Supreme Court Upholds Specific Performance Decree, Orders Additional Payment: C. Haridasan vs. Anappath Parakkattu Vasudeva Kurup (2023)

Introduction

Date of the Judgment: 13 January 2023

Citation: 2023 INSC 372

Judges: M.R. Shah, J. and B.V. Nagarathna, J. (Majority opinion by M.R. Shah, J.; dissenting opinion by B.V. Nagarathna, J.)

Can a court order the specific performance of a land sale agreement, even if the property’s value has significantly increased since the agreement was made? The Supreme Court of India recently addressed this question, focusing on whether the plaintiff was truly ready and willing to fulfill their part of the contract. This case highlights the complexities of balancing contractual obligations with the changing economic realities of property values.

The Supreme Court, in a split decision, ruled in favor of the original plaintiff, ordering the specific performance of a land sale agreement while also directing the plaintiff to pay an additional sum to the defendants. The core issue revolved around whether the plaintiff had demonstrated continuous readiness and willingness to perform their contractual obligations and whether the High Court was correct in reversing the trial court’s decision.

Case Background

On August 7, 2005, C. Haridasan (the plaintiff) and Anappath Parakkattu Vasudeva Kurup and others (the defendants) entered into an agreement for the sale of land. The defendants agreed to sell their land for ₹8,750 per cent, and the plaintiff paid an advance of ₹10,000. The agreement stipulated that the balance payment was to be made within six months after measuring the property, provided the defendants made available the necessary title documents, including a purchase certificate under the Kerala Land Reforms Act.

The plaintiff sent a legal notice on November 2, 2006, to the defendants, requesting the execution of the sale deed. The defendants refused, leading the plaintiff to file a suit for specific performance in the trial court. The defendants argued that the plaintiff was not ready and willing to perform his part of the contract and that the suit was filed after the agreement’s expiry. They also claimed that they were compelled to sell the property due to financial difficulties arising from the first defendant’s heart surgery, and they had to sell gold ornaments to clear their debts when the plaintiff did not pay the balance amount.

Timeline:

Course of Proceedings

The trial court decreed the suit for specific performance, ordering the plaintiff to pay 25% more than the originally agreed sale consideration, setting the new rate at ₹11,000 per cent. The trial court also directed the plaintiff to deposit the balance sale consideration of ₹3,97,000 within two months.

The defendants appealed to the High Court of Kerala, which partly allowed the appeal. The High Court set aside the trial court’s decree for specific performance, stating that the trial court was not justified in enhancing the sale consideration. Instead, the High Court directed the defendants to pay ₹3,10,000 to the plaintiff, effectively reversing the trial court’s decision. The High Court relied on Section 20 of the Specific Relief Act, stating that the trial court should not have exercised its discretion in favor of the plaintiff.

Legal Framework

The case primarily revolves around the interpretation and application of Section 20 of the Specific Relief Act, 1963. This section deals with the court’s discretion in granting specific performance of contracts.

Section 20 of the Specific Relief Act, 1963 (prior to its amendment in 2018), stated that the jurisdiction to decree specific performance is discretionary, and the court is not bound to grant such relief merely because it is lawful to do so. The section allowed the court to consider the circumstances of the case and deny specific performance if it would be inequitable. However, this discretion was not to be exercised arbitrarily but based on sound and reasonable judicial principles.

Arguments

Plaintiff’s Arguments:

• The plaintiff argued that the execution of the agreement to sell and receipt of part sale consideration were not disputed by the defendants.
• The plaintiff contended that the balance sale consideration was to be paid within six months after the property was measured and the defendants provided the necessary title documents, including the purchase certificate under the Kerala Land Reforms Act.
• The plaintiff submitted that the purchase certificate was issued during the pendency of the suit, and therefore, the trial court was justified in decreeing the suit for specific performance.
• The plaintiff argued that the trial court’s enhancement of the sale consideration was to do complete justice and should not be held against the plaintiff.
• The plaintiff asserted that the High Court erred in considering Section 20 of the Specific Relief Act without considering the trial court’s findings on the execution of the agreement, payment of part consideration, and the plaintiff’s readiness and willingness to perform the contract.

