Date of the Judgment: September 13, 2022
Citation: 2022 INSC 778
Judges: Indira Banerjee, J. and V. Ramasubramanian, J.
Can a court compel specific performance of a sale agreement when the agreement’s execution depends on a third party’s actions? The Supreme Court of India recently addressed this crucial question in a case involving a sale agreement where access to the property was contingent on the seller acquiring land from a third party. This judgment clarifies the limitations of specific performance when third-party involvement is a prerequisite. The bench comprised of Justice Indira Banerjee and Justice V. Ramasubramanian, delivered the judgment.
Case Background
The case revolves around a suit for specific performance of a sale agreement. The respondent, R. Natarajan, filed a suit seeking to enforce an Agreement of Sale dated 19.06.1993 with the appellants, the legal representatives of the original defendant, Raman. The agreement pertained to the sale of land measuring approximately 76 cents for a total consideration of Rs. 1,44,000. An advance of Rs. 25,000 was paid at the time of the agreement’s execution. Further payments were made by the respondent: Rs. 50,000 on 19.11.1995, Rs. 43,000 on 11.05.1998, Rs. 10,000 on 27.01.2001, and Rs. 16,400 on 10.07.2005. The agreement stipulated that the defendant would simultaneously enter into an agreement with his brother’s wife to purchase a portion of her land to be used as a pathway to access the suit property. The time for performance was fixed as 11 months from the date the defendant entered into the agreement with his brother’s wife.
When the respondent issued a legal notice on 27.03.2007, the defendant denied the agreement, leading to the suit being filed.
Timeline
| Date | Event |
|---|---|
| 19.06.1993 | Agreement of Sale executed. Advance of Rs. 25,000 paid. |
| 19.11.1995 | Payment of Rs. 50,000 made. |
| 11.05.1998 | Payment of Rs. 43,000 made. |
| 27.01.2001 | Payment of Rs. 10,000 made. |
| 10.07.2005 | Payment of Rs. 16,400 made. |
| 27.03.2007 | Legal notice issued by the respondent. |
| 04.04.2007 | Reply notice by the defendant denying the agreement. |
| November 2007 | Suit filed by the respondent. |
| 14.02.2012 | Trial Court decreed the suit for specific performance. |
Course of Proceedings
The Trial Court decreed the suit in favor of the respondent, holding the agreement to be valid and not barred by limitation. However, the First Appellate Court reversed this decision, concluding that the endorsements of payments on the agreement were not proven, the respondent did not prove his readiness and willingness to perform, and the suit was barred by limitation. The High Court reversed the First Appellate Court’s decision and restored the Trial Court’s decree, stating that the endorsements were proved and the suit was within the limitation period.
Legal Framework
The Supreme Court considered the following legal provisions:
- Article 54 of the Schedule to the Limitation Act, 1963: This provision specifies the limitation period for filing a suit for specific performance as three years from the date fixed for performance, or if no such date is fixed, from when the plaintiff has notice that performance is refused.
- Section 12(1) of the Specific Relief Act, 1963: This section states that a court shall not direct specific performance of a part of a contract, except as otherwise provided.
- Section 13(1)(b) of the Specific Relief Act, 1963: This provision outlines the rights of a purchaser against a person with no title or imperfect title, allowing the purchaser to compel the vendor to procure the concurrence or conveyance of other persons necessary to validate the title, provided those persons are bound to concur or convey at the vendor’s request.
Arguments
Appellant’s Submissions:
- The High Court erred in framing a question of fact as a substantial question of law.
- The High Court reversed the finding of the First Appellate Court on limitation without framing a substantial question of law or referring to the statutory provisions.
- The suit was barred by limitation based on Section 18(1) of the Limitation Act, 1963, as the fourth endorsement was made more than three years after the third.
- The specific performance of the agreement depended on the appellants entering into an agreement with a third party (the defendant’s brother’s wife) which cannot be compelled by the court.
- The court cannot grant specific performance compelling the defendant to enter into an agreement with a third party and seek specific relief against such a third party.
- The case does not fall under exceptions provided under Section 12(2), (3) and (4) of the Specific Relief Act, 1963.
- The respondent cannot claim rights under Section 13(1)(b) of the Specific Relief Act, 1963, as the defendant had no legal right to compel the third party to convey her land.
Respondent’s Submissions:
- The Trial Court rightly decreed the suit for specific performance.
- The High Court correctly reversed the First Appellate Court’s decision.
- The endorsements on the agreement were proved by the evidence of witnesses.
- The suit was not barred by limitation as the time for performance was fixed as 11 months from the date the defendant entered into an agreement with his brother’s wife, which never happened.
