Date of the Judgment: January 05, 2023
Citation: 2023 INSC 19
Judges: M. R. Shah, J. and B.V. Nagarathna, J.
Can a High Court overturn a trial court’s finding on the readiness and willingness of a buyer to perform a contract for sale, simply because the buyer didn’t produce bank statements? The Supreme Court addressed this question in a recent case, emphasizing the importance of evidence presented and the need for a holistic view. The Court restored the trial court’s decree for specific performance, highlighting that the buyer’s readiness and willingness were sufficiently demonstrated through their actions and statements. This judgment was delivered by a two-judge bench comprising Justice M. R. Shah and Justice B.V. Nagarathna, with Justice M.R. Shah authoring the opinion.
Case Background
On March 13, 2007, Padmavathi (Respondent No. 1) agreed to sell land to Basavaraj (Appellant) for ₹12,74,000. Basavaraj paid ₹3,00,000 as earnest money, with the sale to be completed by July 31, 2007. When Padmavathi failed to execute the sale deed, Basavaraj sent a legal notice on November 20, 2007, asking her to complete the sale. Padmavathi denied the agreement in her reply on December 3, 2007. Subsequently, Basavaraj filed a suit for specific performance on February 14, 2008, seeking the court’s order to force the sale. Padmavathi contested the suit, denying the agreement and Basavaraj’s readiness to complete the sale.
Timeline
| Date | Event |
|---|---|
| March 13, 2007 | Agreement to sell executed between Padmavathi and Basavaraj. Basavaraj pays ₹3,00,000 as earnest money. |
| July 31, 2007 | Deadline for the sale deed execution as per the agreement. |
| June, 2007 | Basavaraj claims to have approached Padmavathi with the balance sale consideration. |
| July, 2007 | Basavaraj claims to have again approached Padmavathi with the balance sale consideration. |
| November 20, 2007 | Basavaraj sends a legal notice to Padmavathi asking for the sale to be completed. |
| December 3, 2007 | Padmavathi replies to the legal notice, denying the agreement to sell. |
| February 14, 2008 | Basavaraj files a suit for specific performance in O.S. No. 17/2008. |
| September 30, 2011 | Trial Court decrees the suit for specific performance in favour of Basavaraj. |
| October 31, 2011 | Basavaraj deposits ₹9,74,000 with the Trial Court. |
| November 27, 2020 | High Court of Karnataka allows the appeal of Padmavathi and quashes the Trial Court decree. |
| December 6, 2021 | High Court dismisses the review petition filed by Basavaraj. |
| January 05, 2023 | Supreme Court allows the appeal of Basavaraj and restores the Trial Court decree. |
Course of Proceedings
The Trial Court, after examining the evidence, ruled in favor of Basavaraj, decreeing the suit for specific performance on September 30, 2011. The court found that the agreement to sell was valid, the earnest money was paid, and Basavaraj was ready and willing to perform his part of the contract. Following the decree, Basavaraj deposited the remaining ₹9,74,000 with the Trial Court on October 31, 2011. Padmavathi appealed to the High Court of Karnataka, which reversed the Trial Court’s decision on November 27, 2020, stating that Basavaraj had not proven his readiness and willingness to pay. A review petition filed by Basavaraj was also dismissed on December 6, 2021.
Legal Framework
The core legal issue revolves around the concept of “readiness and willingness” in cases of specific performance under the Specific Relief Act, 1963. To obtain a decree for specific performance, the plaintiff (buyer) must demonstrate that they were always ready and willing to fulfill their obligations under the contract. This includes showing that they had the financial capability to pay the remaining amount and were prepared to do so. The Specific Relief Act, 1963 does not specifically define the term “readiness and willingness”, but it has been interpreted by the courts to mean the capacity and intention to perform the contract.
Arguments
Appellant (Basavaraj)’s Arguments:
- The appellant argued that the Trial Court’s findings on readiness and willingness were based on a thorough assessment of the evidence and should not have been overturned.
- Basavaraj contended that he had specifically stated his readiness and willingness in the plaint, the legal notice, and his deposition.
- He argued that he had approached the seller with the balance amount in June and July 2007, which was supported by the testimony of witnesses.
- The appellant highlighted that the seller had initially denied the agreement, then admitted to receiving ₹3,00,000, and later claimed it was a loan transaction, which showed dishonesty.
- He emphasized that the deposit of the balance amount with the Trial Court after the decree further demonstrated his readiness and willingness.
- The appellant relied on the Supreme Court’s decisions in Indira Kaur and Ors. Vs. Sheo Lal Kapoor; (1988) 2 SCC 488 and Beemaneni Maha Lakshmi Vs. Gangumalla Appa Rao; (2019) 6 SCC 233, arguing that not producing bank statements or passbooks should not lead to an adverse inference against the buyer.
- He also cited Ramrati Kuer Vs. Dwarika Prasad Singh; (1967) 1 SCR 153, stating that adverse inferences should not be drawn if accounts are not produced without a specific court order.
Respondent (Padmavathi)’s Arguments:
- The respondent argued that the High Court was correct in reversing the Trial Court’s decision because the appellant had not demonstrated sufficient funds to pay the balance.