Defendants’ Arguments:

• The defendants argued that the agreement to sell was a forced agreement due to the first defendant’s heart attack and the urgent need for money.
• The defendants submitted that the plaintiff paid a meager amount of ₹10,000 as advance and failed to pay the balance within six months, forcing the defendants to sell their gold ornaments to clear their liabilities.
• The defendants contended that the High Court rightly set aside the decree for specific performance, considering Section 20 of the Specific Relief Act, and exercised discretion in favor of the defendants.
• The defendants argued that the price of the property had increased significantly, and therefore, the court should not interfere with the High Court’s judgment.

The innovativeness of the plaintiff’s argument was in emphasizing the trial court’s attempt to do complete justice by enhancing the sale consideration, which the plaintiff agreed to, and arguing that this should not be a reason to deny specific performance. The defendants’ argument was innovative in highlighting the financial distress they were in at the time of the agreement and how the plaintiff’s delay in payment caused them further hardship.

Issues Framed by the Supreme Court

The Supreme Court framed the following issues for consideration:

1. Whether the plaintiff’s conduct demonstrates readiness and willingness on his part to carry out his obligations under the agreement of sale of Kanam and Kuzhikoor rights dated 7th August, 2005?
2. Whether the plaintiff, by not paying consideration above 4% of total sale consideration within the period stipulated in the agreement, had defeated the purpose of the agreement to sell Kanam and Kuzhikoor rights executed by the defendants?
3. What order?

Treatment of the Issue by the Court

Authorities

The Supreme Court considered the following authorities:

Cases:

• Pratap Lakshman Muchandi v. Shamlal Uddavadas Wadhwa, (2008) 12 SCC 67: The Supreme Court relied on this case to justify the trial court’s direction to the plaintiff to pay more than the agreed sale consideration. The trial court had enhanced the sale consideration to do complete justice, and this was upheld by the Supreme Court.
• Shenbagam vs. K.K. Rathinavel, 2022 SCC OnLine SC 71: The Supreme Court reiterated that in deciding whether or not to grant the relief of specific performance, the Courts must be cognizant of the conduct of the parties, the escalation in the price of the suit property and consider whether one party will unfairly benefit from the decree.
• Mehboob-Ur-Rehman (Dead) through LRs vs. Ahsanul Ghani, (2019) 19 SCC 415: The Supreme Court noted that the position of law on all material aspects remains the same even after the amendment of the Specific Relief Act, 1963. It was observed that, even following the amendment, the law was to the effect that specific performance of a contract could not be granted or enforced in favor to the person who fails to prove that he has already 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 the terms of which, the performance has been prevented or waived by the other party.
• Sughar Singh vs. Hari Singh (Dead) through LRs and Ors., A.I.R. 2021 SC 5581: In this case, the Supreme Court held that the provisions subsequently substituted, may act as a guide to Courts in exercising discretion in matters dating prior to the substitution, even though such provisions may not apply retrospectively.
• B. Santoshamma vs. D. Sarala and Anr., (2020) 19 SCC 80: The Supreme Court observed that after the amendment to Section 10, the words “specific performance of any contract may, in the discretion of the Court, be enforced” have been substituted with the words “specific performance of a contract shall be enforced subject to the provisions contained in sub-section (2) of Section 11, Section 14 and Section 16”. It was concluded that although the relief of specific performance of a contract is no longer discretionary, after the amendment, the same would still be subject to Section 11, Section 14 and Section 16 of the Act.
• Bachhaj Nahar vs. Nilima Mandal and Ors., (2008) 17 SCC 491: The Supreme Court held that no amount of evidence can be looked into, upon a plea which was never put forward in the pleadings. A question which did not arise from the pleadings and which was not the subject matter of an issue, cannot be decided by the Court.
• Motilal Jain vs. Ramdasi Devi, A.I.R. 2000 SC 2408: The Supreme Court observed that it was sufficient if the averments in substance indicate continuous readiness and willingness on the part of the person suing, to perform his part of the contract.
• Syed Dastagir vs. T.R. Gopalakrishna Shetty, (1999) 6 SCC 337: The Supreme Court declared that language in Section 16 (c), as it stood prior to the Amendment Act of 2018, did not require any specific phraseology to be followed in relation to the averments as to readiness and willingness. That the compliance of requirements of readiness and willingness have to be in spirt and substance and not in letter and form.
• His Holiness Acharya Swami Ganesh Dassji vs. Sita Ram Thapar, (1996) 4 SCC 526: The Supreme Court made a distinction between ‘readiness’ and ‘willingness’ and the manner in which the said parameters are to be scrutinised in deciding a suit for specific performance.
• J.P. Builders vs. A. Ramdas Rao, (2011) 1 SCC 429: The Supreme Court held that Section 16(c) of the Specific Relief Act, 1963 mandates “readiness and willingness” on the part of the plaintiff and it is a condition precedent for obtaining relief of grant of specific performance. It is also clear that in a suit for specific performance, the plaintiff must allege and prove a continuous “readiness and willingness” to perform the contract on his part from the date of the contract. The onus is on the plaintiff.
• Saradamani Kandappan vs. S. Rajalakshmi, (2011) 12 SCC 18: The Supreme Court considered the aspect of payment of a nominal advance by the plaintiff and effect of the amount of advance paid on the decision of the Court to grant the discretionary relief of specific performance.
• K.S. Vidyanadam vs. Vairavan, (1997) 3 SCC 1: The Supreme Court reiterated the directions issued in an earlier decision regarding the factors that ought to guide the Court’s decision in decreeing a suit for specific performance, particularly when the agreement of sale has not been given effect to within the time stipulated therein.

