Supreme Court Reverses Course on Specific Performance in Property Dispute: Siddamsetty Infra Projects Wins (2024)

Date of the Judgment: 08 November 2024
Citation: 2024 INSC 861
Judges: Dr Dhananjaya Y Chandrachud, CJI, J.B. Pardiwala J, Manoj Misra J
Can a court reverse its own judgment? The Supreme Court of India recently revisited a case concerning a property sale agreement, focusing on whether the suit was filed within the correct time frame and if the buyer deserved to have the property transferred to them. This case highlights the complexities of property law and the importance of adhering to contractual timelines. The Supreme Court bench, consisting of Chief Justice Dr Dhananjaya Y Chandrachud, Justice J.B. Pardiwala, and Justice Manoj Misra, reviewed the previous decision and ultimately reversed it, favoring the buyer.

Case Background

The case revolves around a property sale agreement. On 19 March 1994, the original owners agreed to sell a 127.29-acre land to the vendors, handing over 65.23 acres initially and the rest after full payment, though no sale deed was executed. Instead, an irrevocable power of attorney was given to the vendors on 28 March 1994.

On 26 March 1997, the vendors entered into an agreement to sell 38.15 acres of the land to the petitioner, M/s Siddamsetty Infra Projects Pvt. Ltd., for Rs 38,37,500 (first agreement to sell). The petitioner paid Rs 5,30,000 in cash and Rs 6,00,000 by cheque as advance. A second agreement to sell was made on 27 March 1997 for 1.33 acres for Rs 1,82,500.

The petitioner sent a legal notice on 8 February 2000, asking the vendors to complete the sale. The vendors refused, claiming they had not received the payment. The petitioner sent another legal notice on 6 July 2002, and the vendors replied on 22 July 2002, claiming the suit was time-barred and they were ready with the documents but the petitioner was not ready with the payment.

On 9 August 2002, the petitioner filed a suit seeking specific performance of the sale agreements, stating they had paid Rs 34,80,850 of the total Rs 40,20,000 and were always ready to pay the remaining amount.

Timeline

Course of Proceedings

The Trial Court dismissed the petitioner’s suit on 12 December 2010, stating that the petitioner failed to prove they were always willing to perform their part of the agreement. The court also noted that the petitioner made false claims about the possession of the property and the amount paid, and that the suit was barred by limitation.

The High Court partly allowed the appeal on 23 April 2021, stating that the Trial Court had erred in calculating the limitation period. The High Court held that the limitation period should start from the date of refusal of performance, not from the date fixed for performance. The High Court also held that time was not of the essence in this contract and that the petitioner had shown readiness and willingness to perform the contract. The High Court decreed specific performance to the extent of consideration paid.

The Supreme Court, in its judgment dated 25 August 2022, allowed the appeal against the High Court’s judgment, holding that time was of the essence in the contract and that the suit was barred by limitation. The Supreme Court also held that the petitioner was not ready and willing to perform their part of the contract.

Legal Framework

The case primarily involves the interpretation of the following legal provisions:

• Article 54 of the Schedule to the Limitation Act 1963: This provision sets the limitation period for filing a suit for specific performance of a contract. It states:
  
  “For specific performance of a contract: Three years. The date fixed for the performance, or, if no such date is fixed, when the plaintiff has notice that performance is refused.”
• Section 10 of the Specific Relief Act 1963 (before 2018 amendment): This section deals with cases in which specific performance of a contract is enforceable. It states:
  
  “Except as otherwise provided in this Chapter, the specific performance of any contract may, in the discretion of the court, be enforced- (a) when there exists no standard for ascertaining actual damage caused by the non- performance of the act agreed to be done; or (b) when the act agreed to be done is such that compensation in money for its non- performance would not afford adequate relief.”
• Section 16(c) of the Specific Relief Act 1963: This section specifies personal bars to relief, stating that specific performance cannot be enforced in favor of a person who fails to prove that they have performed or have always been ready and willing to perform the essential terms of the contract.
  
  “Specific performance of a contract cannot be enforced in favour of a person- […] (c) who fails to 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.”
• Section 52 of the Transfer of Property Act 1882: This section deals with the doctrine of lis pendens, which prevents the transfer of property during the pendency of a suit.
  
  “During the pendency in any Court having authority within the limits of India excluding the State of Jammu and Kashmir or established beyond such limits by the Central Government of any suit or proceeding which is not collusive and in which any right to immovable property is directly and specifically in question, the property cannot be transferred or otherwise dealt with by any party to the suit or proceeding so as to affect the rights of any other party thereto under any decree or order which may be made therein, except under the authority of the Court and on such terms as it may impose.”

