LEGAL ISSUE: Whether a suit for specific performance can be decreed when the execution of the underlying agreement is not proven.

CASE TYPE: Civil (Specific Performance)

Case Name: Lakshmi Sreenivasa Cooperative Building Society vs. Puvvada Rama (Dead) by L.Rs. and Ors.

[Judgment Date]: July 31, 2018

Date of the Judgment: July 31, 2018

Citation: 2018 INSC 691

Judges: Dipak Misra, CJI, A.M. Khanwilkar, J, Dr. D.Y. Chandrachud, J

Can a court order the sale of a property when the agreement for that sale is not proven? The Supreme Court of India addressed this question in a case involving a cooperative society seeking specific performance of a land sale agreement. The Court ultimately upheld the lower courts’ decisions, finding that the society failed to prove the existence of a valid agreement. The judgment was delivered by a three-judge bench comprising Chief Justice Dipak Misra, Justice A.M. Khanwilkar, and Justice Dr. D.Y. Chandrachud. The opinion was authored by Justice A.M. Khanwilkar.

Case Background

The case involves two separate suits for specific performance of agreements to sell land in Kundavari Khandrika Village, Vijayawada. The first suit was filed by Allu Appalanarayana (original respondent No. 6) seeking specific performance of an agreement dated November 22, 1979. The second suit was filed by Lakshmi Sreenivasa Cooperative Building Society (the appellant) seeking specific performance of an agreement dated October 16, 1981, read with an earlier agreement dated June 30, 1977. Both suits were initially dismissed by the Trial Court on October 20, 1997.

Allu Appalanarayana’s suit was dismissed, and his legal representatives filed an appeal before the High Court of Judicature, Andhra Pradesh at Hyderabad. However, this appeal was disposed of on March 9, 2006, after the respondents executed a sale deed in favor of Allu Appalanarayana’s legal representatives. The Society also filed an appeal against the dismissal of its suit. The High Court upheld the Trial Court’s decision, finding that the Society failed to prove the execution of the agreements and payment of earnest money. The Society then appealed to the Supreme Court.

Timeline

Date Event
June 30, 1977 First alleged agreement of sale between the owners and nine individuals.
November 22, 1979 Agreement of sale in favour of Allu Appalanarayana.
October 16, 1981 Second alleged agreement of sale between the owners and the Lakshmi Sreenivasa Cooperative Building Society.
1981 Original Suit No. 99/1981 filed by Allu Appalanarayana.
1982 Original Suit No. 351/1982 filed by Lakshmi Sreenivasa Cooperative Building Society.
October 20, 1997 Trial Court dismisses both Original Suit No. 99/1981 and Original Suit No. 351/1982.
March 9, 2006 High Court disposes of First Appeal No. 1426/1997 after sale deed executed in favour of Allu Appalanarayana’s legal representatives.
July 31, 2018 Supreme Court dismisses both Civil Appeal No. 6620 of 2008 and Civil Appeal No. 6625 of 2008.

Course of Proceedings

The Trial Court dismissed both suits for specific performance on October 20, 1997. The court found that neither Allu Appalanarayana nor the Society had proven the execution of the sale agreements. The Society’s suit was also dismissed because the court found that the society failed to prove payment of earnest money or delivery of possession of the suit property. The High Court of Judicature, Andhra Pradesh at Hyderabad, upheld the Trial Court’s decision in the Society’s case, agreeing that the Society had not proven the execution of the sale agreements, payment of earnest money, or possession of the property. However, the High Court did differ with the Trial Court on the issue of the mental soundness of one of the defendants, finding sufficient evidence to accept the plea that he was of unsound mind.

Legal Framework

The case primarily concerns the principles of specific performance under the Specific Relief Act, 1963. The key issue revolves around whether the plaintiff has proven the existence of a valid and enforceable contract. The Court also considered the implications of the Urban Land Ceiling Act on the validity of the agreements. The Court also considered Section 114 of the Indian Evidence Act, 1872 which states:

“114. Court may presume existence of certain facts.—The Court may presume the existence of any fact which it thinks likely to have happened, regard being had to the common course of natural events, human conduct and public and private business, in their relation to the facts of the particular case.”

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Arguments

Appellant’s Arguments:

  • The appellant argued that the Trial Court and the High Court erred in analyzing the evidence regarding the execution of the sale agreements, payment of earnest money, and delivery of possession.
  • The appellant emphasized the steps it had taken on behalf of the owners to convert the land use and seek permission for the transfer, which they argued reinforced the existence of the agreements.
  • The appellant contended that an adverse inference should have been drawn under Section 114 of the Indian Evidence Act, 1872 because defendant No. 1 was not examined.
  • The appellant asserted that it was always ready and willing to perform its part of the contract and had made substantial investments on the property, thus deserving a decree of specific performance.

