Supreme Court Reverses Specific Performance Decree: Meenakshisundaram vs. Vijayakumar (2018)

Date of the Judgment: March 28, 2018
Citation: (2018) INSC 237
Judges: R. Banumathi, J., Uday Umesh Lalit, J.
Can a buyer obtain specific performance of a sale agreement if they fail to demonstrate continuous readiness and willingness to complete the purchase? The Supreme Court of India addressed this question in a case concerning a dispute over a marriage hall sale. The Court overturned the High Court’s decision, emphasizing the necessity of proving continuous readiness and willingness in specific performance suits. The judgment was delivered by a two-judge bench comprising Justice R. Banumathi and Justice Uday Umesh Lalit, with Justice Uday Umesh Lalit authoring the opinion.

Case Background

The case involves a property, a marriage hall, in Madurai. The appellant, P. Meenakshisundaram, had mortgaged the property with the Catholic Syrian Bank. On June 30, 2000, the appellant entered into an agreement with the first respondent, P. Vijayakumar, to sell the property for Rs. 19 lakhs, with Rs. 1 lakh paid as advance. This agreement stated that there was no encumbrance on the property, but also noted that the original parent document was with the bank. The cheques issued by the respondent were dishonored, leading to a new agreement on September 20, 2000, for Rs. 37.5 lakhs, including movables. An additional Rs. 5 lakhs was paid as advance. The agreement stipulated the remaining amount was to be paid by March 20, 2001. A further sum of Rs. 2 lakhs was paid on February 21, 2001, and Rs. 10 lakhs on September 22, 2001. The respondent claimed possession was handed over on August 3, 2002, while the appellant claimed it was forcibly taken on September 16, 2002. The respondent filed a suit for specific performance on February 19, 2002, which was later amended to include the Federal Bank as a defendant.

Timeline

Course of Proceedings

The trial court decreed the suit in favor of the respondent, directing the appellant to execute the sale deed after receiving the balance amount. The trial court held that time was not of the essence of the contract and that the respondent was ready and willing to perform his part of the contract. The High Court of Judicature at Madras upheld the trial court’s decision, stating that the appellant had suppressed the fact of the encumbrance on the property. The High Court relied on the decision in S.P. Chengalvaraya Naidu (Dead) by LRs v. Jaganath (Dead) by LRs and Others [(1994) 1 SCC 112], stating that the entire defense of the appellant was based on falsehood and could be dismissed. The appellant then appealed to the Supreme Court.

Legal Framework

The Supreme Court referred to Section 16(c) of the Specific Relief Act, 1963, which mandates that a plaintiff seeking specific performance must prove their readiness and willingness to perform the contract from the date of the contract until the hearing of the suit. The Court emphasized that this is a condition precedent for obtaining relief of specific performance. The court also discussed the concept of “readiness and willingness” as interpreted in previous cases. The court observed that the requirement of readiness and willingness was not present in the old Specific Relief Act of 1877, but was inserted later with the recommendations of the 9th Law Commission’s Report.

Arguments

Appellant’s Submissions:

• The appellant argued that the respondent failed to prove continuous readiness and willingness to perform the contract.
• The appellant contended that the respondent did not take appropriate steps to complete the transaction by the stipulated date of March 20, 2001.
• The appellant submitted that the respondent’s claim that possession was handed over on 03.08.2002 was false.
• The appellant argued that the High Court erred in relying on S.P. Chengalvaraya Naidu (Dead) by LRs v. Jaganath (Dead) by LRs and Others [(1994) 1 SCC 112], as that case was not related to a suit for specific performance.
• The appellant submitted that he had cleared the encumbrance on the property by paying Rs. 13 lakhs to the Federal Bank after the filing of the suit.

Respondent’s Submissions:

• The respondent argued that he had paid an advance of Rs. 6 lakhs on September 20, 2000, a further advance of Rs. 2 lakhs on January 21, 2001, and an additional Rs. 10 lakhs on September 22, 2001, demonstrating his readiness and willingness.
• The respondent submitted that he had issued a notice to the appellant on July 29, 2002, to execute the sale deed.
• The respondent contended that a meeting was held between the parties and their counsels to determine the manner of performance of the agreement, as set out in the Plaint in Para 6.
• The respondent claimed that he took possession of the property on August 3, 2002.
• The respondent argued that he sought impleadment in the debt recovery proceedings to settle the debt due from the appellant.
• The respondent submitted that he filed the suit within 9 days after the appellant cancelled the agreement.
• The respondent argued that the non-deposit of the balance consideration was because the encumbrance was not cleared by the appellant.

Issues Framed by the Supreme Court

The primary issue before the Supreme Court was whether the respondent had demonstrated continuous readiness and willingness to perform his part of the contract, as required for a decree of specific performance.

