Supreme Court Overturns Specific Performance Decree in Property Sale Dispute: U.N. Krishnamurthy vs. A.M. Krishnamurthy (2022)

Introduction

Date of the Judgment: 12 July 2022

Citation: 2022 INSC 625

Judges: Indira Banerjee, J., Hrishikesh Roy, J.

Can a buyer obtain specific performance of a property sale agreement if they fail to prove they were continuously ready and willing to pay the balance amount? The Supreme Court of India recently addressed this critical question in a case concerning the sale of a property. The Court overturned the decisions of the lower courts, emphasizing the necessity of proving both readiness and willingness for specific performance. This judgment clarifies the requirements under Section 16(c) of the Specific Relief Act, 1963. The bench comprised Justices Indira Banerjee and Hrishikesh Roy, with Justice Banerjee authoring the judgment.

Case Background

The case revolves around a dispute over an agreement for the sale of a property. The original defendant, U.N. Krishnamurthy, inherited the property from his father in 1987. In November 2002, a real estate agent approached U.N. Krishnamurthy with an offer to sell the property.

The plaintiff, A.M. Krishnamurthy, claimed that U.N. Krishnamurthy agreed to sell the property for ₹15,10,000, with an advance of ₹10,001 paid on November 11, 2002. The sale was to be completed by March 15, 2003. However, the defendant denied any such agreement and refused to execute the sale deed despite the plaintiff’s repeated requests. The plaintiff then sent a legal notice on February 13, 2003, expressing his readiness to complete the sale, which the defendant denied on March 10, 2003. The plaintiff filed a suit for specific performance on October 17, 2005, seeking the court’s intervention to enforce the sale agreement.

Timeline:

Course of Proceedings

The Trial Court ruled in favor of the plaintiff, A.M. Krishnamurthy, ordering the defendant, U.N. Krishnamurthy, to execute the sale deed after receiving the balance amount of ₹15,00,000. The Trial Court held that the plaintiff was ready and willing to perform his part of the contract.

The High Court of Judicature at Madras upheld the Trial Court’s decision, affirming that the plaintiff had always been ready and willing to fulfill his contractual obligations. The High Court noted the letter dated 11.11.2002 (Ex. A-1) and the legal notice dated 13.02.2003 (Ex. A2) as evidence of the plaintiff’s intent.

The defendant then appealed to the Supreme Court, arguing that the plaintiff had not demonstrated continuous readiness and willingness, as required by Section 16(c) of the Specific Relief Act, 1963.

Legal Framework

The core legal provision at the heart of this case is Section 16 of the Specific Relief Act, 1963, which outlines personal bars to relief. Specifically, Section 16(c) states that specific performance of a contract cannot be enforced in favor of a person who fails to prove that they have always been ready and willing to perform the essential terms of the contract.

Section 16 of the Specific Relief Act, 1963, as it stood at the material time (prior to amendment with effect from 1.10.2018), provides:

“16. Personal bars to relief .—Specific performance of a contract cannot be enforced in favour of a person—
(a) who would not be entitled to recover compensation for its
breach; or
(b) who has become incapable of performing, or violates any
essential term of, the contract that on his part remains to be
performed, or acts in fraud of the contract, or wilfully acts at
variance with, or in subversion of, the relation intended to be
established by the contract; or
(c) who fails to aver and 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.
Explanation. —For the purposes of clause (c), —
(i) where a contract involves the payment of money, it is not
essential for the plaintiff to actually tender to the defendant or to
deposit in court any money except when so directed by the court;
(ii) the plaintiff must aver performance of, or readiness and
willingness to perform, the contract according to its true
construction.”

The explanation to Section 16(c) clarifies that while actual tender of money or deposit in court is not always required, the plaintiff must demonstrate a continuous readiness and willingness to perform the contract according to its true construction. This readiness includes the financial capacity to fulfill the monetary obligations of the contract.

Arguments

The Appellants, represented by Mr. Krishnan Venugopal, argued that the lower courts erred in both fact and law, particularly concerning the “readiness and willingness” of the Respondent Plaintiff. They emphasized that under Section 16(c) of the Specific Relief Act, 1963, the plaintiff must demonstrate continuous readiness and willingness, regardless of any default by the defendant. The Appellants also highlighted the significant increase in real estate prices, suggesting it would be inequitable to grant specific performance.

The Respondent Plaintiff, represented by Mr. N.D.B. Raju, contended that the issues of a concluded contract and the plaintiff’s readiness and willingness were factual matters determined by evidence. Mr. Raju argued that the concurrent findings of the Trial Court and the High Court should not be disturbed. He emphasized that the plaintiff was always ready and willing to perform his part of the contract and that the defendant had delayed the execution of the sale deed. He cited the testimony of witnesses who stated the plaintiff had approached the defendant multiple times before the deadline, ready to complete the sale.

