Date of the Judgment: 05 January 2023
Citation: (2023) INSC 17
Judges: M. R. Shah, J. and B.V. Nagarathna, J.
Can a High Court overturn a Trial Court’s decision on the readiness and willingness of a buyer to purchase a property, especially when the buyer has demonstrated their intent by depositing the balance amount? The Supreme Court of India addressed this crucial question in a recent case concerning a land sale agreement. The Court examined whether the High Court was correct in reversing the Trial Court’s decree for specific performance, focusing on the buyer’s readiness and willingness to fulfill the contract. The judgment was delivered by a division bench of Justices M. R. Shah and B.V. Nagarathna, with Justice M. R. Shah authoring the opinion.
Case Background
The case revolves around an agreement to sell a piece of land. On 13th March 2007, the original defendant (Respondent No. 1), agreed to sell the land to the original plaintiff (Appellant) for ₹12,74,000. The buyer paid ₹3,00,000 as earnest money. The sale was to be completed by 31st July 2007. When the seller failed to execute the sale deed, the buyer sent a legal notice on 20th November 2007, asking the seller to complete the sale. The seller denied the agreement on 3rd December 2007. Subsequently, the buyer filed a suit for specific performance on 14th February 2008. The seller denied the agreement and the buyer’s readiness to complete the sale.
Timeline
| Date | Event |
|---|---|
| 13th March 2007 | Agreement to sell executed between the buyer and seller for ₹12,74,000, with ₹3,00,000 paid as earnest money. |
| 31st July 2007 | Deadline for the sale deed execution as per the agreement. |
| 20th November 2007 | Buyer issues legal notice to the seller to complete the sale. |
| 3rd December 2007 | Seller denies the agreement in response to the legal notice. |
| 14th February 2008 | Buyer files a suit for specific performance. |
| 30th September 2011 | Trial Court decrees the suit for specific performance. |
| 31st October 2011 | Buyer deposits the balance sale amount of ₹9,74,000 in the Trial Court. |
| 27th November 2020 | High Court allows the seller’s appeal, setting aside the Trial Court’s decree. |
| 6th December 2021 | High Court dismisses the review petition filed by the buyer. |
| 5th January 2023 | Supreme Court allows the appeal, restoring the Trial Court’s decree with additional directions. |
Course of Proceedings
The Trial Court, after examining the evidence, ruled in favor of the buyer on 30th September 2011, decreeing the suit for specific performance. The court accepted that the agreement was valid, that the earnest money was paid, and that the buyer was ready and willing to complete the sale. Following the Trial Court’s decree, the buyer deposited the remaining ₹9,74,000 with the court on 31st October 2011. The seller then appealed to the High Court of Karnataka at Kalaburagi. The High Court reversed the Trial Court’s decision on 27th November 2020, stating that the buyer had not proven their readiness and willingness to perform the contract. The High Court also dismissed the review petition on 6th December 2021. The buyer then appealed to the Supreme Court.
Legal Framework
The case primarily revolves around the interpretation of “readiness and willingness” in the context of specific performance under the Specific Relief Act, 1963. The Supreme Court has considered the previous judgments on the aspect of readiness and willingness of the buyer.
Arguments
Appellant’s Arguments (Buyer):
- The buyer argued that they had consistently shown readiness and willingness to complete the sale. This was evidenced by:
- Averments in the plaint stating readiness and willingness.
- Averments in the legal notice dated 20th November 2007, expressing readiness to pay the balance.
- Testimony stating he approached the seller in June and July 2007 with the balance amount.
- Testimony of witnesses (PW2 and PW3) confirming the buyer’s offer to pay in cash in July 2007.
- Deposit of the balance amount of ₹9,74,000 in the Trial Court on 31st October 2011.
- The seller initially denied the agreement, then contradicted themselves by admitting the receipt of ₹3 lakhs and later claiming it was a loan transaction.
- The buyer 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 be held against them.
- They also cited Ramrati Kuer Vs. Dwarika Prasad Singh; (1967) 1 SCR 153, stating that no adverse inference should be drawn for not producing accounts unless specifically asked by the court.
Respondent’s Arguments (Seller):
- The seller argued that the buyer had failed to prove that they had sufficient funds to pay the balance amount.
- They contended that the High Court was right in reversing the Trial Court’s decision due to the lack of evidence of the buyer’s financial capacity.