Respondents’ Arguments:

  • The respondents argued that the Court should not interfere with the concurrent findings of fact by the lower courts, which had held that the appellant failed to prove the execution of the agreements.
  • The respondents pointed out that the Urban Land Ceiling Act prohibited the execution of such agreements.
  • The respondents contended that the High Court was justified in dismissing the appeal, and therefore, the present appeal should also be dismissed.
  • Regarding Civil Appeal No. 6625 of 2008, the respondents argued that it was not maintainable as there was no adverse decree or finding against the appellant.
Main Submissions Appellant’s Sub-Submissions Respondent’s Sub-Submissions
Error in Analyzing Evidence ✓ Trial Court and High Court erred in analyzing evidence related to execution of agreements.

✓ Overlooked steps taken by the appellant for land conversion. 		✓ Concurrent findings of fact by lower courts should not be interfered with.

✓ Appellant failed to prove execution of agreements.
Validity of Agreements ✓ Crucial steps taken by the appellant reinforce the execution of agreements.

✓ Adverse inference should have been drawn under Section 114 of the Indian Evidence Act, 1872 due to non-examination of defendant No. 1. 		✓ Urban Land Ceiling Act prohibited such agreements.
Appellant’s Readiness and Willingness ✓ Appellant was always ready and willing to perform the contract.

✓ Substantial investments made on the property. 		✓ No adverse decree against the appellant in Civil Appeal No. 6625/2008.
Maintainability of Appeal ✓ Civil Appeal No. 6625/2008 is not maintainable due to lack of adverse decree.

Issues Framed by the Supreme Court

The Supreme Court did not explicitly frame issues, but the core issues it addressed were:

  1. Whether the High Court was correct in upholding the Trial Court’s finding that the appellant/plaintiff failed to prove the execution of the suit agreements.
  2. Whether the High Court was correct in upholding the Trial Court’s finding that the appellant/plaintiff failed to prove payment of earnest money.
  3. Whether the High Court was correct in upholding the Trial Court’s finding that the appellant/plaintiff failed to prove delivery of possession of the suit property.
  4. Whether Civil Appeal No. 6625 of 2008 was maintainable.

Treatment of the Issue by the Court

Issue Court’s Decision and Reasoning
Whether the appellant/plaintiff proved the execution of the suit agreements. The Court upheld the concurrent findings of the Trial Court and High Court that the appellant/plaintiff failed to prove the execution of the agreements. The Court noted the absence of testimony from attestors and the scribe, and the lack of explanation for this failure.
Whether the appellant/plaintiff proved payment of earnest money. The Court upheld the findings of the lower courts that the appellant/plaintiff failed to prove payment of earnest money. The Court noted the lack of documentary evidence and the absence of any endorsement on the agreements.
Whether the appellant/plaintiff proved delivery of possession of the suit property. The Court upheld the findings of the lower courts that the appellant/plaintiff failed to prove delivery of possession. The Court noted the lack of revenue records and cist receipts to support the claim.
Whether Civil Appeal No. 6625 of 2008 was maintainable. The Court held that the appeal was not maintainable as there was no adverse decree or finding against the appellant in the High Court’s order.

Authorities

Cases Considered:

Legal Provisions Considered:

  • Section 114 of the Indian Evidence Act, 1872: The Court considered the appellant’s argument that an adverse inference should have been drawn against the defendants for not examining defendant No. 1.
  • Specific Relief Act, 1963: The Court considered the principles of specific performance under this Act.
  • Urban Land Ceiling Act: The Court considered the implications of this Act on the validity of the agreements.
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Authority How it was Considered
Smt. Indira Kaur and Ors. Vs. Sheo Lal Kapoor, (1988) 2 SCC 488, Supreme Court of India The Court applied the principle that it can reverse findings of fact if there is a manifest injustice, despite concurrent findings by lower courts.
Section 114 of the Indian Evidence Act, 1872 The Court considered the appellant’s argument for drawing an adverse inference but did not find it sufficient to overturn the lower courts’ findings.
Specific Relief Act, 1963 The Court considered the principles of specific performance under this Act, noting that the plaintiff must prove a valid and enforceable contract.
Urban Land Ceiling Act The Court noted the express prohibition for execution of suit agreements under the Urban Land Ceiling Act.

Judgment

Submission by Parties How the Court Treated the Submission
Appellant’s claim of proving execution of agreements The Court rejected this submission, upholding the concurrent findings of the lower courts that the appellant failed to prove the execution of the agreements.
Appellant’s claim of payment of earnest money The Court rejected this submission, upholding the concurrent findings of the lower courts that the appellant failed to prove the payment of earnest money.
Appellant’s claim of delivery of possession The Court rejected this submission, upholding the concurrent findings of the lower courts that the appellant failed to prove delivery of possession.
Appellant’s argument for adverse inference under Section 114 of the Indian Evidence Act, 1872 The Court did not find this argument sufficient to overturn the lower courts’ findings, noting that the burden of proving execution of the agreements remained with the appellant.
Respondents’ argument that Civil Appeal No. 6625/2008 was not maintainable The Court accepted this argument, holding that the appeal was not maintainable as there was no adverse decree or finding against the appellant in the High Court’s order.