The innovativeness of the argument by the Appellants was that they were able to successfully argue that the plaintiff had not demonstrated continuous readiness and willingness to perform his part of the contract, despite the concurrent findings of the lower courts.

Issues Framed by the Supreme Court

The Supreme Court framed the primary issue as:

1. Whether the Respondent Plaintiff has proved his readiness and willingness to perform his part of the contract or not?

Treatment of the Issue by the Court

Authorities

The Supreme Court considered several authorities to address the issue of readiness and willingness in specific performance cases. These authorities are categorized by the legal point they address:

Readiness and Willingness:

• Man Kaur v. Hartar Singh Sangha, (2010) 10 SCC 512, Supreme Court of India: This case established that a plaintiff must prove continuous readiness and willingness to perform their part of the contract, regardless of any breach by the defendant.

• Pt. Prem Raj v. D.L.F. Housing and Construction (Private) Ltd. And Anr., AIR 1968 SC 1355, Supreme Court of India: This case emphasized that a plaintiff must allege and prove continuous readiness and willingness from the date of the contract to the time of the hearing.

• Ardeshir Mama v. Flora Sassoon, 55 IA 300, Privy Council: This case, relied upon in Pt. Prem Raj, highlighted the need for continuous readiness and willingness.

• N.P. Thirugnanam v. Dr. R. Jagan Mohan Rao and Ors., (1995) 5 SCC 115, Supreme Court of India: This case reiterated that Section 16(c) of the Specific Relief Act, 1963, requires the plaintiff to plead and prove continuous readiness and willingness.

• Umabai v. Nilkanth Dhondiba Chavan, (2005) 6 SCC 243, Supreme Court of India: This case held that a finding of readiness and willingness is mandatory and requires considering the pleadings and evidence.

• His Holiness Acharya Swami Ganesh Dassji v. Sita Ram Thapar, (1996) 4 SCC 526, Supreme Court of India: This case distinguished between readiness (financial capacity) and willingness (conduct).

• Kalawati v. Rakesh Kumar, (2018) 3 SCC 658, Supreme Court of India: This case reaffirmed the distinction between readiness and willingness.

• Cort v. Ambergate etc. and Rly. Co, (1851) 117 ER 1229: This case, cited in H.P. Pyarejan, emphasized that readiness and willingness implies the non-completion of the contract was not the plaintiff’s fault.

Discretionary Relief of Specific Performance:

• K.S. Vidyanadam v. Vairavan, (1997) 3 SCC 114, Supreme Court of India: This case stated that the grant of specific performance is discretionary and time is a significant factor.

• Saradamani Kandappan v. S. Rajalakshmi, (2011) 12 SCC 18, Supreme Court of India: This case highlighted the need to consider the steep increase in property prices and the importance of timely completion of sale.

• P.R. Deb and Associates v. Sunanda Roy, (1996) 4 SCC 423, Supreme Court of India: This case supports the view that delay in filing the suit can be a ground to decline specific performance.

• Manjunath Anandappa v. Tammanasa, (2003) 10 SCC 390, Supreme Court of India: This case also supports the view that delay in filing the suit can be a ground to decline specific performance.

• Azhar Sultana v. B. Rajamani, (2009) 17 SCC 27, Supreme Court of India: This case held that the court can consider whether the suit was filed within a reasonable time.

• Atma Ram v. Charanjit Singh, (2020) 3 SCC 311, Supreme Court of India: This case emphasized the importance of the plaintiff’s conduct in a suit for specific performance.

First Appellate Court’s Duty:

• Balraj Taneja v. Sunil Madan, (1999) 8 SCC 396, Supreme Court of India: This case emphasized that the first appellate court must examine the continuous readiness and willingness of the plaintiff.

• H.P. Pyarejan v. Dasappa, (2006) 2 SCC 496, Supreme Court of India: This case reinforced the duty of the first appellate court to examine readiness and willingness.

• Malluru Mallappa v. Kuruvathappa, (2020) 4 SCC 313, Supreme Court of India: This case outlined the duties of the first appellate court, including addressing all issues of fact and law.

Other Relevant Cases:

• Bhavyanath v. K.V. Balan, (2020) 11 SCC 790, Supreme Court of India: This case was cited by the Respondent, but distinguished by the Court due to the plaintiff’s failure to prove readiness and willingness.

Judgment

The Supreme Court, after considering the arguments and authorities, overturned the judgments of the Trial Court and the High Court. The Court held that the Respondent Plaintiff failed to prove his readiness and willingness to perform his part of the contract, which is a mandatory requirement under Section 16(c) of the Specific Relief Act, 1963.

