Supreme Court Reverses High Court in Specific Performance Suit: Janardan Das vs. Durga Prasad Agarwalla (2024)

Date of the Judgment: 26 September 2024

Citation: 2024 INSC 778

Judges: Vikram Nath J., Pankaj Mithal J., Prasanna B. Varale J.

Can a party obtain specific performance of a contract if they fail to demonstrate continuous readiness and willingness to fulfill their obligations? The Supreme Court of India recently addressed this question in a case concerning a property sale agreement. The court overturned a High Court decision, emphasizing the importance of proving both readiness and willingness, and the necessity of proper authorization for an agent to act on behalf of a principal. This case highlights the strict requirements for obtaining specific performance of a contract.

Case Background

The case revolves around a property in Baripada, Odisha, originally owned by Late Surendranath Banerjee. Upon his death on 03.07.1980, the property was inherited by his five heirs: two sons (Binayendra Banerjee and late Soumendra Nath Banerjee) and three daughters (Smt. Rekha Mukherjee, Smt. Sikha Das, and Smt. Monila Pal).

On 14.04.1993, the co-owners (Defendant Nos. 1 to 8) orally agreed to sell the property to the appellants (Defendant Nos. 9 to 11) for ₹4,20,000. Subsequently, on 06.06.1993, the plaintiffs (Respondent Nos. 1 & 2), who operated a petrol pump on the land, allegedly entered into an agreement with Defendant No. 1 and late Soumendra to purchase the property for ₹5,70,000, paying ₹70,000 as earnest money. This agreement stipulated that the sisters (Defendant Nos. 6 to 8) would come to Baripada within three months to execute the sale deed. However, this agreement was only signed by Defendant No. 1 and late Soumendra, without any explicit consent from the sisters.

The plaintiffs claimed that Defendant No. 1 was authorized to act on behalf of his sisters through an unregistered General Power of Attorney (GPA) dated 30.12.1982. However, this GPA was limited to managing the property and collecting rent, and it was effectively revoked by a registered partition deed dated 17.02.1988.

On 27.09.1993, the co-owners, including the sisters, executed a registered sale deed in favor of the appellants (Defendant Nos. 9 to 11) for ₹4,20,000. The plaintiffs then filed a suit seeking specific performance of their agreement or, alternatively, specific performance to the extent of the shares of Defendant No. 1 and late Soumendra.

Timeline:

Course of Proceedings

The Trial Court dismissed the plaintiffs’ suit for specific performance, finding that the agreement dated 06.06.1993 was incomplete and unenforceable against Defendant Nos. 6 to 8, as they had not consented to the sale. The court also held that the General Power of Attorney (GPA) did not authorize Defendant No. 1 to sell the property on behalf of his sisters and was impliedly revoked by the partition deed. The Trial Court concluded that the plaintiffs failed to demonstrate continuous readiness and willingness to perform their part of the contract.

On appeal, the High Court reversed the Trial Court’s decision, holding that the GPA was valid and authorized Defendant No. 1 to act on behalf of his sisters. The High Court found the agreement dated 06.06.1993 to be valid and enforceable against all defendants, including the sisters, and directed the defendants to execute the sale deed in favor of the plaintiffs.

Legal Framework

The case primarily concerns Section 16(c) of the Specific Relief Act, 1963, which states that a plaintiff seeking specific performance must prove their readiness and willingness to perform their part of the contract. The provision states:

“16. Personal bars to relief.—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.”

This section mandates that the plaintiff must demonstrate a continuous readiness and willingness to fulfill their contractual obligations. This includes having the financial capacity and taking necessary steps to complete the transaction.

Additionally, the court considered the implications of an agent acting on behalf of a principal. The court examined whether the General Power of Attorney (GPA) granted Defendant No. 1 the authority to bind his sisters to the agreement.