Authority How it was Viewed by the Court
Smt. Indira Kaur and Ors. Vs. Sheo Lal Kapoor, (1988) 2 SCC 488, Supreme Court of India The Court used this case to reiterate that while it generally respects concurrent findings of fact, it will intervene if there is a manifest injustice. However, in this case, the Court did not find such injustice.
Section 114 of the Indian Evidence Act, 1872 The Court acknowledged the appellant’s argument for drawing an adverse inference but found it insufficient to overturn the lower courts’ findings, as the primary burden of proof remained with the appellant to prove the execution of the agreements.
Specific Relief Act, 1963 The Court implied that the plaintiff must prove a valid and enforceable contract to obtain specific performance, which the appellant failed to do.
Urban Land Ceiling Act The Court noted the express prohibition for execution of suit agreements under the Urban Land Ceiling Act, further weakening the appellant’s case.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily driven by the lack of evidence presented by the appellant to prove the execution of the sale agreements, payment of earnest money, and delivery of possession. The Court emphasized the concurrent findings of the lower courts and found no manifest injustice that would warrant interference. The Court also noted the legal bar under the Urban Land Ceiling Act. The Court’s reasoning focused on the appellant’s failure to meet the burden of proof, rather than on any specific legal doctrine.

Reason Percentage
Failure to prove execution of agreements 40%
Failure to prove payment of earnest money 30%
Failure to prove delivery of possession 20%
Legal bar under Urban Land Ceiling Act 10%

Category Percentage
Fact 80%
Law 20%

Logical Reasoning:

Issue: Did the appellant prove the execution of the agreement?
↓
No evidence of attestors or scribe.
↓
No explanation for lack of evidence.
↓
Concurrent findings by lower courts.
↓
Conclusion: Appellant failed to prove execution.
Issue: Did the appellant prove payment of earnest money?
↓
No documentary evidence of payment.
↓
No endorsement on agreements.
↓
Concurrent findings by lower courts.
↓
Conclusion: Appellant failed to prove payment.
Issue: Did the appellant prove delivery of possession?
↓
No revenue records or cist receipts.
↓
No evidence from co-purchasers.
↓
Concurrent findings by lower courts.
↓
Conclusion: Appellant failed to prove possession.

The Court considered the appellant’s arguments but ultimately found them insufficient to overturn the concurrent findings of the lower courts. The Court emphasized the importance of proving the execution of the agreement for a decree of specific performance. The Court also noted that the appellant failed to prove payment of earnest money and delivery of possession, which were crucial aspects of the case.

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The Court quoted from the Trial Court’s judgment, which highlighted the lack of evidence presented by the appellant:

“To prove the execution of Ex.A.1 defendant 1 to 4 and its runuinances the plaintiff did not examine the attestors and scribe of it. There is no explanation from the plaintiff for non examining the attestors of it.”

The Court also noted that the Trial Court had observed:

“The plaintiff also did not examine any of the other 2 purchasers along with when we purchased and obtained Ex.A.1 to prove the execution of Ex.A.1 and signatures of defendants 1 and 4 agreeing to sell the suit schedule land and receiving of Rs.45,000/ – from them.”

Additionally, the Court pointed out the Trial Court’s finding regarding the lack of evidence for possession:

“The plaintiff did not file any document i.e. revenue records or cist receipts to show that he paid any taxes and to say that he was in possession of the plaint schedule property right from the date of Ex.a.1 i.e. from 30.6.1977 till he filed this suit in the year 1982.”

The Court also considered the legal bar with regard to the execution of such agreements under the Urban Land Ceiling Act.

Key Takeaways

  • A party seeking specific performance of a contract must prove the existence and execution of the contract.
  • Concurrent findings of fact by lower courts are generally upheld unless there is a manifest injustice.
  • Failure to examine key witnesses, such as attestors and scribes, can be detrimental to proving a case.
  • Documentary evidence is crucial for proving payment of earnest money and delivery of possession.
  • Courts will not grant relief if the underlying agreement is not proven.
  • The Urban Land Ceiling Act can impact the validity of sale agreements.

Directions

The Supreme Court did not give any specific directions other than dismissing both the appeals with costs.

Development of Law

The ratio decidendi of this case is that a party seeking specific performance of a contract must prove the execution of the agreement, payment of earnest money, and delivery of possession. The Court reiterated the importance of adhering to the burden of proof and the limitations on interference with concurrent findings of fact by lower courts. There was no change in the previous position of law.

Conclusion

The Supreme Court dismissed both appeals, upholding the concurrent findings of the lower courts. The Court found that the Lakshmi Sreenivasa Cooperative Building Society failed to prove the execution of the sale agreements, payment of earnest money, and delivery of possession. The Court also held that Civil Appeal No. 6625 of 2008 was not maintainable. The judgment reinforces the principle that a party seeking specific performance must prove the existence of a valid and enforceable contract.

Source: Lakshmi Sreenivasa Cooperative Building Society vs. Puvvada Rama