- Limitation started running from the date of refusal by the defendant.
| Main Submission | Sub-Submissions (Appellant) | Sub-Submissions (Respondent) |
|---|---|---|
| Validity of High Court’s Decision |
|
|
| Limitation |
|
|
| Specific Performance |
|
|
Innovativeness of the Argument: The appellant’s argument regarding the impossibility of compelling a party to enter into an agreement with a third party, and the consequent bar on specific performance, was innovative and crucial to the case’s outcome.
Issues Framed by the Supreme Court
The Supreme Court did not explicitly frame issues in the judgment. However, the core issues addressed can be summarized as:
- Whether the High Court erred in reversing the First Appellate Court’s decision on the basis of a factual question.
- Whether the High Court was correct in reversing the First Appellate Court’s decision on limitation without framing a substantial question of law or referring to Article 54 of the Limitation Act, 1963.
- Whether a court can grant specific performance of a contract when it depends on the defendant entering into an agreement with a third party.
Treatment of the Issue by the Court
| Issue | Court’s Decision |
|---|---|
| Whether the High Court erred in reversing the First Appellate Court’s decision on the basis of a factual question. | The Supreme Court held that the High Court did err, as the question was indeed a question of fact and not a substantial question of law. |
| Whether the High Court was correct in reversing the First Appellate Court’s decision on limitation without framing a substantial question of law or referring to Article 54 of the Limitation Act, 1963. | The Supreme Court held that the High Court erred in reversing the decision on limitation without framing a substantial question of law and without reference to Article 54 of the Limitation Act, 1963. |
| Whether a court can grant specific performance of a contract when it depends on the defendant entering into an agreement with a third party. | The Supreme Court held that a court cannot grant specific performance in such a case as it would be compelling the defendant to enter into an agreement with a third party, which is not permissible. |
Authorities
The Supreme Court considered the following legal provisions:
- Article 54 of the Schedule to the Limitation Act, 1963: This provision specifies the limitation period for filing a suit for specific performance as three years from the date fixed for performance, or if no such date is fixed, from when the plaintiff has notice that performance is refused.
- Section 12(1) of the Specific Relief Act, 1963: This section states that a court shall not direct specific performance of a part of a contract, except as otherwise provided.
- Section 13(1)(b) of the Specific Relief Act, 1963: This provision outlines the rights of a purchaser against a person with no title or imperfect title, allowing the purchaser to compel the vendor to procure the concurrence or conveyance of other persons necessary to validate the title, provided those persons are bound to concur or convey at the vendor’s request.
| Authority | Court | How it was Considered |
|---|---|---|
| Article 54 of the Schedule to the Limitation Act, 1963 | Statute | The Court noted that the High Court failed to consider this provision while deciding on the issue of limitation. |
| Section 12(1) of the Specific Relief Act, 1963 | Statute | The Court used this provision to highlight that specific performance of part of a contract is generally not allowed. |
| Section 13(1)(b) of the Specific Relief Act, 1963 | Statute | The Court clarified that the respondent could not claim rights under this provision as the defendant had no legal right to compel the third party to convey her land. |
Judgment
| Submission Made by Parties | How it was treated by the Court |
|---|---|
| The High Court erred in framing a question of fact as a substantial question of law. | The Supreme Court agreed with this submission, stating that the High Court’s question was indeed a question of fact. |
| The High Court reversed the finding of the First Appellate Court on limitation without framing a substantial question of law or referring to the statutory provisions. | The Supreme Court agreed with this submission, stating that the High Court reversed the finding on limitation without framing a substantial question of law and without reference to Article 54 of the Limitation Act, 1963. |
| The suit was barred by limitation based on Section 18(1) of the Limitation Act, 1963, as the fourth endorsement was made more than three years after the third. | The Supreme Court did not directly address this argument, but focused on the High Court’s failure to consider Article 54 of the Limitation Act. |
| The specific performance of the agreement depended on the appellants entering into an agreement with a third party (the defendant’s brother’s wife) which cannot be compelled by the court. | The Supreme Court agreed with this submission, stating that a court cannot compel a party to enter into an agreement with a third party. |
| The court cannot grant specific performance compelling the defendant to enter into an agreement with a third party and seek specific relief against such a third party. | The Supreme Court upheld this submission, stating that the specific performance of the agreement is dependent on the will of a third party. |
| The case does not fall under exceptions provided under Section 12(2), (3) and (4) of the Specific Relief Act, 1963. | The Supreme Court agreed with this, stating that none of the exceptions under Section 12 of the Specific Relief Act applied to the facts of the case. |
| The respondent cannot claim rights under Section 13(1)(b) of the Specific Relief Act, 1963, as the defendant had no legal right to compel the third party to convey her land. | The Supreme Court agreed with this submission, stating that the defendant had no right to compel the third party to convey her land. |
| The Trial Court rightly decreed the suit for specific performance. | The Supreme Court disagreed with this submission, setting aside the Trial Court’s decree. |
