 5,70,000/- paying Rs. 70,000/- as earnest money.
The appellants who were bona fide purchasers, acted in good faith and completed the transaction with all the five rightful owners, and accordingly acquired valid title to the property. The plaintiffs, despite being aware of the necessity of obtaining consent from the defendants, filed a suit before the Civil Judge seeking specific performance of the agreement. The Trial Court dismissed their suit and hence, they moved to the High Court. As the High Court reversed the impugned judgment and decreed the suit in favour of the plaintiffs, the appellants approached the Apex Court.
The Supreme Court in the above regard, said, “The plaintiffs' failure to comply with the essential terms of the agreement and to take necessary steps within the stipulated time demonstrates a lack of readiness and willingness, which is fatal to their claim for specific performance.”
The Court took note of the fact that the General Power of Attorney did not confer upon the defendant the power to sell the property on behalf of his sisters at the time of the agreement, having been impliedly revoked by the partition deed.
“The agreement was, therefore, incomplete and unenforceable against Defendant Nos. 6 to 8, who collectively held a majority share in the property. The plaintiffs' knowledge of the necessity of obtaining the sisters' consent, coupled with their failure to secure such consent, renders the agreement ineffective against Defendant Nos. 6 to 8. Consequently, the agreement cannot be specifically enforced against them, and the plaintiffs cannot claim any right over their shares in the property based on the said agreement”, it observed.
Furthermore, the Court said that the plaintiffs failed to demonstrate readiness and willingness to perform their obligations and did not take necessary steps to secure the consent of all co-owners. It added that, granting specific performance would unfairly prejudice the defendants, who never consented to the sale to the plaintiffs.
“… the plaintiffs can be adequately compensated by a refund of the earnest money with interest; there is no evidence to suggest that monetary compensation would not suffice”, it noted.
The Court also observed that the appellants are the bona fide purchasers in good faith of the suit property for valuable consideration, and therefore, once they have acquired the rights in the property way back in 1993, there was no justification to disturb the said sale deed by decreeing the suit for specific performance of the agreement which was not even signed by all the co-owners specially the three sisters.
“The aforesaid sale deed was not even challenged though it had come into existence at the time of filing of the suit for specific performance, therefore, when the Trial Court had exercised its discretion not to decree the suit for specific performance, it was not open for the appellate court to decree it affecting the rights of the bona fide purchasers i.e. the appellants”, it said.
The Court, therefore, concluded that granting specific performance in this case would be neither just nor equitable and that the plaintiffs' failure to fulfil essential contractual terms, coupled with the lack of authority to bind all co-owners, renders the grant of specific performance inappropriate.
Accordingly, the Apex Court allowed the appeal, set aside the High Court’s judgment, and restored that of the Trial Court.
Cause Title- Janardan Das & Ors. v. Durga Prasad Agarwalla & Ors. (Neutral Citation: 2024 INSC 778)
Appearance:
Appellants: AOR Niranjan Sahu, Advocates Umakant Misra, Prabhati Nayak, Monomoy Basu, and Apoorva Sharma.
Respondents: Senior Advocates S.R. Singh, A.C. Pradhan, AOR Saurabh Mishra, Advocates Shrimay Mishra, and Abhinav Pandey.
