Supreme Court Denies Specific Performance to Vendee for Non-Payment of Rent: Surinder Kaur vs. Bahadur Singh (2019)

Date of the Judgment: September 11, 2019

Citation: 2019 INSC 842

Judges: Deepak Gupta, J., Aniruddha Bose, J.

Can a buyer who hasn’t kept their promise in a contract still force the seller to fulfill their part? The Supreme Court of India addressed this crucial question in a case involving a land sale agreement where the buyer failed to pay the agreed-upon rent. This judgment clarifies the conditions under which a party can seek specific performance of a contract, especially when they themselves have not fully complied with its terms. The bench consisted of Justice Deepak Gupta and Justice Aniruddha Bose, with the judgment authored by Justice Deepak Gupta.

Case Background

On May 13, 1964, Mohinder Kaur agreed to sell her land to Bahadur Singh for Rs. 5605. Bahadur Singh paid Rs. 1000 as earnest money, and they agreed that the remaining amount would be paid when the sale deed was registered. The possession of the land was given to Bahadur Singh on the same day.

A condition was included in the agreement that the sale deed would be executed within one month after the decision of a pending civil appeal in the Punjab and Haryana High Court. Additionally, it was agreed that if the decision took more than a year, Bahadur Singh would pay customary rent for the land to Mohinder Kaur.

Timeline

Course of Proceedings

Bahadur Singh filed a suit for specific performance of the agreement after Mohinder Kaur refused to execute the sale deed. The trial court decreed the suit in favor of Bahadur Singh. Mohinder Kaur appealed, but the lower appellate court also upheld the trial court’s decision. The High Court also upheld the decision of the lower courts.

The primary contention raised by Mohinder Kaur was that Bahadur Singh had failed to pay the rent as per Clause 3 of the agreement and was therefore not entitled to specific performance. This issue was contested at all levels of the judiciary, ultimately reaching the Supreme Court.

Legal Framework

The Supreme Court considered the following legal provisions:

• Section 51 of the Indian Contract Act, 1872: This section states that when a contract involves reciprocal promises to be performed simultaneously, neither party needs to perform their promise unless the other party is ready and willing to perform their reciprocal promise. “When a contract consists of reciprocal promises to be simultaneously performed, no promisor need perform his promise unless the promisee is ready and willing to perform his reciprocal promise.”
• Section 16(c) of the Specific Relief Act, 1963: This provision specifies that specific performance of a contract cannot be enforced in favor of a person who fails to prove that they have performed, or have always been ready and willing to perform, the essential terms of the contract to be performed by them. “Specific performance of a contract cannot be enforced in favour of a person – (c) who fails to 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 or waived by the defendant.”
• Section 20 of the Specific Relief Act, 1963: This section deals with the discretionary nature of specific performance, stating that the court is not bound to grant such relief merely because it is lawful. The court must exercise its discretion based on sound judicial principles. “The jurisdiction to decree specific performance is discretionary, and the court is not bound to grant such relief merely because it is lawful to do so; but the discretion of the court is not arbitrary but sound and reasonable, guided by judicial principles and capable of correction by a court of appeal.”

Arguments

Appellant’s (Mohinder Kaur’s) Arguments:

• The appellant argued that the agreement contained reciprocal promises, and since Bahadur Singh failed to pay the rent as agreed in Clause 3, he was not entitled to specific performance.

• They contended that payment of rent was an essential term of the contract, and Bahadur Singh’s failure to pay demonstrated a lack of readiness and willingness to perform his part of the contract.

• The appellant further argued that granting specific performance would be inequitable given Bahadur Singh’s non-compliance with the rent payment clause.

Respondent’s (Bahadur Singh’s) Arguments:

• The respondent argued that the promise to pay rent was not a reciprocal promise and was separate from the agreement to sell the land.

• They contended that the agreement to sell should be enforced regardless of the non-payment of rent.

• The respondent also argued that the appellant could have filed a separate suit for recovery of rent and that non-payment of rent should not bar specific performance of the sale agreement.

Issues Framed by the Supreme Court

The Supreme Court framed the following key issue:

1. Whether a vendee who does not perform one of his promises in a contract can obtain the discretionary relief of specific performance of that very contract.

Treatment of the Issue by the Court

Authorities

The Supreme Court considered the following authorities:

Judgment

How each authority was viewed by the Court?