The Court’s treatment of the authorities is summarized below:

• Man Kaur v. Hartar Singh Sangha [CITATION]*: The Court followed this authority to emphasize the need for continuous readiness and willingness.
• Pt. Prem Raj v. D.L.F. Housing and Construction (Private) Ltd. And Anr. [CITATION]*: The Court followed this authority to highlight the requirement of continuous readiness and willingness from the date of the contract.
• Ardeshir Mama v. Flora Sassoon [CITATION]*: The Court followed this authority to emphasize the need for continuous readiness and willingness.
• N.P. Thirugnanam v. Dr. R. Jagan Mohan Rao and Ors. [CITATION]*: The Court followed this authority to reiterate that Section 16(c) requires pleading and proving continuous readiness and willingness.
• Umabai v. Nilkanth Dhondiba Chavan [CITATION]*: The Court followed this authority to emphasize that a finding of readiness and willingness is mandatory and requires considering the pleadings and evidence.
• K.S. Vidyanadam v. Vairavan [CITATION]*: The Court followed this authority to state that the grant of specific performance is discretionary and time is a significant factor.
• His Holiness Acharya Swami Ganesh Dassji v. Sita Ram Thapar [CITATION]*: The Court followed this authority to distinguish between readiness (financial capacity) and willingness (conduct).
• Kalawati v. Rakesh Kumar [CITATION]*: The Court followed this authority to reaffirm the distinction between readiness and willingness.
• Cort v. Ambergate etc. and Rly. Co [CITATION]*: The Court followed this authority to emphasize that readiness and willingness implies the non-completion of the contract was not the plaintiff’s fault.
• Saradamani Kandappan v. S. Rajalakshmi [CITATION]*: The Court followed this authority to highlight the need to consider the steep increase in property prices and the importance of timely completion of sale.
• P.R. Deb and Associates v. Sunanda Roy [CITATION]*: The Court followed this authority to support the view that delay in filing the suit can be a ground to decline specific performance.
• Manjunath Anandappa v. Tammanasa [CITATION]*: The Court followed this authority to support the view that delay in filing the suit can be a ground to decline specific performance.
• Azhar Sultana v. B. Rajamani [CITATION]*: The Court followed this authority to hold that the court can consider whether the suit was filed within a reasonable time.
• Atma Ram v. Charanjit Singh [CITATION]*: The Court followed this authority to emphasize the importance of the plaintiff’s conduct in a suit for specific performance.
• Balraj Taneja v. Sunil Madan [CITATION]*: The Court followed this authority to emphasize that the first appellate court must examine the continuous readiness and willingness of the plaintiff.
• H.P. Pyarejan v. Dasappa [CITATION]*: The Court followed this authority to reinforce the duty of the first appellate court to examine readiness and willingness.
• Malluru Mallappa v. Kuruvathappa [CITATION]*: The Court followed this authority to outline the duties of the first appellate court, including addressing all issues of fact and law.
• Bhavyanath v. K.V. Balan [CITATION]*: The Court distinguished this authority, stating that in that case, the plaintiff had adduced cogent evidence to prove his readiness and willingness, which was not the case here.

What weighed in the mind of the Court?

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

• Lack of Evidence of Financial Readiness: The Court was not convinced that the plaintiff had the financial capacity to pay the balance amount at the time stipulated in the contract. The plaintiff’s bank balance sheet did not support his claim of having the necessary funds.
• Delay in Depositing Balance Amount: The plaintiff deposited the balance amount in court seven years after the stipulated deadline. The Court found this delay significant and indicative of a lack of continuous readiness.
• Steep Rise in Real Estate Prices: The Court took judicial notice of the steep rise in real estate prices in Hosur. It considered it inequitable to grant specific performance after such a significant increase in property value, especially when the plaintiff had not demonstrated continuous readiness.
• Importance of Section 16(c) of the Specific Relief Act: The Court emphasized the mandatory nature of Section 16(c), which requires the plaintiff to prove continuous readiness and willingness. The Court found that the lower courts had not properly applied this provision.
• Duty of the First Appellate Court: The Court stressed the duty of the first appellate court to examine the continuous readiness and willingness of the plaintiff. The Court found that the High Court had failed to fulfill this duty.

Flowchart of the Decision Process

Conclusion

The Supreme Court’s judgment in U.N. Krishnamurthy vs. A.M. Krishnamurthy (2022) underscores the critical importance of demonstrating continuous readiness and willingness in specific performance cases. The Court clarified that mere assertion of readiness and willingness is insufficient; the plaintiff must provide concrete evidence, particularly of financial capacity, to fulfill their contractual obligations. The judgment also highlights that the courts must consider the equity of granting specific performance, especially in light of significant increases in property prices. This case serves as a reminder that the remedy of specific performance is not automatic and is subject to strict compliance with the requirements of Section 16(c) of the Specific Relief Act, 1963. The case also reinforces the duty of the first appellate court to examine the continuous readiness and willingness of the plaintiff.