Arguments

Petitioner’s Submissions:

• The petitioner argued that the Supreme Court’s judgment contained errors apparent on the face of the record.
• The petitioner contended that the Supreme Court incorrectly interpreted Clause 21 of the agreements to sell, which referred to an agreement between the original owners and the vendors, not the petitioner.
• The petitioner submitted that the Trial Court had found that the vendors did not produce the required certificates, which was not challenged before the High Court. The Supreme Court wrongly recorded that the vendors produced the certificates.
• The petitioner argued that Clause 3 of the agreements did not state that the agreement would be canceled if the petitioner did not pay the balance amount within three months.

Respondents’ Submissions:

• The respondents argued that the Supreme Court’s judgment was sound and independent of the misreference to the 1994 agreement.
• The respondents submitted that the suit property was alienated after the Supreme Court’s judgment and before the review petition was registered.
• The respondents argued that the doctrine of lis pendens does not apply when the petition was in the registry in a defective state.

Submissions Table

Issues Framed by the Supreme Court

The Supreme Court framed the following issues for consideration:

1. Whether the judgment of this Court dated 25 August 2022 suffers from an error apparent on the face of the record which warrants the exercise of the review jurisdiction.
2. Whether the suit instituted by the petitioner was barred by limitation.
3. Whether the suit for specific performance must be decreed.

Treatment of the Issue by the Court

The following table demonstrates as to how the Court decided the issues

Authorities

The Supreme Court considered the following authorities:

Cases:

• Chand Rani v. Kamal Rani [(1993) 1 SCC 519] – Supreme Court of India: This case was used to determine whether time was of the essence in the contract. The Court held that there is no presumption that time is of essence in a contract for a sale of immovable property.
• Babula l v. Hajarilal Kishorilal [1982 (1) SCC 525] – Supreme Court of India: This case was relied upon by the High Court to state that delivery of possession is inherent and ancillary to the relief of specific performance under Section 55 of the Transfer of Property Act 1882.
• R Lakshmi Kantham v. Devaraji [(2019) 8 SCC 62] – Supreme Court of India: This case was relied upon by the High Court to state that the suit was filed within limitation.
• Mademsetty Satyanarayana v. G. Yelloji Rao [AIR 1965 SC 1405] – Supreme Court of India: This case was relied upon by the High Court to state that the suit was filed within limitation.
• Saradamani Kandappan v. S. Rajalakshmi [(2011) 12 SCC 18] – Supreme Court of India: This case was used to determine the factors that the Courts must consider while deciding whether to exercise the discretion of decreeing specific performance of a contract.
• Jaswinder Kaur v. Gurmeet Singh, [(2017) 12 SCC 810] – Supreme Court of India: This case was used to state that Section 12 of the Specific Relief Act does not apply to situations where the inability to perform the contract arises out of the party’s own conduct.
• Murali Sundaram v. Jothibai Kannan, [2023 SCC OnLine SC 185] – Supreme Court of India: This case was used to lay down the principles on the exercise of review jurisdiction.
• Karnail Singh v. State of Haryana, [2021 SCC OnLine SC 961] – Supreme Court of India: This case was used to lay down the principles on the exercise of review jurisdiction.
• Kamlesh Verma v. Mayawati, [(2013) 8 SCC 320] – Supreme Court of India: This case was used to lay down the principles on the exercise of review jurisdiction.
• Sanjay Kumar Agarwal v. State Tax Officer, [(2024) 2 SCC 362] – Supreme Court of India: This case was used to lay down the principles on the exercise of review jurisdiction.
• Nagubai Ammal v. B Shama Rao, [1956 SCC 321] – Supreme Court of India: This case was used to define a collusive suit.
• Amit Kumar Shaw v. Farida Khatoon, [(2005) 11 SCC 403] – Supreme Court of India: This case was used to state the conditions for the doctrine of lis pendens to apply.
• Bellamy v. Sabine [(1857) 1 De G&J 566] – English Court: This case was used to explain the principle on which the doctrine of lis pendens rests.
• Jayaram Mudaliar v. Ayyaswami [AIR 1973 SC 569] – Supreme Court of India: This case was used to set out the content of the doctrine of lis pendens.
• GT Girish v. Y Subba Raju , [2022 8 SCR 991] – Supreme Court of India: This case was used to state that any transfer that is made during the pendency is subject to the final result of the litigation.

Legal Provisions:

• Article 54 of the Schedule to the Limitation Act 1963: This provision was used to determine the limitation period for the suit.
• Section 10 of the Specific Relief Act 1963 (before 2018 amendment): This provision was used to determine whether specific performance should be granted.
• Section 16(c) of the Specific Relief Act 1963: This provision was used to determine if the petitioner was ready and willing to perform the contract.
• Section 52 of the Transfer of Property Act 1882: This provision was used to determine the applicability of the doctrine of lis pendens.

Judgment

How each submission made by the Parties was treated by the Court?

How each authority was viewed by the Court?