• The Court used Section 51 of the Indian Contract Act, 1872 to determine that the promise to pay rent was a reciprocal promise and that the vendor was not bound to perform her part of the contract unless the vendee was ready to perform his part.
• The Court relied on Section 16(c) of the Specific Relief Act, 1963 to hold that the vendee’s failure to pay rent demonstrated that he was not ready and willing to perform his part of the contract, thus disentitling him from seeking specific performance.
• The Court used Section 20 of the Specific Relief Act, 1963 to emphasize that the relief of specific performance is discretionary and that the court is not bound to grant such relief if it is inequitable. The Court found that granting specific performance to the vendee would be inequitable given his non-payment of rent for 13 years.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the following factors:

• Breach of Contract: The court emphasized that Bahadur Singh breached a fundamental term of the contract by not paying the customary rent for 13 years. This breach was not a minor oversight but a significant failure to fulfill his obligations.
• Reciprocal Promise: The court determined that the agreement to pay rent was a reciprocal promise, directly linked to the possession of the land. This meant that the vendor’s obligation to execute the sale deed was contingent on the vendee fulfilling his promise to pay rent.
• Equity and Fairness: The court highlighted that granting specific performance to Bahadur Singh would be inequitable. He had enjoyed the benefits of the land for 13 years without paying any rent, causing undue hardship to Mohinder Kaur.
• Discretionary Relief: The court reiterated that specific performance is a discretionary remedy and not a right. The court is not obligated to grant this relief if it finds that the plaintiff has not acted fairly.
• Conduct of the Parties: Bahadur Singh’s conduct, particularly his denial of liability to pay rent even after the objection was raised in the written statement, weighed heavily against him.

The court’s reasoning was a mix of factual considerations (such as the non-payment of rent for 13 years) and legal principles (such as the interpretation of reciprocal promises and the discretionary nature of specific performance). The legal considerations slightly outweighed the factual aspects in the court’s decision-making process.

Logical Reasoning

Judgment

The Supreme Court allowed the appeals, setting aside the judgments and decrees of all the lower courts. The Court dismissed the suit for specific performance filed by Bahadur Singh.

The Court also held that since the respondents had enjoyed the land for 55 years without paying any rent, they were not entitled to a refund of the earnest money.

The court observed: “In our considered view, he was not entitled to claim the discretionary relief of specific performance of the agreement having not performed his part of the contract even if that part is held to be a distinct part of the agreement to sell.”

The court also stated: “The vendee Bahadur Singh by not paying the rent for 13 long years to the vendor Mohinder Kaur, even when he had been put in possession of the land on payment of less than 18% of the market value, caused undue hardship to her.”

The court further noted: “Equity is totally against him. In our considered view, he was not entitled to claim the discretionary relief of specific performance of the agreement having not performed his part of the contract even if that part is held to be a distinct part of the agreement to sell.”

Key Takeaways

• Specific Performance is Discretionary: The Supreme Court reiterated that specific performance is a discretionary remedy and not a right. Courts have the power to refuse this relief if the plaintiff has not acted fairly or has not fulfilled their contractual obligations.
• Reciprocal Promises are Crucial: Parties to a contract must fulfill their reciprocal promises. Failure to do so can disentitle them from seeking specific performance.
• Essential Terms Must Be Performed: A party seeking specific performance must prove that they have performed or have always been ready and willing to perform the essential terms of the contract. Non-performance of even a seemingly minor term can be detrimental.
• Equity Plays a Role: Courts will consider the equities of the case. If granting specific performance would lead to an unfair outcome or cause undue hardship to the other party, the court may refuse to grant the relief.

Directions

The Supreme Court did not give any specific directions in this case other than setting aside the judgments of the lower courts and dismissing the suit for specific performance. The court also denied the refund of the earnest money to the respondents.

Development of Law

The ratio decidendi of this case is that a vendee who fails to perform an essential reciprocal promise in a contract is not entitled to the discretionary relief of specific performance. This judgment reinforces the principle that parties seeking specific performance must demonstrate their own compliance with the contract’s terms and that equity is a significant factor in granting such relief. This case also clarifies that the non-payment of rent, when it is a part of the agreement, cannot be overlooked and is considered a breach of contract.

Conclusion

In conclusion, the Supreme Court held that a vendee who failed to pay the agreed-upon rent, a reciprocal promise and an essential term of the contract, was not entitled to specific performance of the sale agreement. The court emphasized that specific performance is a discretionary remedy, and equity plays a significant role in deciding whether to grant such relief. The court also held that the vendee was not entitled to a refund of the earnest money as they had enjoyed the benefits of the land for a long period without paying rent.