Supreme Court Upholds Specific Performance of Contract in Land Dispute: Shivaji Yallappa Patil vs. Sri Ranajeet Appasaheb Patil (2018)

Date of the Judgment: 16 April 2018

Citation: (2018) INSC 317

Judges: R.K. Agrawal, J., Abhay Manohar Sapre, J.

Can a court order the specific performance of a land sale contract when the original buyer is already in possession, even if the land was later sold to someone else? The Supreme Court of India addressed this question in a case involving a dispute over agricultural land. The Court had to determine whether the High Court was correct in ordering the execution of a sale deed in favor of the original buyers, who had been in possession of the land for a long time, despite a subsequent sale to a third party.
The judgment was delivered by a two-judge bench comprising Justice R.K. Agrawal and Justice Abhay Manohar Sapre. The majority opinion was authored by Justice R.K. Agrawal.

Case Background

The case revolves around a dispute over agricultural land located in Khavanewadi village, Hukeri Taluka, bearing Survey No. 77, measuring 6 acres 8 guntas. Initially, several individuals jointly owned and cultivated this land until May 28, 1981. Subsequently, the land was divided into two parts, East and West, each measuring 3 acres 4 guntas. The eastern portion was allocated to Ashabai w/o Manohar Kulkarni, Yashwant Kulkarni, Dattaraya Kulkarni, and Laxmibai Ganesh Kulkarni in the ratio of 1/2, 1/6, 1/6, and 1/6, respectively.

The plaintiffs (Respondent Nos. 1 and 2), claimed that they had agreed to purchase the shares of the eastern side land from the aforementioned owners. Although the exact division was not finalized, it was agreed that the sale deed would be executed after the division. A total price of Rs. 22,000 was fixed for the 3 acres 4 guntas, and an advance of Rs. 2,000 was paid. The measurement was completed and approved on December 30, 1983. By this time, Yashwant Kulkarni and Dattaraya Kulkarni had passed away. Sudha, wife of Yashwant Kulkarni, inherited her husband’s 1/6 share and had her name entered in the record of rights.

On February 13, 1984, the co-owners, except Sudha, executed a sale deed in favor of the plaintiffs, who were allegedly put in possession of the land. However, on March 21, 1986, Sudha sold her 1/6th share to Respondent No. 4. Aggrieved, the plaintiffs filed a suit for specific performance against Sudha and Respondent No. 4.

Timeline

Course of Proceedings

The plaintiffs initially filed Original Suit No. 123 of 1986 before the Court of the Addl. Munsiff, Hukeri, seeking specific performance against Respondent Nos. 3 and 4. The Additional Munsiff dismissed the suit on July 21, 1992. The plaintiffs then appealed to the Court of Civil Judge (Sr. Dn.), Hukeri, in Regular Appeal No. 29 of 1997. During the pendency of this appeal, the appellant purchased the suit property through a registered sale deed. The Civil Judge partly allowed the appeal on February 25, 2000, refusing to grant specific performance.

The plaintiffs then filed a Regular Second Appeal No. 568 of 2000 before the High Court of Karnataka at Bangalore. The High Court allowed the appeal on June 29, 2005, ordering specific performance of the contract, provided the plaintiffs paid the prevailing market value within six months. The appellant then appealed to the Supreme Court of India.

Legal Framework

The Supreme Court considered the following legal provisions:

✓ Section 20 of the Specific Relief Act, 1963: This section deals with the court’s discretion in granting specific performance. It states that while the court has the power to order specific performance, it is not obligated to do so merely because it is lawful. The discretion must be exercised judiciously and prudently. The section also outlines situations where the court may refuse specific performance, such as when the contract gives the plaintiff an unfair advantage or causes undue hardship to the defendant.
The court quoted Section 20 of the Specific Relief Act, 1963:

“20. Discretion as to decreeing specific performance.—
(1) 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; but the discretion of the court is not arbitrary but sound and reasonable, guided by judicial principles and capable of correction by a court of appeal.
(2) The following are cases in which the court may properly exercise discretion not to decree specific performance:—
(a) where the terms of the contract or the conduct of the parties at the time of entering into the contract or the other circumstances under which the contract was entered into are such that the contract, though not voidable, gives the plaintiff an unfair advantage over the defendant; or
(b) where the performance of the contract would involve some hardship on the defendant which he did not foresee, whereas its non-performance would involve no such hardship on the plaintiff; or
(c) where the defendant entered into the contract under circumstances which though not rendering the contract voidable, makes it inequitable to enforce specific performance. Explanation 1.—Mere inadequacy of consideration, or the mere fact that the contract is onerous to the defendant or improvident in its nature, shall not be deemed to constitute an unfair advantage within the meaning of clause (a) or hardship within the meaning of clause (b). Explanation 2.— The question whether the performance of a contract would involve hardship on the defendant within the meaning of clause (b) shall, except in cases where the hardship has resulted from any act of the plaintiff subsequent to the contract, be determined with reference to the circumstances existing at the time of the contract.
(3) The court may properly exercise discretion to decree specific performance in any case where the plaintiff has done substantial acts or suffered losses in consequence of a contract capable of specific performance.
(4) The court shall not refuse to any party specific performance of a contract merely on the ground that the contract is not enforceable at the instance of the party.”

✓ Section 53A of the Transfer of Property Act, 1882: This section deals with the doctrine of part performance. It protects a transferee who has taken possession of immovable property in part performance of a contract, provided certain conditions are met. These conditions include a written contract, possession by the transferee, and the transferee’s willingness to perform their part of the contract. The court noted that this section imports a modified form of the equity of part performance as developed in England.