Arguments

Plaintiffs’ Arguments:

• ✓ The plaintiffs argued that they had entered into a valid agreement with Defendant No. 1 and late Soumendra on 06.06.1993 to purchase the property for ₹5,70,000, paying ₹70,000 as earnest money.
• ✓ They contended that Defendant No. 1 was authorized to act on behalf of his sisters (Defendant Nos. 6 to 8) through the General Power of Attorney (GPA) dated 30.12.1982.
• ✓ The plaintiffs maintained that they were always ready and willing to perform their part of the contract, including paying the balance consideration.
• ✓ They asserted that the subsequent sale deed executed on 27.09.1993 in favor of Defendant Nos. 9 to 11 was invalid as it was executed with full knowledge of the prior agreement with the plaintiffs.

Defendants’ Arguments:

• ✓ The defendants argued that Defendant No. 1 did not have the authority to sell the property on behalf of Defendant Nos. 6 to 8.
• ✓ They contended that the GPA was limited in scope and effectively revoked by the partition deed dated 17.02.1988.
• ✓ The defendants maintained that the agreement dated 06.06.1993 was incomplete and unenforceable, as it was contingent upon obtaining the consent of Defendant Nos. 6 to 8, which was never secured.
• ✓ They asserted that the plaintiffs failed to fulfill the terms of the agreement, particularly in not ensuring the presence and consent of the sisters within the stipulated time.
• ✓ The defendants highlighted that the sale deed executed on 27.09.1993 in favor of Defendant Nos. 9 to 11 was valid, having been executed with the full consent and participation of all co-owners.
• ✓ They asserted that the appellants were bona fide purchasers for value without notice of any enforceable prior agreement.

Sub-Submissions:

Issues Framed by the Supreme Court

1. Whether the plaintiffs proved their continuous readiness and willingness to perform their part of the contract as mandated under Section 16(c) of the Specific Relief Act, 1963.
2. Whether the agreement to sell dated 06.06.1993 was valid and enforceable against Defendant Nos. 6 to 8, considering that Defendant No. 1 lacked the authority to act on their behalf without a valid and subsisting General Power of Attorney.
3. Whether the relief of specific performance, being discretionary, having been denied by the Trial Court was rightly granted by the High Court in the facts and circumstances of the present case.

Treatment of the Issue by the Court

Authorities

Cases:

• ✓ U.N. Krishnamurthy v. A.M. Krishnamurthy, (2023) 1 SCC 775, Supreme Court of India: This case was cited to emphasize the importance of proving readiness and willingness for specific performance, and the necessity of having sufficient funds to fulfill the contract.

Legal Provisions:

• ✓ Section 16(c) of the Specific Relief Act, 1963: This section mandates that a plaintiff seeking specific performance must prove their continuous readiness and willingness to perform their part of the contract.
• ✓ Section 20 of the Specific Relief Act, 1963: This section (as it existed before the 2018 amendment) states that specific performance is a discretionary remedy and the court is not bound to grant it merely because it is lawful to do so.

Authority Table:

Judgment

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

How each authority was viewed by the Court?

• ✓ The Supreme Court in U.N. Krishnamurthy v. A.M. Krishnamurthy, (2023) 1 SCC 775* was used to emphasize the necessity for the plaintiffs to prove their continuous readiness and willingness to perform their part of the contract. The Court held that the plaintiffs failed to do so, as they did not take necessary steps to secure the consent of the sisters within the stipulated time.
• ✓ The Court relied on Section 16(c) of the Specific Relief Act, 1963* to highlight the mandatory requirement for a plaintiff seeking specific performance to prove their readiness and willingness. The Court found that the plaintiffs had not met this requirement.
• ✓ The Court referred to Section 20 of the Specific Relief Act, 1963* (prior to the 2018 amendment) to emphasize the discretionary nature of granting specific performance. The Court concluded that specific performance was not justified in this case due to the incomplete nature of the agreement and the plaintiffs’ failure to fulfill their obligations.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the plaintiffs’ failure to demonstrate continuous readiness and willingness to perform their part of the contract, as required by Section 16(c) of the Specific Relief Act, 1963. The Court also emphasized that Defendant No. 1 lacked the authority to bind Defendant Nos. 6 to 8, making the agreement unenforceable against them. The discretionary nature of specific performance, as outlined in Section 20 of the Specific Relief Act, 1963, further weighed against granting the relief. The court also noted the fact that the appellants were bona fide purchasers for value without notice of any enforceable prior agreement.