• Chand Rani v. Kamal Rani [(1993) 1 SCC 519]*: The Court acknowledged the principle laid down in this case, that there is no presumption that time is of the essence in a contract for a sale of immovable property, but held that it had misapplied the principle in its previous judgment.
• Babula l v. Hajarilal Kishorilal [1982 (1) SCC 525]*: The Court did not comment on this authority.
• R Lakshmi Kantham v. Devaraji [(2019) 8 SCC 62]*: The Court did not comment on this authority.
• Mademsetty Satyanarayana v. G. Yelloji Rao [AIR 1965 SC 1405]*: The Court did not comment on this authority.
• Saradamani Kandappan v. S. Rajalakshmi [(2011) 12 SCC 18]*: The Court acknowledged that it had misapplied the principles laid down in this case in its previous judgment.
• Jaswinder Kaur v. Gurmeet Singh, [(2017) 12 SCC 810]*: The Court did not comment on this authority.
• Murali Sundaram v. Jothibai Kannan, [2023 SCC OnLine SC 185]*: The Court relied on this case to reiterate the principles on the exercise of review jurisdiction.
• Karnail Singh v. State of Haryana, [2021 SCC OnLine SC 961]*: The Court relied on this case to reiterate the principles on the exercise of review jurisdiction.
• Kamlesh Verma v. Mayawati, [(2013) 8 SCC 320]*: The Court relied on this case to reiterate the principles on the exercise of review jurisdiction.
• Sanjay Kumar Agarwal v. State Tax Officer, [(2024) 2 SCC 362]*: The Court relied on this case to reiterate the principles on the exercise of review jurisdiction.
• Nagubai Ammal v. B Shama Rao, [1956 SCC 321]*: The Court relied on this case to define a collusive suit.
• Amit Kumar Shaw v. Farida Khatoon, [(2005) 11 SCC 403]*: The Court relied on this case to state the conditions for the doctrine of lis pendens to apply.
• Bellamy v. Sabine [(1857) 1 De G&J 566]*: The Court relied on this case to explain the principle on which the doctrine of lis pendens rests.
• Jayaram Mudaliar v. Ayyaswami [AIR 1973 SC 569]*: The Court relied on this case to set out the content of the doctrine of lis pendens.
• GT Girish v. Y Subba Raju , [2022 8 SCR 991]*: The Court relied on this case to state that any transfer that is made during the pendency is subject to the final result of the litigation.

What weighed in the mind of the Court?

The Supreme Court’s decision was heavily influenced by the following:

• The Court acknowledged its errors in interpreting the sale agreements, particularly Clauses 3 and 21.
• The Court recognized its mistake in the factual finding regarding the production of certificates by the vendors.
• The Court emphasized that the limitation period should be calculated from the date of refusal of performance, not the date fixed for performance.
• The Court stressed that the petitioner had demonstrated readiness and willingness to perform the contract by paying a substantial portion of the sale consideration.
• The Court highlighted that the doctrine of lis pendens applied to the third-party purchaser.

Sentiment Analysis of Reasons Given by the Supreme Court

Fact:Law Ratio

The Court’s reasoning was a blend of factual corrections and legal interpretations. The factual errors regarding the interpretation of the agreement and the production of certificates weighed heavily, while the legal analysis focused on the correct application of the Limitation Act and the Specific Relief Act.

The Court considered alternative interpretations but rejected them based on its analysis of the facts and the law. The Court emphasized that its previous judgment had misapplied the principles laid down in Chand Rani v. Kamal Rani [(1993) 1 SCC 519] and Saradamani Kandappan v. S. Rajalakshmi [(2011) 12 SCC 18].

The Court’s decision was based on a thorough review of the facts and the law, and it concluded that the petitioner was entitled to the relief of specific performance. The Court also held that the doctrine of lis pendens applied to the third-party purchaser.

The Court quoted the following from the judgment:

• “However, the conclusion that the Clause only provides consequences for the non-payment of the balance consideration by the purchaser and not for the non-production of certificates by the vendor s is an error apparent on the face of the record.”
• “Thus, the conclusion that Clause 21 indicates that an agreement was executed in 1994 with the petitioner which did not materialise is an error apparent on the face of the record.”
• “Having concluded that the basis of the reasoning of this Court on whether the petitioner was willing to perform the contract has an error apparent on the face of the record, we are required to decide the issue of whether the petitioner was ready and willing to perform the contract.”

There were no dissenting opinions in this case.

Key Takeaways

• The Supreme Court can review its own judgments if there are errors apparent on the face of the record.
• The limitation period for a suit for specific performance starts from the date of refusal of performance if no specific date is fixed in the contract.
• A purchaser who has paid a substantial portion of the sale consideration can be considered ready and willing to perform the contract.
• The doctrine of lis pendens applies to the third-party purchaser if the property is transferred during the pendency of a suit.
• Courts must carefully examine the terms of contracts and the factual evidence before making a decision.

Directions

Directions by the Supreme Court

The Supreme Court allowed the review petition and set aside its judgment dated 25 August 2022. The Court restored the judgment of the High Court dated 23 April 2021, decreeing specific performance to the extent of the consideration paid by the petitioner. The Court also directed the respondents to execute the sale deed in favor of the petitioner.