Supreme Court Dismisses Specific Performance Suit Due to Limitation and Lack of Readiness: Urvashi Aggarwal vs. Kushagr Ansal (2019)

Introduction

Date of the Judgment: March 06, 2019

Citation: 2019 INSC 206

Judges: L. Nageswara Rao, J. and Mohan M. Shantanagoudar, J.

Can a party seek specific performance of a contract for sale of property many years after the agreed date of execution, especially when they have not fulfilled their obligations? The Supreme Court of India addressed this issue in a case involving a property sale agreement where the plaintiffs sought specific performance more than a decade after the agreed date. The Court examined whether the suit was barred by limitation and if the plaintiffs had demonstrated readiness and willingness to fulfill their part of the contract. This judgment was delivered by a bench comprising Justice L. Nageswara Rao and Justice Mohan M. Shantanagoudar, with Justice L. Nageswara Rao authoring the opinion.

Case Background

In 1974, Justice Chander Bhan Aggarwal’s family, who were tenants of the first and second floors of a property at 82, Jor Bagh, New Delhi, entered into an agreement with the landlord, Smt. Suraj Kumari, to purchase the property. The agreement was between Smt. Urvashi Aggarwal (the first plaintiff) and her son Rajiv Chander Aggarwal (since deceased) and Smt. Suraj Kumari, the owner of the property. The agreed sale price was Rs. 1,85,000. The plaintiffs paid Rs. 20,000 on 05.10.1974, Rs. 40,000 on 31.01.1975, and Rs. 10,000 on 26.12.1975, totaling Rs. 70,000. The agreement stipulated that the sale deed should be executed by March 31, 1975, after obtaining necessary permissions from the Land and Development Office (L&DO) and the Income Tax Department. The plaintiffs claimed they were given proprietary possession of the property upon payment of Rs. 70,000 and were entitled to collect rent from the existing tenants. However, the defendants denied this and claimed the plaintiffs failed to pay the monthly installments and did not take steps to evict the tenants.

Timeline

Course of Proceedings

The Trial Court dismissed the suit, concluding that time was of the essence of the agreement, and the plaintiffs were not ready and willing to perform their part of the agreement. The High Court affirmed the Trial Court’s judgment, agreeing that the suit was barred by limitation and that the plaintiffs failed to prove their readiness and willingness to perform the essential terms of the agreement.

Legal Framework

The Supreme Court considered the following legal provisions:

• Section 63 of the Indian Contract Act, 1872: This provision deals with the power of parties to dispense with or remit performance of a contract.
• Article 54 of the Schedule to the Limitation Act, 1963: This article specifies the limitation period for suits relating to specific performance of a contract. It states that the limitation period is three years from the date fixed for performance, or if no such date is fixed, from the date when the plaintiff has notice that performance is refused.
• Section 16(c) of the Specific Relief Act, 1963: This section requires a plaintiff seeking specific performance to prove their readiness and willingness to perform the essential terms of the contract.
• Section 55 of the Indian Contract Act, 1872: This provision deals with the effect of failure to perform a contract at a fixed time, where time is of the essence.

The Court examined how these provisions applied to the facts of the case, particularly in relation to the limitation period and the requirement for the plaintiffs to demonstrate readiness and willingness.

Arguments

Plaintiffs’ Arguments:

• The suit was filed within the prescribed period of limitation. The cause of action did not accrue on 31.03.1975, as the necessary permission from the L&DO was not obtained by that date.
• The date fixed for execution of the sale deed was extended by the conduct of the parties, as the defendants continued to pursue the application for permission from L&DO even after 31.03.1975.
• The second part of Article 54 of the Schedule to the Limitation Act, 1963, applies, and the limitation period should start from the date of refusal to perform the agreement, which occurred in 1987.
• They were always ready and willing to perform their part of the agreement.
• They had the financial capacity to pay the balance sale consideration.
• The defendants did not terminate the agreement nor refund the amount paid by the plaintiffs.