Legal Provisions:

• Section 20 of the Specific Relief Act, 1963: This section, dealing with the court’s discretion in granting specific performance, was central to the High Court’s decision. The Supreme Court considered its application in light of the facts of the case.
• Section 16 of the Specific Relief Act, 1963: This section deals with the personal bars to relief in specific performance cases. The Supreme Court considered the aspect of readiness and willingness of the plaintiff to perform his part of the contract.
• Article 142 of the Constitution of India: The Supreme Court invoked this article to do complete justice by directing the plaintiff to pay an additional sum to the defendants.

Judgment

The Supreme Court, in a majority opinion by Justice M.R. Shah, allowed the appeal and restored the trial court’s decree for specific performance. However, to do complete justice, the Court directed the plaintiff to pay an additional sum of ₹10,00,000 to the defendants within six weeks, in addition to the sale consideration mentioned in the agreement and the amount already deposited. The Court also directed that the amount of ₹3,10,000, which the defendants might have deposited pursuant to the High Court’s order, be returned to them.

How each authority was viewed by the Court:

• The Supreme Court followed Pratap Lakshman Muchandi v. Shamlal Uddavadas Wadhwa, (2008) 12 SCC 67* to justify the trial court’s enhancement of the sale consideration.
• The Supreme Court cited Shenbagam vs. K.K. Rathinavel, 2022 SCC OnLine SC 71* to reiterate the importance of conduct of parties and price escalation.
• The Supreme Court cited Mehboob-Ur-Rehman (Dead) through LRs vs. Ahsanul Ghani, (2019) 19 SCC 415* to show that the law on material aspects remains the same even after the amendment of the Specific Relief Act, 1963.
• The Supreme Court cited Sughar Singh vs. Hari Singh (Dead) through LRs and Ors., A.I.R. 2021 SC 5581* to show that the substituted provisions may act as a guide to Courts in exercising discretion.
• The Supreme Court cited B. Santoshamma vs. D. Sarala and Anr., (2020) 19 SCC 80* to show that although specific performance is no longer discretionary, it is still subject to Sections 11, 14 and 16 of the Act.
• The Supreme Court cited Bachhaj Nahar vs. Nilima Mandal and Ors., (2008) 17 SCC 491* to emphasize that no evidence can be looked into, upon a plea which was never put forward in the pleadings.
• The Supreme Court cited Motilal Jain vs. Ramdasi Devi, A.I.R. 2000 SC 2408* to show that it is sufficient if the averments in substance indicate continuous readiness and willingness.
• The Supreme Court cited Syed Dastagir vs. T.R. Gopalakrishna Shetty, (1999) 6 SCC 337* to show that no specific phraseology is required for readiness and willingness.
• The Supreme Court cited His Holiness Acharya Swami Ganesh Dassji vs. Sita Ram Thapar, (1996) 4 SCC 526* to make a distinction between ‘readiness’ and ‘willingness’.
• The Supreme Court cited J.P. Builders vs. A. Ramdas Rao, (2011) 1 SCC 429* to show that Section 16(c) mandates “readiness and willingness”.
• The Supreme Court cited Saradamani Kandappan vs. S. Rajalakshmi, (2011) 12 SCC 18* to consider the aspect of payment of a nominal advance.
