Supreme Court Review: Upholding Specific Performance in Property Sale Agreements, Addressing Limitation Issues (2024) INSC 861 (8 November 2024)

Date of the Judgment: 8 November 2024
Citation: 2024 INSC 861
Judges: Dr Dhananjaya Y Chandrachud, CJI, J. B. Pardiwala, J, Manoj Misra, J
Can a court overturn its own judgment if there’s a clear error? The Supreme Court of India recently addressed this question in a review petition concerning a property sale agreement. The court examined whether a previous judgment had overlooked critical details regarding the timeline for fulfilling contractual obligations and whether specific performance of the contract was appropriate. This case highlights the importance of accuracy in legal interpretation and the court’s power to correct its own errors. The judgment was authored by Chief Justice Dr. Dhananjaya Y Chandrachud, with Justices J.B. Pardiwala and Manoj Misra concurring.

Case Background

In 1994, original owners agreed to sell a large plot of land to vendors, handing over partial possession. Although the full sale amount was paid, the sale deed wasn’t executed; instead, an irrevocable power of attorney was given to the vendors. Later, in 1997, the vendors entered into two agreements to sell portions of this land to M/s Siddamsetty Infra Projects Pvt. Ltd. (the petitioner). The first agreement, dated 26 March 1997, involved 38.15 acres for Rs 38,37,500, with an advance payment made. The second agreement, dated 27 March 1997, concerned 1.33 acres for Rs 1,82,500. The petitioner claimed to have paid a substantial portion of the sale consideration. The petitioner then sent legal notices in 2000 and 2002 to the vendors asking them to execute the sale deed, which the vendors refused.

Timeline

Course of Proceedings

The Additional District Judge dismissed the petitioner’s suit, stating that the petitioner had not proven their willingness to perform the contract, made false claims about possession and payment, and that the suit was time-barred. The High Court partly allowed the appeal, noting that the trial court erred in calculating the limitation period and that the petitioner had shown readiness and willingness to perform the contract. The High Court ordered specific performance to the extent of the consideration paid. On appeal, the Supreme Court overturned the High Court’s decision, stating that time was of the essence in the contract and the suit was barred by limitation. The Supreme Court ordered a refund of the sale consideration with interest. The petitioner then filed a review petition against this judgment.

Legal Framework

The judgment primarily revolves around the interpretation of Article 54 of the Schedule to the Limitation Act 1963, which specifies the limitation period for suits of specific performance. It states:

“54. 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.”

The provision has two parts: the first applies when a contract fixes a date for performance, and the second applies when no such date is fixed. The court also considered Section 10 of the Specific Relief Act 1963, which, before its amendment in 2018, granted courts discretion in awarding specific performance. Additionally, Section 16(c) of the Specific Relief Act, which requires the plaintiff to prove their readiness and willingness to perform the contract, was relevant. The Court also examined Section 52 of the Transfer of Property Act 1882, related to the doctrine of lis pendens, which prevents the transfer of property during the pendency of a suit.

Arguments

Petitioner’s Submissions:

• The Supreme Court incorrectly assumed the 1994 agreement was between the petitioner and respondents, whereas it was between the original owners and the vendors.
• The Trial Court found that the vendors did not produce necessary certificates, a finding the Supreme Court overlooked.
• Clause 3 of the agreement does not state that the agreement would be cancelled if the balance amount was not paid within three months.

Respondents’ Submissions:

• The Supreme Court’s judgment was sound, irrespective of the reference to the 1994 agreement.
• The doctrine of lis pendens doesn’t apply as the review petition was defective when the property was alienated.

Innovativeness of the Argument: The petitioner’s argument was innovative in pointing out the factual errors in the Supreme Court’s previous judgment, particularly regarding the parties to the 1994 agreement and the Trial Court’s findings on the vendors’ failure to produce necessary certificates.

Issues Framed by the Supreme Court

The Supreme Court considered the following issues:

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 Court considered the following authorities:

Judgment

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

How each authority was viewed by the Court?

