Supreme Court Upholds Specific Performance of Agreement to Sell: Vundavalli Ratna Manikyam vs. V.P.P.R.N. Prasada Rao (2020)

Introduction

Date of the Judgment: 06 February 2020

Citation: 2020 INSC 133

Judges: Arun Mishra J., Vineet Saran J., M.R. Shah J.

Can a suit for specific performance of an agreement to sell be dismissed on the grounds of limitation if the agreement stipulated that the vendor would settle all disputes related to the property, and those disputes took time to resolve? The Supreme Court of India addressed this question in a recent case, focusing on the correct application of the Limitation Act. The core issue was whether Article 54 or Article 113 of the Limitation Act would apply to a suit for specific performance of an agreement to sell, where the vendor was responsible for settling disputes related to the property. The Supreme Court bench, consisting of Justices Arun Mishra, Vineet Saran, and M.R. Shah, delivered the judgment, with the opinion authored by Justice M.R. Shah.

Case Background

The case revolves around an agreement to sell dated 7th May 1981, where Nimmalapudi Ramaswami, the original owner, agreed to sell his land to V.P.P.R.N. Prasada Rao (the plaintiff) for Rs. 59,200. An advance of Rs. 26,500 was paid on the same day. The agreement stipulated that the remaining amount was to be paid within four months. This period was later extended by eight months. However, before the sale could be completed, the State Government initiated land acquisition proceedings. Both Ramaswami and Prasada Rao made representations to the Assistant Collector to remove the land from the acquisition, with both stating that the land had been sold to the plaintiff and possession was given to the plaintiff.

A notification under Section 4 of the Land Acquisition Act was issued on 21st September 1981. Prasada Rao challenged this notification in the High Court, which was eventually set aside on 22nd November 1984. After Ramaswami’s death, his wife, Nimmalapudi Veeramma, sold the land to Bogilla Satyanarayana Murthy. Fearing interference with his possession, Prasada Rao filed a suit for permanent injunction. Subsequently, Prasada Rao issued a legal notice on 20th January 1986, to Nimmalapudi Veeramma and Bogilla Satyanarayana Murthy, seeking specific performance of the agreement to sell. Veeramma refused, stating she had already sold the land to Murthy. Prasada Rao then filed a suit for specific performance on 23rd April 1986.

Timeline:

Course of Proceedings

The trial court initially dismissed the suit for specific performance, holding that it was barred by limitation under Article 54 of the Limitation Act. The trial court, however, acknowledged the execution of the agreement to sell and the plaintiff’s possession of the property. The High Court reversed the trial court’s decision, holding that Article 113 of the Limitation Act applied, and decreed the suit for specific performance. The High Court also upheld the trial court’s decision regarding permanent injunction in favour of the plaintiff.

Legal Framework

The primary legal issue revolves around the application of the Limitation Act, specifically Articles 54 and 113. Article 54 deals with suits for specific performance of a contract, stating that the limitation period is three years from the date fixed for performance, or, if no such date is fixed, when the plaintiff has notice that performance is refused. Article 113 provides a general limitation period of three years for suits where no specific period is provided, and the period begins when the right to sue accrues. The court had to determine whether the limitation period should be calculated from the date fixed in the agreement (or its extension) or from the date when the vendor refused to execute the sale deed after the land acquisition proceedings were resolved.

Arguments

Appellants’ Arguments (Original Defendants):

• The suit was barred by limitation under Article 54 of the Limitation Act.
• The sale deed was to be executed within four months from the date of agreement, extended to 6th May 1982. Therefore, the limitation period should be three years from 6th May 1982.
• The High Court erred in considering a stray sentence in the agreement (Ex.A1) that the vendor had to settle all disputes as an implied covenant.
• There was a valid sale by the widow of the vendor to Bogilla Satyanarayana Murthy, who was a bonafide purchaser without notice of the earlier agreement.

Respondent’s Arguments (Original Plaintiff):

• The High Court correctly applied Article 113 of the Limitation Act.
• There were concurrent findings of fact by the trial court and the High Court regarding the execution of the agreement and the plaintiff’s possession.
• The land acquisition proceedings, which were challenged by the plaintiff, delayed the execution of the sale deed.
• As per the agreement, the vendor was to settle all disputes related to the property. The right to sue accrued when the defendants refused to execute the sale deed after the acquisition proceedings were quashed.
• The plaintiff was always ready and willing to perform his part of the contract.

The innovativeness of the argument lies in the respondent’s contention that the vendor’s obligation to settle disputes extended the limitation period, making Article 113 applicable instead of Article 54.

Issues Framed by the Supreme Court

The Supreme Court did not explicitly frame issues in a separate section in the provided document. However, the core issue that the court addressed was:

1. Whether the High Court was correct in applying Article 113 of the Limitation Act instead of Article 54, to the suit for specific performance of the agreement to sell?