Sentiment Analysis of Reasons:

Fact:Law Ratio:

Logical Reasoning:

The Court considered alternative interpretations but rejected them due to the clear lack of readiness and willingness on the part of the plaintiffs and the lack of authority of Defendant No. 1 to bind his sisters. The Court emphasized that the plaintiffs’ inaction and the incomplete nature of the agreement made specific performance inappropriate.

The Supreme Court overturned the High Court’s decision and restored the Trial Court’s judgment. The Court held that the plaintiffs failed to prove their continuous readiness and willingness to perform their contractual obligations, and that Defendant No. 1 lacked the authority to bind Defendant Nos. 6 to 8. The Court also emphasized that specific performance is a discretionary remedy and should not be granted in this case.

The key reasons for the decision are:

• ✓ The plaintiffs failed to demonstrate continuous readiness and willingness to perform their part of the contract as mandated under Section 16(c) of the Specific Relief Act, 1963.
• ✓ Defendant No. 1 lacked the authority to bind Defendant Nos. 6 to 8 in the agreement to sell dated 06.06.1993.
• ✓ The relief of specific performance is discretionary and should not be granted when the agreement is incomplete and the plaintiffs failed to fulfill essential contractual terms.

“Section 16 (c) of the Specific Relief Act, 1963 bars the relief of specific performance of a contract in favour of a person, who fails to aver and prove his readiness and willingness to perform his part of contract.”

“The agreement was deemed incomplete and unenforceable against Defendant Nos. 6 to 8, as their consent and participation were essential for a valid sale.”

“The relief of specific performance under the Specific Relief Act, 1963, is discretionary in nature… the court is not bound to grant such relief merely because it is lawful to do so.”

Key Takeaways

• ✓ Plaintiffs seeking specific performance must demonstrate continuous readiness and willingness to fulfill their contractual obligations.
• ✓ Agents must have clear and unambiguous authority to bind their principals, and any limitations or revocations of such authority must be considered.
• ✓ Specific performance is a discretionary remedy and will not be granted if it is not just and equitable in the circumstances of the case.
• ✓ Parties must take proactive steps to ensure all necessary consents and participations are secured in contracts involving multiple parties.

This judgment underscores the importance of fulfilling contractual obligations and ensuring proper authorization when acting on behalf of others. It also highlights the discretionary nature of specific performance and the need for courts to consider the equities of each case.

Directions

The Supreme Court directed the appellants to refund ₹10,00,000 (Rupees Ten Lakhs) to the plaintiffs (Respondent Nos. 1 & 2) within two months from the date of the order. This amount includes the earnest money paid by the plaintiffs and accounts for any interest and expenses incurred.

Specific Amendments Analysis

There is no discussion of any specific amendment in the judgment.

Development of Law

The ratio decidendi of this case is that a plaintiff seeking specific performance of a contract must prove continuous readiness and willingness to perform their part of the contract, and that an agent must have proper authority to bind their principal. This case reinforces the established legal principles regarding specific performance and agency, and does not introduce any new legal doctrines. The Court clarified that a General Power of Attorney can be impliedly revoked by a subsequent partition deed that limits the agent’s authority. The Court also reiterated that specific performance is a discretionary remedy and should not be granted if it is not just and equitable.

Conclusion

In the case of Janardan Das & Ors. vs. Durga Prasad Agarwalla & Ors., the Supreme Court reversed the High Court’s decision and restored the Trial Court’s judgment, dismissing the suit for specific performance. The Court held that the plaintiffs failed to prove their continuous readiness and willingness to perform their contractual obligations, and that Defendant No. 1 lacked the authority to bind Defendant Nos. 6 to 8. The Court also emphasized the discretionary nature of specific performance and the need for courts to consider the equities of each case. This judgment underscores the importance of fulfilling contractual obligations and ensuring proper authorization when acting on behalf of others.