- She contended that the appellant had not proven his readiness and willingness, as he did not produce any evidence of having the required cash or funds.
- The respondent relied on the Supreme Court’s decisions in J.P. Builders and Anr. Vs. A. Ramadas and Anr.; (2011) 1 SCC 429 and U.N. Krishnamurthy Vs. A.M. Krishnamurthy; 2022 SCC OnLine SC 840 to support her claim that the buyer must prove their financial capacity.
| Main Submission | Appellant (Basavaraj)’s Sub-Submissions | Respondent (Padmavathi)’s Sub-Submissions |
|---|---|---|
| Readiness and Willingness |
✓ Specific averment in plaint and legal notice. ✓ Testimony of approaching seller with cash. ✓ Deposit of balance amount with Trial Court. ✓ No cross-examination on these points. |
✓ Lack of proof of funds/cash. ✓ No production of passbooks/bank statements. |
| Evidence |
✓ Testimony of attestors to the agreement. ✓ Admission of agreement and receipt of earnest money by seller. |
✓ Relied on precedents that require proof of funds. |
| Dishonesty of Seller |
✓ Seller’s contradictory statements. ✓ Initial denial of agreement, then claiming it was a loan. |
|
| Reliance on Precedents | ✓ Indira Kaur, Beemaneni Maha Lakshmi, Ramrati Kuer: Non-production of accounts is not fatal. | ✓ J.P. Builders, U.N. Krishnamurthy: Buyer must prove financial capacity. |
Issues Framed by the Supreme Court
The primary issue before the Supreme Court was whether the High Court was justified in reversing the Trial Court’s findings on the readiness and willingness of the plaintiff (buyer) to perform his part of the contract, particularly when the plaintiff did not produce bank statements or passbooks to demonstrate their financial capacity.
Treatment of the Issue by the Court
| Issue | Court’s Treatment |
|---|---|
| Whether the High Court was justified in reversing the Trial Court’s findings on readiness and willingness of the plaintiff (buyer) to perform his part of the contract? | The Supreme Court held that the High Court erred in reversing the Trial Court’s findings. The Court emphasized that the plaintiff had sufficiently demonstrated readiness and willingness through his statements in the plaint, legal notice, deposition, and the testimony of witnesses. The Court also noted the plaintiff’s deposit of the balance amount with the Trial Court. The Court held that the non-production of bank statements or passbooks, without a specific court order, was not a valid reason to draw an adverse inference against the plaintiff. |
Authorities
Cases Relied Upon by the Court:
| Authority | Court | How it was used |
|---|---|---|
| Ramrati Kuer Vs. Dwarika Prasad Singh; (1967) 1 SCR 153 | Supreme Court of India | The Supreme Court relied on this case to emphasize that adverse inferences cannot be drawn against a party for not producing accounts unless there is a specific court order to do so. |
| Indira Kaur and Ors. Vs. Sheo Lal Kapoor; (1988) 2 SCC 488 | Supreme Court of India | The Court followed this case, which held that adverse inferences should not be drawn against a plaintiff for not producing a passbook unless specifically asked by the defendant or ordered by the court. |
| Beemaneni Maha Lakshmi Vs. Gangumalla Appa Rao; (2019) 6 SCC 233 | Supreme Court of India | The Court cited this case to support the view that the failure to demonstrate sufficient funds by the date of evidence is not of much consequence. |
Legal Provisions Considered by the Court:
- The Specific Relief Act, 1963: The court considered the provisions related to specific performance of contracts and the requirement of readiness and willingness on the part of the plaintiff.
Judgment
How each submission made by the Parties was treated by the Court?
| Submission | How it was treated by the Court |
|---|---|
| Appellant’s claim of readiness and willingness through pleadings, legal notice, and deposition. | The Court accepted this submission, noting the specific averments and the lack of cross-examination on these points. |
| Appellant’s submission of approaching seller with cash. | The Court accepted this submission, noting the testimony of witnesses supporting this claim and the lack of cross-examination. |
| Appellant’s deposit of balance amount with the Trial Court. | The Court viewed this as further evidence of readiness and willingness. |
| Appellant’s reliance on Indira Kaur, Beemaneni Maha Lakshmi, and Ramrati Kuer. | The Court upheld this reliance, stating that non-production of accounts or passbooks without a specific order does not warrant an adverse inference. |
| Respondent’s argument that the appellant did not prove sufficient funds. | The Court rejected this argument, stating that the appellant had sufficiently demonstrated readiness and willingness through their actions and statements. |
| Respondent’s reliance on J.P. Builders and U.N. Krishnamurthy. | The Court did not specifically address these cases, implicitly distinguishing them from the present case. |
How each authority was viewed by the Court?
✓ Ramrati Kuer Vs. Dwarika Prasad Singh; (1967) 1 SCR 153: The Supreme Court relied on this case to emphasize that adverse inferences cannot be drawn against a party for not producing accounts unless there is a specific court order to do so.
✓ Indira Kaur and Ors. Vs. Sheo Lal Kapoor; (1988) 2 SCC 488: The Court followed this case, which held that adverse inferences should not be drawn against a plaintiff for not producing a passbook unless specifically asked by the defendant or ordered by the court.
