Supreme Court orders fresh trial on readiness and willingness in specific performance suit: V.S. Ramakrishnan vs. P.M. Muhammed Ali (2022) INSC 981 (09 November 2022)

Date of the Judgment: 09 November 2022
Citation: (2022) INSC 981
Judges: M.R. Shah, J. and M.M. Sundresh, J.

In a case concerning a dispute over a property sale agreement, the Supreme Court of India addressed whether a lower court can dismiss a suit for specific performance without a specific issue framed on the readiness and willingness of the plaintiff to perform their part of the contract. The Court also examined whether a post-dated cheque, returned due to an attachment order, could be considered a valid payment towards part of the sale consideration.

The bench, comprising Justice M.R. Shah and Justice M.M. Sundresh, delivered the judgment.

Case Background

The case revolves around an agreement to sell a property between V.S. Ramakrishnan (the appellant/original plaintiff) and P.M. Muhammed Ali (the respondent/original defendant).

On 13th July 2005, they agreed on a sale of property for a consideration of Rs. 52,500 per cent, totaling 9 acres and 47.41 cents in Karukutty Village.

The appellant paid Rs. 1 crore as earnest money, with Rs. 65 lakhs in cash and a post-dated cheque of Rs. 35 lakhs dated 25th August 2005.

The final date for the balance payment was set for 12th January 2006. The post-dated cheque was dishonored due to a bank account attachment by the Income Tax Department, not due to insufficient funds.

The defendant, through his advocate, notified the plaintiff about the dishonored cheque on 2nd September 2005. The plaintiff claimed to have offered cash payment of Rs. 35 lakhs, which the defendant refused.

On 23rd September 2005, the defendant terminated the agreement, forfeiting Rs. 10 lakhs and offering to return Rs. 55 lakhs.

The plaintiff responded on 18th October 2005, asking the defendant to accept the balance by 12th January 2006.

A legal notice was sent by the plaintiff on 3rd January 2006, requesting the execution of the sale deed after receiving the balance.

The plaintiff then filed a suit for specific performance when the defendant failed to comply. The defendant repudiated the contract, claiming the plaintiff defaulted on payment.

Timeline:

Course of Proceedings

The Trial Court dismissed the suit for specific performance, stating that the plaintiff did not demonstrate the readiness and willingness to pay the balance amount of Rs. 3 crores and 9 lakhs. However, the court granted a partial decree for the return of Rs. 65 lakhs with 6% interest.

Both parties appealed to the High Court of Kerala. The plaintiff appealed against the refusal of specific performance (RFA No. 766/2010), and the defendant appealed against the imposed costs (RFA No. 686/2010).

The High Court dismissed the plaintiff’s appeal and partly allowed the defendant’s appeal regarding costs, stating that the returned post-dated cheque meant there was no concluded contract.

Legal Framework

The judgment primarily revolves around the interpretation of the requirements for a valid contract and the conditions for specific performance.

The issue of “readiness and willingness” of the plaintiff to perform their part of the contract is central to suits for specific performance.

Arguments

The appellant (original plaintiff) argued that the post-dated cheque was not “worthless” at the time of issuance, and its return was due to an attachment order, not due to insufficient funds. The appellant also contended that they had offered to pay the amount in cash, which the defendant refused.

The respondent (original defendant) argued that the return of the post-dated cheque meant that there was a default on the part of the plaintiff and no concluded contract. The defendant also argued that the plaintiff was not ready and willing to pay the balance consideration.

Issues Framed by the Supreme Court

The Supreme Court did not explicitly frame issues but addressed the following points:

• Whether the High Court was correct in holding that there was no concluded contract due to the return of the post-dated cheque.
• Whether the Trial Court was correct in giving a finding on the readiness and willingness of the plaintiff without framing a specific issue on the same.

Treatment of the Issue by the Court

Authorities

The judgment does not cite any specific cases or legal provisions.

Judgment

The Supreme Court did not approve the High Court’s view that the post-dated cheque was worthless. The Court stated, “the observation made by the High Court that the post-dated cheque was worthless cheque and tendering such worthless cheque cannot be said to be a payment towards part sale consideration cannot be accepted.”

The Court also held that the Trial Court should have framed a specific issue on the readiness and willingness of the plaintiff. The Court observed that, “There must be a specific issue framed on readiness and willingness on the part of the plaintiff in a suit for specific performance and before giving any specific finding, the parties must be put to notice.”

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the procedural lapse of the Trial Court in not framing a specific issue on the readiness and willingness of the plaintiff and the High Court’s incorrect assessment of the post-dated cheque. The Court emphasized the importance of due process and the need for a fair opportunity for both parties to present their case. The Court noted that the cheque was not returned for reasons of insufficient funds, but due to an attachment order.

The Court’s reasoning was based on the fact that the cheque was not returned due to insufficient funds, but due to an attachment order. The Court also emphasized that the issue of readiness and willingness should have been specifically framed by the Trial Court.

The Supreme Court did not consider any alternative interpretations, as the issue was primarily about procedural correctness and factual accuracy.

The majority opinion was delivered by Justice M.R. Shah, with Justice M.M. Sundresh concurring. There were no dissenting opinions.

Key Takeaways

• A post-dated cheque returned due to an attachment order cannot be considered a “worthless” payment towards a contract.
• In a suit for specific performance, a specific issue on the readiness and willingness of the plaintiff must be framed.
• Parties must be given an opportunity to present evidence on the issue of readiness and willingness.

This judgment emphasizes the importance of procedural fairness and the need for courts to consider all relevant facts before making a decision. It also clarifies that a cheque returned due to an attachment order is not the same as a cheque returned for insufficient funds.

Directions

The Supreme Court remitted the matter back to the Trial Court with directions to:

• Frame a specific issue on the readiness and willingness of the plaintiff to perform their part of the contract.
• Allow both parties to lead evidence on the issue of readiness and willingness.
• Decide the suit afresh on merits based on the evidence presented.

The Trial Court was directed to complete the process within twelve months from the date of receipt of the order.

Development of Law

The ratio decidendi of this case is that in a suit for specific performance, a specific issue on the readiness and willingness of the plaintiff must be framed, and parties must be given an opportunity to lead evidence on this issue. This case also clarifies that a cheque returned due to an attachment order is not the same as a cheque returned for insufficient funds.

Conclusion

The Supreme Court set aside the judgments of the High Court and the Trial Court, remanding the case back to the Trial Court for a fresh trial. The Court emphasized the need to frame a specific issue on the readiness and willingness of the plaintiff and to allow both parties to present evidence. This decision underscores the importance of procedural fairness and accurate factual assessment in legal proceedings.