- The seller 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 their claim that the buyer had to demonstrate the availability of funds.
| Main Submission | Sub-Submissions by Appellant (Buyer) | Sub-Submissions by Respondent (Seller) |
|---|---|---|
| Readiness and Willingness |
✓ Plaint averred readiness and willingness. ✓ Legal notice showed readiness to pay the balance. ✓ Buyer testified to approaching the seller with cash. ✓ Witnesses confirmed the buyer’s cash offer. ✓ Balance amount deposited in court. |
✓ Buyer failed to prove sufficient funds. ✓ High Court correctly reversed the Trial Court’s decision. |
| Dishonest Conduct of Seller |
✓ Seller initially denied the agreement. ✓ Seller later admitted receiving ₹3 lakhs. ✓ Seller claimed the agreement was for a loan. |
|
| Authorities |
✓ Indira Kaur: Non-production of passbook is not conclusive. ✓ Beemaneni Maha Lakshmi: Failure to demonstrate sufficient money is not conclusive. ✓ Ramrati Kuer: No adverse inference without a specific prayer for accounts. |
✓ J.P. Builders: Buyer must demonstrate funds. ✓ U.N. Krishnamurthy: Buyer must demonstrate funds. |
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 buyer’s readiness and willingness to perform the contract.
Treatment of the Issue by the Court
| Issue | Court’s Decision | Brief Reasons |
|---|---|---|
| Whether the High Court was correct in reversing the Trial Court’s findings on the buyer’s readiness and willingness? | No. The Supreme Court held that the High Court erred in reversing the Trial Court’s findings. | The buyer had consistently demonstrated readiness and willingness through their actions and statements, and the High Court incorrectly drew an adverse inference for not producing bank statements. |
Authorities
The Supreme Court considered the following authorities:
Cases:
- Ramrati Kuer Vs. Dwarika Prasad Singh; (1967) 1 SCR 153: The Court reiterated that no adverse inference can be drawn for not producing accounts unless specifically asked for by the court.
- Indira Kaur and Ors. Vs. Sheo Lal Kapoor; (1988) 2 SCC 488: The Court held that unless the plaintiff is called upon to produce the passbook either by the defendant or by the Court, no adverse inference can be drawn.
- Beemaneni Maha Lakshmi Vs. Gangumalla Appa Rao; (2019) 6 SCC 233: The Court observed that the failure to demonstrate sufficient funds by the date of evidence is not consequential.
- J.P. Builders and Anr. Vs. A. Ramadas and Anr.; (2011) 1 SCC 429: The seller relied on this case to support their claim that the buyer had to demonstrate the availability of funds.
- U.N. Krishnamurthy Vs. A.M. Krishnamurthy; 2022 SCC OnLine SC 840: The seller relied on this case to support their claim that the buyer had to demonstrate the availability of funds.
| Authority | Court | How the Authority was Considered |
|---|---|---|
| Ramrati Kuer Vs. Dwarika Prasad Singh; (1967) 1 SCR 153 | Supreme Court of India | Followed: No adverse inference for not producing accounts unless specifically asked. |
| Indira Kaur and Ors. Vs. Sheo Lal Kapoor; (1988) 2 SCC 488 | Supreme Court of India | Followed: No adverse inference for not producing a passbook unless specifically asked. |
| Beemaneni Maha Lakshmi Vs. Gangumalla Appa Rao; (2019) 6 SCC 233 | Supreme Court of India | Followed: Failure to demonstrate sufficient funds is not consequential. |
| J.P. Builders and Anr. Vs. A. Ramadas and Anr.; (2011) 1 SCC 429 | Supreme Court of India | Distinguished: Not applicable in the present context. |
| U.N. Krishnamurthy Vs. A.M. Krishnamurthy; 2022 SCC OnLine SC 840 | Supreme Court of India | Distinguished: Not applicable in the present context. |
Judgment
| Submission by Parties | How the Court Treated the Submission |
|---|---|
| Appellant’s submission that they were ready and willing to perform the contract. | The Court accepted the submission, noting the buyer’s consistent actions and statements showing readiness and willingness. |
| Appellant’s submission that the seller took contradictory stands. | The Court noted the seller’s contradictory pleas, which supported the buyer’s case. |
| Appellant’s reliance on Indira Kaur, Beemaneni Maha Lakshmi, and Ramrati Kuer. | The Court upheld the appellant’s reliance on these cases, stating that no adverse inference should have been drawn for not producing bank statements. |
| Respondent’s submission that the buyer had failed to prove sufficient funds. | The Court rejected the submission, stating that the buyer had sufficiently demonstrated readiness and willingness. |
| Respondent’s reliance on J.P. Builders and U.N. Krishnamurthy. | The Court distinguished these cases, holding that they were not applicable to the present facts. |
The Supreme Court held that the High Court had erred in reversing the Trial Court’s findings on the readiness and willingness of the buyer. The Court emphasized that the buyer had consistently shown their intent to complete the sale.