✓ Beemaneni Maha Lakshmi Vs. Gangumalla Appa Rao; (2019) 6 SCC 233: The Court cited this case to support the view that the failure to demonstrate sufficient funds by the date of evidence is not of much consequence.
What weighed in the mind of the Court?
The Supreme Court’s decision was primarily influenced by the evidence presented by the appellant, which demonstrated his readiness and willingness to perform the contract. The Court emphasized that the appellant had made specific averments in the plaint, the legal notice, and his deposition, stating his readiness to pay the balance amount. The Court also noted the testimony of witnesses who corroborated the appellant’s claim of approaching the seller with the balance amount in cash. The fact that the appellant deposited the balance amount with the Trial Court after the decree was also a significant factor in the Court’s decision. The Court also considered the dishonest pleas taken by the seller. The Court also relied on previous precedents to state that non-production of bank statements without a court order cannot be a ground for adverse inference.
| Sentiment | Percentage |
|---|---|
| Evidence of Readiness and Willingness | 40% |
| Deposit of Balance Amount | 20% |
| Dishonest Pleas of the Seller | 20% |
| Precedents on Non-Production of Accounts | 20% |
| Ratio | Percentage |
|---|---|
| Fact | 60% |
| Law | 40% |
Logical Reasoning
The Supreme Court found that the High Court had erred in reversing the Trial Court’s decision. The Court emphasized that the plaintiff had sufficiently demonstrated his readiness and willingness to perform the contract through his statements, actions, and the testimony of witnesses. The Court held that not producing bank statements or passbooks was not a valid reason to draw an adverse inference against the plaintiff, especially since no specific court order was made for their production. The Court relied on previous decisions to support this view. The Court also noted the dishonest pleas taken by the seller. The Supreme Court restored the Trial Court’s decree for specific performance, directing the plaintiff to pay an additional sum of ₹10 lakhs to the seller within eight weeks, and the seller to execute the sale deed within two weeks thereafter.
The Court quoted from Ramrati Kuer Vs. Dwarika Prasad Singh; (1967) 1 SCR 153:
“An adverse inference could only have been drawn against the plaintiffs-respondents if the appellant had asked the court to order them to produce accounts and they had failed to produce them after admitting that Basekhi Singh used to keep accounts. But no such prayer was made to the court, and in the circumstances no adverse inference could be drawn from the non-production of accounts.”
The Court also quoted from Indira Kaur and Ors. Vs. Sheo Lal Kapoor; (1988) 2 SCC 488:
“unless the plaintiff was called upon to produce the passbook either by the defendant or, the Court orders him to do so, no adverse inference can be drawn.”
The Court also stated:
“However, at the same time, to do the complete justice, we are of the opinion that if the plaintiff is directed to pay a further sum of Rs. 10 lakhs towards sale consideration, it will meet the ends of justice.”
Key Takeaways
- Readiness and Willingness: In suits for specific performance, a plaintiff can demonstrate their readiness and willingness through their statements in pleadings, legal notices, and depositions, along with the testimony of witnesses.
- Non-Production of Accounts: Courts cannot draw adverse inferences against a party for not producing bank statements or passbooks unless there is a specific court order to do so.
- Holistic Assessment: Courts should consider the totality of evidence and circumstances when assessing the readiness and willingness of a party to perform a contract.
- Dishonest Pleas: Dishonest pleas by the defendant can be a factor in deciding the case.
- Additional Payment: The Supreme Court has the power to direct additional payments to achieve complete justice.
Directions
The Supreme Court directed the plaintiff to pay an additional sum of ₹10 lakhs to the defendant within eight weeks. Upon this payment, the defendant was directed to execute the sale deed in favor of the plaintiff within two weeks. The defendant was also permitted to withdraw the amount of ₹9,74,000 deposited by the plaintiff with the Trial Court, along with the accrued interest.
Development of Law
The ratio decidendi of this case is that in suits for specific performance, the readiness and willingness of the plaintiff can be demonstrated through their statements in pleadings, legal notices, and depositions, along with the testimony of witnesses, and that non-production of bank statements or passbooks does not warrant an adverse inference unless there is a specific court order. The Supreme Court has clarified that a holistic assessment of the evidence is required, and that dishonest pleas taken by the seller can be a factor in deciding the case. This judgment reinforces the principle that courts should not take a narrow or technical view of readiness and willingness, and that the focus should be on the substance of the evidence. The judgment also clarifies that the Supreme Court has the power to direct additional payments to achieve complete justice.
Conclusion
In conclusion, the Supreme Court allowed the appeal, setting aside the High Court’s judgment and restoring the Trial Court’s decree for specific performance. The Court emphasized that the plaintiff had sufficiently demonstrated his readiness and willingness to perform the contract. The Court also directed the plaintiff to pay an additional sum of ₹10 lakhs to the defendant, ensuring complete justice. This judgment clarifies that courts should not draw adverse inferences solely based on the non-production of bank statements without a specific order and should consider the totality of evidence when assessing readiness and willingness.
Source: Basavaraj vs. Padmavathi