• The Supreme Court cited K.S. Vidyanadam vs. Vairavan, (1997) 3 SCC 1* to reiterate the directions regarding the factors that ought to guide the Court’s decision in decreeing a suit for specific performance.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the fact that the execution of the agreement to sell and the receipt of part sale consideration were not disputed by the defendants. The Court also considered that the plaintiff had agreed to pay the enhanced sale consideration as directed by the trial court. The Court emphasized the need to do complete justice between the parties, which led to the direction for the plaintiff to pay an additional sum of ₹10,00,000 to the defendants.

The court’s reasoning was influenced more by the factual aspects of the case, such as the undisputed execution of the agreement and the plaintiff’s agreement to pay the enhanced consideration, than by purely legal considerations.

Logical Reasoning:

Dissenting Opinion

Justice B.V. Nagarathna dissented from the majority opinion, arguing that the High Court’s decision was correct and should not be interfered with. She noted that the plaintiff had not paid the balance consideration within the stipulated time, and the defendants were compelled to sell their gold ornaments to clear their debts. She also emphasized the significant increase in the property’s value since the agreement was made.

Justice Nagarathna’s main points of dissent were:

• The plaintiff did not demonstrate continuous readiness and willingness to perform his part of the contract.
• The delay in paying the balance consideration caused hardship to the defendants, who had to sell their gold ornaments to clear their debts.
• The significant increase in the property’s value made specific performance inequitable.
• The High Court’s decision was correct in considering the equities of the case and in denying specific performance.

Justice Nagarathna’s dissent was based on the principle that specific performance is an equitable remedy and should not be granted if it would cause undue hardship to one party, especially when the plaintiff has not acted diligently. She also emphasized the court’s discretion under Section 20 of the Specific Relief Act, which, in her view, was correctly exercised by the High Court.

Conclusion

The Supreme Court, by a majority of 2:1, upheld the trial court’s decree for specific performance, with an additional payment of ₹10,00,000 to the defendants. This decision underscores the importance of demonstrating readiness and willingness to perform contractual obligations, while also highlighting the court’s power to do complete justice. The case also illustrates how courts balance contractual obligations with the changing economic realities of property values.

Key Takeaways:

• Readiness and willingness to perform contractual obligations are critical for obtaining specific performance.
• Courts have the discretion to enhance the sale consideration to do complete justice.
• The court’s discretion under Section 20 of the Specific Relief Act is not absolute and must be exercised judiciously.
• The Supreme Court can exercise its powers under Article 142 of the Constitution to do complete justice.
• Even if the property value has increased significantly, specific performance can be granted if the plaintiff has demonstrated readiness and willingness and the court deems it equitable.

The ruling reaffirms the principle that while specific performance is an equitable remedy, it is not granted arbitrarily. The court will consider the conduct of the parties, the circumstances of the case, and the need to do complete justice. The additional payment ordered by the Supreme Court reflects a balancing act between enforcing contractual obligations and addressing the economic realities of increased property values.