| The High Court correctly reversed the First Appellate Court’s decision. | The Supreme Court disagreed with this submission, setting aside the High Court’s judgment. |
| The endorsements on the agreement were proved by the evidence of witnesses. | The Supreme Court did not address this submission directly, focusing on the legal issues regarding specific performance. |
| The suit was not barred by limitation as the time for performance was fixed as 11 months from the date the defendant entered into an agreement with his brother’s wife, which never happened. | The Supreme Court rejected this argument, stating that the High Court did not frame a substantial question of law on limitation and failed to consider Article 54 of the Limitation Act. |
| Limitation started running from the date of refusal by the defendant. | The Supreme Court did not accept this submission, focusing on the High Court’s procedural errors and failure to consider Article 54 of the Limitation Act. |
| Authority | How it was viewed by the Court |
|---|---|
| Article 54 of the Schedule to the Limitation Act, 1963 | The Court noted that the High Court failed to consider this provision while deciding on the issue of limitation, indicating that the High Court’s decision was flawed. |
| Section 12(1) of the Specific Relief Act, 1963 | The Court used this provision to highlight that specific performance of part of a contract is generally not allowed, which was central to its reasoning for rejecting the specific performance claim. |
| Section 13(1)(b) of the Specific Relief Act, 1963 | The Court clarified that the respondent could not claim rights under this provision because the defendant had no legal right to compel the third party to convey her land, thereby limiting the application of this provision in this case. |
What weighed in the mind of the Court?
The Supreme Court’s decision was primarily influenced by the legal principle that a court cannot compel a party to perform an act that depends on the will of a third party. The Court emphasized that the specific performance of the agreement was contingent on the defendant entering into an agreement with his brother’s wife, which was beyond the court’s power to enforce. The Court also focused on the procedural errors made by the High Court, particularly in reversing the First Appellate Court’s decision on limitation without framing a substantial question of law and without considering Article 54 of the Limitation Act, 1963.
| Sentiment Analysis of Reasons | Percentage |
|---|---|
| Impossibility of compelling third-party action | 40% |
| Procedural errors by High Court | 30% |
| Limitations on specific performance | 20% |
| Lack of legal right to compel third party | 10% |
| Ratio | Percentage |
|---|---|
| Fact | 20% |
| Law | 80% |
The Court rejected the High Court’s interpretation that the limitation period started from the date of refusal, emphasizing that the High Court failed to consider Article 54 of the Limitation Act, 1963. The Court also noted that the specific performance sought by the respondent was not possible because it required the defendant to enter into an agreement with a third party, which the court could not compel.
The Court stated: “In any case, the High Court ought to have seen that a Court cannot grant the relief of specific performance against a person compelling him to enter into an agreement with a third party and seek specific relief against such a third party.”
The Court further added: “Since the defendant’s brother’s wife was not a party to the suit agreement of sale, the Court cannot compel her to enter into an agreement with the defendant.”
The Court also clarified: “Even the limited rights conferred by Section 13(1)(b) of the Specific Relief Act are not available to the respondent, as there was no legal right in the defendant to compel 3rd parties to convey their land to him for the purpose of providing a pathway to the land agreed to be sold to the respondent herein.”
The bench, comprising Justices Indira Banerjee and V. Ramasubramanian, unanimously agreed on the decision.
Key Takeaways
- A court cannot compel a party to enter into an agreement with a third party.
- Specific performance of a contract cannot be granted if it depends on the will or action of a third party.
- High Courts must frame substantial questions of law and consider relevant statutory provisions when deciding second appeals.
- The limitation period for specific performance is governed by Article 54 of the Limitation Act, 1963.
Directions
The Supreme Court set aside the High Court’s judgment and rejected the relief of specific performance. However, the Court directed the appellants to repay the respondent Rs. 1,44,400 with 9% interest per annum from the date of filing the suit until repayment. The parties were directed to bear their respective costs throughout the proceedings.
Development of Law
The ratio decidendi of this case is that specific performance of a contract cannot be granted if it depends on the defendant entering into an agreement with a third party. This case clarifies the limitations of specific performance and emphasizes that courts cannot compel a party to perform an act that depends on the will of a third party. This is a reaffirmation of the existing position of law and provides clarity on the application of Section 12(1) of the Specific Relief Act, 1963.
Conclusion
The Supreme Court’s judgment in Raman vs. Natarajan clarifies that specific performance cannot be granted when it depends on a party entering into an agreement with a third party. The Court emphasized the limitations of judicial power in compelling actions dependent on the will of third parties and highlighted the importance of adhering to procedural and statutory requirements in appellate proceedings. The appeal was allowed, the High Court’s judgment was set aside, and the relief of specific performance was rejected. The appellants were directed to repay the amount paid by the respondent with interest.
Source: Raman vs. Natarajan