The Supreme Court used the authorities as follows:

• Chand Rani v. Kamal Rani [(1993) 1 SCC 519]* was used to determine that time was not of the essence in the contract for the sale of immovable property.
• Babula l v. Hajarilal Kishorilal [1982 (1) SCC 525]* was cited to support the principle that possession is inherent in specific performance.
• R Lakshmi Kantham v. Devaraji [(2019) 8 SCC 62]* and Mademsetty Satyanarayana v. G. Yelloji Rao [AIR 1965 SC 1405]* were cited to support the view that a suit filed within the limitation cannot be dismissed for delay.
• Saradamani Kandappan v. S. Rajalakshmi [(2011) 12 SCC 18]* was cited to discuss the factors for exercising discretion in granting specific performance.
• Jaswinder Kaur v. Gurmeet Singh [(2017) 12 SCC 810]* was cited to show that Section 12 does not apply when inability to perform is due to the party’s conduct.
• Murali Sundaram v. Jothibai Kannan [2023 SCC OnLine SC 185]*, Karnail Singh v. State of Haryana [2021 SCC OnLine SC 961]*, Kamlesh Verma v. Mayawati [(2013) 8 SCC 320]*, and Sanjay Kumar Agarwal v. State Tax Officer [(2024) 2 SCC 362]* were cited for the principles on exercising review jurisdiction.
• Nagubai Ammal v. B Shama Rao [1956 SCC 321]* was cited for the definition of a collusive suit.
• Amit Kumar Shaw v. Farida Khatoon [(2005) 11 SCC 403]* was cited for the conditions for the application of the doctrine of lis pendens.
• Bellamy v. Sabine [(1857) 1 De G&J 566]* was cited for the rationale behind the doctrine of lis pendens.
• Jayaram Mudaliar v. Ayyaswami [AIR 1973 SC 569]* was cited for the explanation of the doctrine of lis pendens.
• GT Girish v. Y Subba Raju [2022 8 SCR 991]* was cited for the principle that any transfer made during the pendency of a suit is subject to the final result of the litigation.

What weighed in the mind of the Court?

The Supreme Court was primarily influenced by the need to correct errors in its previous judgment. The Court emphasized that the interpretation of Clause 21 was erroneous and that Clause 3 did not specify a deadline for performance of the contract but rather provided for cancellation of the agreement if the vendors failed to produce the necessary documents. The Court also noted that the vendors had not challenged the Trial Court’s finding that they failed to produce necessary certificates. The Court was also influenced by the fact that the petitioner had already paid a substantial portion of the sale consideration, indicating their readiness and willingness to perform the contract.

Logical Reasoning:

The Court considered alternative interpretations of the clauses but rejected them, emphasizing the need to adhere to the actual wording of the agreements and the factual findings of the Trial Court. The Court also rejected the argument that the review petition was defective, stating that the doctrine of lis pendens applies from the date of institution of the review proceedings. The Court concluded that the petitioner was entitled to specific performance because they had paid a substantial portion of the sale consideration and were ready and willing to perform the contract, whereas the vendors had failed to produce the necessary documents. The Court stated, “The judgment completely disregards the phrase “and this agreement of sale will be cancelled” in Clause 3.”, “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.” and “The Court concluded that the petitioner was not ready and willing to perform the contract in which time was of essence.”

The Court’s decision was unanimous, with all three judges concurring.

Key Takeaways

• The Supreme Court can review its own judgments if there are errors apparent on the face of the record.
• The interpretation of contractual clauses must be based on the precise wording and context of the agreement.
• The limitation period for specific performance starts from the date of refusal if no specific date is fixed in the contract.
• Specific performance can be granted if the purchaser demonstrates readiness and willingness to perform, and the seller is at fault.
• The doctrine of lis pendens applies from the date of institution of a suit or proceeding, even if the petition is defective.

Directions

The Supreme Court recalled its judgment dated 25 August 2022 and restored the judgment of the High Court dated 23 April 2021.

Development of Law

The ratio decidendi of the case is that the Supreme Court can review its own judgments if there are errors apparent on the face of the record, and that the interpretation of contractual clauses must be based on the precise wording and context of the agreement. This judgment also clarifies that the doctrine of lis pendens applies from the date of institution of a suit or proceeding, even if the petition is defective. This case reaffirms the principles of contract law and the importance of accuracy in legal interpretation.

Conclusion

The Supreme Court’s review judgment in the case of M/s Siddamsetty Infra Projects Pvt. Ltd. vs Katta Sujatha Reddy & Ors. highlights the court’s commitment to correcting its own errors and ensuring justice. By recalling its previous judgment and restoring the High Court’s order, the Supreme Court upheld the principle of specific performance in property sale agreements, emphasizing that the limitation period begins from the date of refusal and not a fixed date if not mentioned in the contract. This decision reinforces the importance of accuracy in legal interpretation and the court’s power to correct its own mistakes.