Treatment of the Issue by the Court

Authorities

The Supreme Court considered the following authorities:

Judgment

How each authority was viewed by the Court?

• The Court relied on Gomathinayagam Pillai and Others v. Pallaniswami Nadar [(1967) 1 SCR 227] and J.P. Builders and Another v. A. Ramadas Rao and Another [(2011) 1 SCC 429] to emphasize the requirement of continuous readiness and willingness in specific performance suits.
• The Court distinguished S.P. Chengalvaraya Naidu (Dead) by LRs v. Jaganath (Dead) by LRs and Others [(1994) 1 SCC 112], stating that it was not applicable to the present case.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the respondent’s failure to demonstrate continuous readiness and willingness to perform his part of the contract. The Court emphasized that the respondent did not take appropriate steps to complete the transaction by the stipulated deadline and that his actions after the deadline did not indicate a continuous willingness to perform. The Court also noted that the respondent’s claim of possession was doubtful and inconsistent with the facts. The court found that the High Court’s reliance on S.P. Chengalvaraya Naidu (Dead) by LRs v. Jaganath (Dead) by LRs and Others [(1994) 1 SCC 112] was misplaced.

The court considered various interpretations of the facts and legal principles, but ultimately concluded that the respondent had not met the burden of proving continuous readiness and willingness. The court rejected the High Court’s interpretation of the facts and the application of the S.P. Chengalvaraya Naidu (Dead) by LRs v. Jaganath (Dead) by LRs and Others [(1994) 1 SCC 112] case. The court noted that the respondent did not take any steps to complete the transaction by March 20, 2001, and his actions after that date did not demonstrate a continuous willingness to perform. The court also found that the respondent’s claim of possession was doubtful and inconsistent with the facts.

The Supreme Court stated that, “The respondent must in a suit for specific performance of an agreement plead and prove that he was ready and willing to perform his part of the contract continuously between the date of the contract and the date of hearing of the suit.” The court also noted, “If respondent No.1 was well aware about the encumbrance and the parties had chosen that the balance consideration be paid to the appellant before 20.03.2001 so that the sale deed could be registered without any encumbrance, it was for respondent No.1 to have taken appropriate steps in that behalf for completion of transaction.” The court also observed, “The assertion made by respondent No.1 in paragraph 7 of the plaint is a mere assertion without any relevant details as to what exactly he had done towards fulfillment of his obligations and completion of the transaction.”

There were no dissenting opinions in this case. The judgment was delivered by a two-judge bench comprising Justice R. Banumathi and Justice Uday Umesh Lalit, with Justice Uday Umesh Lalit authoring the opinion. The Court’s reasoning focused on the factual timeline and the respondent’s lack of consistent action to complete the transaction.

Key Takeaways

• In a suit for specific performance, the plaintiff must prove continuous readiness and willingness to perform their part of the contract from the date of the contract until the hearing of the suit.
• Mere assertions of readiness and willingness are not sufficient; the plaintiff must demonstrate concrete actions taken to fulfill their obligations.
• If a party is aware of an encumbrance on a property, they must take appropriate steps to ensure the transaction is completed as per the agreement.
• Courts will not grant specific performance if the plaintiff fails to demonstrate continuous readiness and willingness.

Directions

The Supreme Court directed the following:

• The suit for specific performance filed by the respondent was dismissed.
• The appellant was directed to refund Rs. 18 lakhs to the respondent within three months, without interest. If the sum is not paid within three months, it will carry interest at 7.5% per annum.
• The counter-claim made by the appellant was allowed, and the respondent was directed to hand over vacant possession of the suit property to the appellant within one month.
• The appellant was not entitled to any mesne profits for the period of wrongful possession by the respondent.

Development of Law

The ratio decidendi of this case is that in a suit for specific performance, the plaintiff must prove continuous readiness and willingness to perform their part of the contract from the date of the contract until the hearing of the suit. This judgment reinforces the established legal principle that readiness and willingness are not mere formalities but essential conditions for obtaining specific performance. The Court clarified that the plaintiff must demonstrate concrete actions taken to fulfill their obligations, and mere assertions are insufficient. This case also highlights the importance of adhering to contractual timelines and taking proactive steps to complete transactions. There is no change in the previous position of law, but the Court has clarified the application of the principle of readiness and willingness.

Conclusion

The Supreme Court allowed the appeal, setting aside the High Court’s judgment. The Court held that the respondent had failed to prove continuous readiness and willingness to perform his part of the contract. The suit for specific performance was dismissed, and the appellant’s counter-claim for recovery of possession was allowed. The appellant was directed to refund the advance amount to the respondent, and the respondent was directed to hand over possession of the property to the appellant. This case underscores the importance of demonstrating continuous readiness and willingness in specific performance suits and the need for parties to take proactive steps to fulfill their contractual obligations.