Treatment of the Issue by the Court:

Authorities

The judgment does not explicitly mention any authorities, cases or books that were relied upon by the court. However, it does consider the following legal provisions:

• Article 54 of the Limitation Act: This provision specifies the limitation period for suits related to specific performance of a contract.
• Article 113 of the Limitation Act: This provision provides a general limitation period for suits where no specific period is provided.
• Section 4 of the Land Acquisition Act: This provision relates to the issuance of notification for land acquisition.

Judgment

What weighed in the mind of the Court?

The Court’s decision was primarily influenced by the following factors:

• The vendor’s responsibility to settle disputes related to the property, which was part of the agreement.
• The plaintiff’s active role in challenging the land acquisition proceedings, which demonstrated his readiness and willingness to perform his part of the contract.
• The concurrent findings of fact by the trial court and the High Court regarding the execution of the agreement and the plaintiff’s possession.
• The fact that the plaintiff served a notice on the defendants to execute the sale deed, and that the defendants refused to do so, triggered the right to sue.

Fact:Law Ratio:

The Court’s reasoning was heavily influenced by the factual circumstances of the case, particularly the vendor’s responsibility to settle disputes and the plaintiff’s actions to protect his interests. The legal interpretation of the Limitation Act was applied in light of these facts.

Logical Reasoning

Judgment

The Supreme Court upheld the High Court’s decision to apply Article 113 of the Limitation Act. The Court reasoned that the vendor’s responsibility to settle disputes related to the property was a crucial factor. The Court noted that the plaintiff had actively pursued the matter by challenging the land acquisition proceedings. It was only after the acquisition proceedings were quashed and the vendor refused to execute the sale deed that the right to sue accrued. The Court also considered the fact that the plaintiff was always ready and willing to perform his part of the contract.

The Court stated, “At this stage, it is required to be noted that under the agreement to sell it was for the vendor to settle all the disputes in the property. As the land in question was subjected to the acquisition and thereafter the acquisition proceedings came to be quashed and set aside at the instance of the plaintiff in the year 1984/1985 and thereafter the plaintiff served a legal notice upon the defendants on 20.01.1986 calling upon the defendants to execute the sale deed which came to be refused by reply notice dated 31.1.1986 and thereafter the suit for specific performance was preferred, as rightly observed by the High Court, Article 113 of the Limitation Act would be applicable and not Article 54 of the Limitation Act as applied by the learned trial Court.”

The Court also observed, “Therefore applying Article 113 of the Limitation Act to the facts of the case on hand and the conduct of the plaintiff all throughout to protect not only his possession but to protect the property from acquisition and that he was always ready and willing to perform his part of the agreement to sell/contract, the High Court has rightly decreed the suit for specific performance.”

The Court further added, “We are in complete agreement with the view taken by the High Court in applying Article 113 of the Limitation Act.”

While upholding the High Court’s decision, the Supreme Court also directed the plaintiff to pay a total sum of Rs. 15,00,000 to the defendants as the full sale consideration, inclusive of the balance amount, to be paid within eight weeks. Upon payment, the defendants were directed to execute the sale deed in favor of the plaintiff.

Key Takeaways

• When an agreement to sell stipulates that the vendor must settle all disputes related to the property, the limitation period for specific performance may be governed by Article 113 of the Limitation Act, rather than Article 54.
• The right to sue for specific performance accrues when the vendor refuses to execute the sale deed after all disputes have been resolved.
• The conduct of the plaintiff, particularly their readiness and willingness to perform their part of the contract, is a crucial factor in determining the applicability of the limitation period.
• Courts may consider the specific facts and circumstances of each case when deciding on the applicable limitation period for specific performance.

Directions

The Supreme Court directed the plaintiff to pay a total sum of Rs. 15,00,000 (Rupees fifteen lakhs only) to the defendants as full sale consideration, within a period of eight weeks. Upon payment, the defendants were directed to execute the sale deed in favor of the plaintiff.

Specific Amendments Analysis

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

Development of Law

The ratio decidendi of this case is that if an agreement to sell includes a clause that the vendor is responsible for settling disputes, the limitation period for filing a suit for specific performance is governed by Article 113 of the Limitation Act, and the right to sue accrues when the vendor refuses to execute the sale deed after the disputes are settled. This judgment clarifies the application of the Limitation Act in cases where the vendor is obligated to resolve disputes before the sale can be completed, and it reinforces the importance of considering the specific terms of the agreement and the conduct of the parties.

Conclusion

The Supreme Court upheld the High Court’s decision, ruling that the suit for specific performance was not barred by limitation. The Court emphasized the vendor’s obligation to settle disputes and the plaintiff’s active role in resolving the land acquisition issue. The judgment reinforces the principle that the right to sue accrues when the vendor refuses to perform their part of the contract after all conditions are met. The Court directed the plaintiff to pay a total sum of Rs. 15,00,000 to the defendants as full sale consideration, and directed the defendants to execute the sale deed.