The Court cited Indira Kaur and Ors. Vs. Sheo Lal Kapoor; (1988) 2 SCC 488, stating that *“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 further observed that in Ramrati Kuer Vs. Dwarika Prasad Singh; (1967) 1 SCR 153, it was held that *“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 noted that in Beemaneni Maha Lakshmi Vs. Gangumalla Appa Rao; (2019) 6 SCC 233, it was observed that *“failure on the part of the vendee to “demonstrate” that he was having sufficient money with him to pay the balance sale consideration by the date of his evidence is not of much of consequence.”*
The Supreme Court restored the Trial Court’s decree for specific performance. However, to do complete justice, the Court directed the buyer to pay an additional ₹10 lakhs to the seller within eight weeks. Upon this payment, the seller was directed to execute the sale deed within two weeks. The seller was also permitted to withdraw the ₹9,74,000 deposited by the buyer, along with the accrued interest.
What weighed in the mind of the Court?
The Supreme Court’s decision was primarily influenced by the consistent actions and statements of the buyer demonstrating their readiness and willingness to complete the sale. The Court emphasized that the High Court had erred in drawing an adverse inference against the buyer for not producing bank statements or passbooks, especially when the buyer had already deposited the balance amount in court. The Court also considered the contradictory stands taken by the seller, which further supported the buyer’s case.
| Sentiment | Percentage |
|---|---|
| Buyer’s Readiness and Willingness | 40% |
| Seller’s Contradictory Stands | 25% |
| Incorrect Inference by High Court | 25% |
| Deposit of Balance Amount | 10% |
| Ratio | Percentage |
|---|---|
| Fact | 60% |
| Law | 40% |
Key Takeaways
- A buyer’s readiness and willingness to perform a contract for the sale of land can be demonstrated through their actions, statements, and conduct.
- Courts should not draw adverse inferences against a buyer for not producing bank statements or passbooks unless specifically asked to do so.
- Contradictory stands taken by a seller can weaken their case and support the buyer’s claim.
- The Supreme Court has clarified the interpretation of “readiness and willingness” in specific performance cases.
- The Supreme Court has the power to do complete justice by directing additional payment by the buyer to the seller.
Directions
The Supreme Court directed the following:
- The buyer must pay an additional ₹10 lakhs to the seller within eight weeks.
- Upon payment, the seller must execute the sale deed within two weeks.
- The seller is permitted to withdraw the ₹9,74,000 deposited by the buyer, along with the accrued interest.
Development of Law
The Supreme Court reaffirmed the principles laid down in previous cases regarding the interpretation of “readiness and willingness” in specific performance cases. The Court emphasized that the burden is on the plaintiff to prove their readiness and willingness, but this does not necessarily require the production of bank statements or passbooks unless specifically asked by the court. The ratio decidendi of the case is that a buyer can demonstrate readiness and willingness without producing bank statements, and the court should not draw adverse inference unless specifically asked to produce.
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 buyer had consistently demonstrated their readiness and willingness to complete the sale, and the High Court had erred in reversing the Trial Court’s decision. The Court directed the buyer to pay an additional ₹10 lakhs to the seller to do complete justice.
Category
Parent Category: Contract Law
Child Category: Specific Performance
Child Category: Readiness and Willingness
Parent Category: Specific Relief Act, 1963
Child Category: Specific Relief Act, 1963 Section 16(c)
FAQ
Q: What does “readiness and willingness” mean in a contract for the sale of land?
A: “Readiness” means the buyer has the financial capacity to pay the balance amount, while “willingness” means the buyer is actually willing to complete the purchase.
Q: Can a court assume a buyer is not ready to purchase if they don’t show bank statements?
A: No, a court cannot assume a buyer is not ready if they don’t show bank statements unless the court or the seller specifically asks for them.
Q: What if the seller denies the agreement but later admits to receiving a part payment?
A: If the seller takes contradictory stands, it can weaken their case and support the buyer’s claim that the agreement was valid.
Q: What happens if a court finds that the buyer has demonstrated readiness and willingness?
A: If the court finds that the buyer has demonstrated readiness and willingness, it may order the seller to complete the sale as per the agreement.
Q: What is specific performance?
A: Specific performance is a legal remedy where a court orders a party to fulfill their obligations under a contract, especially in cases involving the sale of property.
Source: Basavaraj vs. Padmavathi