Defendants’ Arguments:

• The limitation period started on 31.03.1975, the date fixed for performance of the agreement. Since the suit was filed after three years from that date, it was barred by limitation.
• The agreement was not varied or modified, and the non-fulfilment of the condition regarding permission from L&DO cannot excuse the delay in filing the suit.
• The second part of Article 54 of the Schedule to the Limitation Act, 1963, does not apply to this case.
• There was an inordinate delay in filing the suit, which amounts to abandonment of the agreement.
• The plaintiffs were never ready and willing to perform their part of the contract.

Issues Framed by the Supreme Court

The Supreme Court considered the following key issues:

1. Whether the suit is within limitation?
2. Whether the Plaintiffs have been ready and willing to perform the Agreement to sell?

Treatment of the Issue by the Court

The following table demonstrates as to how the Court decided the issues:

Authorities

The Supreme Court considered the following authorities:

Judgment

How each authority was viewed by the Court?

• The Supreme Court followed Fateh Nagpal & Co. v. L.M. Nagpal [CITATION], Vishwa Nath Sharma v. Shyam Shanker Goela [CITATION], and K. Raheja Constructions Ltd. v. Alliance Ministries [CITATION] to reiterate that a vendee cannot claim that the cause of action did not arise on the date fixed in the contract because certain conditions were not fulfilled.
• The Supreme Court followed K.S.Vidyanadam v. Vairavan [CITATION], to emphasize that even when time is not of the essence, the plaintiff must perform their part of the contract within a reasonable time.

What weighed in the mind of the Court?

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

• Limitation: The suit was filed 12 years after the date fixed for performance, which was a major factor in dismissing the suit. The Court emphasized that the limitation period started on 31.03.1975, and the conduct of the parties did not extend this period.
• Readiness and Willingness: The Court found that the plaintiffs did not demonstrate readiness and willingness to perform their part of the contract. Their failure to pay installments, collect rent, and take eviction action indicated a lack of commitment to the agreement.
• Abandonment: The Court noted that the plaintiffs’ silence for about 12 years amounted to abandonment of the agreement.

Logical Reasoning:

The Court rejected the argument that the date for execution of the sale deed was extended by conduct of the parties. The Court also found that the plaintiffs’ silence for about 12 years amounted to abandonment of the agreement. The Court stated that “Even where time is not of the essence of the contract, the plaintiffs must perform his part of the contract within a reasonable time and reasonable time should be determined by looking at all the surrounding circumstances including the express terms of the contract and the nature of the property.” The Court also observed that “The silence maintained by the Plaintiffs for about 12 years amounted to abandonment of the Agreement”. The Court also noted that the Plaintiffs had failed to prove their readiness and willingness to perform their part of the Agreement, stating that “The failure on the part of the Plaintiffs in not paying the monthly instalments of Rs.7,000/-, not collecting the rent from the tenant on the ground floor, not paying the house tax etc., and not taking any action for eviction of the tenant on the ground floor are some of the points held against the Plaintiffs by the Courts below which show that they were not ready and willing to perform their part of the Agreement.”

Key Takeaways

• A suit for specific performance must be filed within three years from the date fixed for performance in the agreement.
• The conduct of parties cannot extend the date of performance unless there is a clear agreement to that effect.
• Plaintiffs seeking specific performance must demonstrate readiness and willingness to perform their obligations under the agreement.
• Inordinate delay in filing a suit for specific performance can be interpreted as abandonment of the agreement.

Directions

The Supreme Court directed the defendants to pay Rs. 2,00,00,000 (Rupees Two Crores) to the plaintiffs within eight weeks, instead of the refund of Rs. 70,000 with 24% interest as directed by the High Court.

Development of Law

The ratio decidendi of this case is that a suit for specific performance must be filed within the prescribed limitation period, and the plaintiff must demonstrate readiness and willingness to perform their part of the contract. This case reinforces the existing legal position on limitation and specific performance, emphasizing the importance of timely action and fulfillment of contractual obligations. There is no change in the previous position of law.

Conclusion

The Supreme Court dismissed the appeal, upholding the decisions of the Trial Court and the High Court. The Court found that the suit for specific performance was barred by limitation and that the plaintiffs failed to prove their readiness and willingness to perform their part of the agreement. The Court, however, modified the High Court’s order regarding the refund and directed the defendants to pay Rs. 2,00,00,000 to the plaintiffs, considering the time elapsed and increase in property prices.