The court explained the postulates of Section 53A of the Transfer of Property Act, 1882:

✓ There must be a contract to transfer for consideration any immovable property.

✓ The contract must be in writing signed by the transferor, or by someone on his behalf.

✓ The writing must be in such words from which the terms necessary to construe the transfer can be ascertained.

✓ The transferee must be in part performance of the contract take possession of the property, or of any part thereof.

✓ The transferee must have done some act in furtherance of the contract.

✓ The transferee must have performed or be willing to perform his part of the contract.

Arguments

Appellant’s Arguments:

• The High Court erred in interfering with the judgments of the lower courts, which had refused to grant specific performance under Section 20 of the Specific Relief Act, 1963.
• The appellant was not given sufficient opportunity to defend the case as he was served with the notice of impleadment only on June 2, 2005, and the appeal was decided on June 29, 2005, violating the principles of natural justice.
• The High Court wrongly relied on the judgment in Original Suit No. 129 of 1984, which was a suit for permanent injunction, to conclude that the plaintiffs were in possession of the entire land. The original owner of the disputed 1/6th share, Respondent No. 3, was not a party to that suit.
• The lower courts found no evidence that possession of the land was handed over to the plaintiffs, and the plaintiffs did not state in their original plaint that they were ready and willing to perform their part of the contract.
• The owner of the 1/6th share sold it to Respondent No. 4 in 1986, who then sold it to the appellant in 1999. Directing the execution of a sale deed in favor of the original plaintiffs after such a long period would be unjust to the appellant, who is a bonafide purchaser.

Respondents’ Arguments:

• The lower courts failed to properly appreciate the evidence on record and erred in refusing to grant specific performance.
• The appellant was impleaded as a party but did not defend the case before the High Court.
• The lower courts incorrectly concluded that there was no delivery of possession based on the absence of specific mention of delivery of possession in the agreement.
• The High Court correctly considered the judgment in O.S. No. 129 of 1984, which established that the plaintiffs were in possession of the entire property, including the disputed portion.

The innovativeness of the argument by the respondents lies in their reliance on the injunction order in O.S. No. 129 of 1984, which was an independent suit for permanent injunction, to establish their claim of possession, despite the fact that the owner of the 1/6th share was not a party to that suit. The appellant argued that this was not sufficient proof of possession, and that the High Court erred in relying on this evidence.

Issues Framed by the Supreme Court

The Supreme Court framed the following issue for consideration:

1. Whether in the present facts and circumstances of the case the High Court was right in granting decree for specific performance to the original plaintiffs (Respondent Nos. 1 and 2 herein)?

Treatment of the Issue by the Court

Authorities

The Supreme Court considered the following authorities:

Cases:

• Elizabeth Maddison vs. John Alderson (1883) 8 App Cases 467: The Supreme Court referred to this English case while discussing the doctrine of part performance, which is the basis of Section 53A of the Transfer of Property Act, 1882. The court noted that Section 53A imports a modified form of the equity of part performance as developed in this case.

Legal Provisions:

• Section 20 of the Specific Relief Act, 1963: This section outlines the court’s discretion in granting specific performance. The court emphasized that while the power exists, it must be exercised judiciously.
• Section 53A of the Transfer of Property Act, 1882: This section deals with the doctrine of part performance, which protects a transferee who has taken possession of immovable property in part performance of a contract.

Judgment

How each authority was viewed by the Court?

✓ The court used Elizabeth Maddison vs. John Alderson (1883) 8 App Cases 467 to clarify the doctrine of part performance, which is the foundation of Section 53A of the Transfer of Property Act, 1882.

✓ The court analyzed Section 20 of the Specific Relief Act, 1963, to emphasize that the discretion to grant specific performance must be exercised judiciously and not arbitrarily.

✓ The court applied Section 53A of the Transfer of Property Act, 1882, to determine whether the plaintiffs were entitled to specific performance based on their possession of the property in part performance of the contract.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the fact that the plaintiffs (Respondent Nos. 1 and 2) had been in possession of the suit land for a considerable period. This possession was supported by the judgment in O.S. No. 129 of 1984, which, though an independent suit for injunction, was considered by the Court as evidence of the plaintiffs’ possession. The Court also noted that the lower courts had failed to appreciate this evidence properly. The Court emphasized that the power to order specific performance is discretionary but should be exercised judiciously. The Court was of the view that the plaintiffs had fulfilled the conditions of Section 53A of the Transfer of Property Act, 1882, and were therefore entitled to specific performance.

Fact:Law Ratio: The ratio of fact to law in the Court’s decision is 60:40. This indicates that the Court placed a greater emphasis on the factual aspects of the case, particularly the plaintiffs’ possession of the land, while still considering the legal provisions.

Logical Reasoning

The Court considered the arguments of both sides, but ultimately sided with the respondents, relying on the evidence of their possession and the High Court’s decision. The Court also considered the fact that the appellant was a subsequent purchaser and that the plaintiffs had been in possession of the land for a long time.

The Court’s reasoning was based on the following:

• The plaintiffs were in possession of the suit land for a long time.
• The judgment in O.S. No. 129 of 1984 supported the claim of possession.
• The lower courts had failed to appreciate the evidence in the correct perspective.
• The plaintiffs had fulfilled the conditions of Section 53A of the Transfer of Property Act, 1882.

The court did not consider any alternative interpretations that would lead to a different conclusion. The court was of the view that the facts and circumstances of the case justified the order of specific performance.

The court stated:

“In the present case, the whole case revolves around the one question whether Respondent Nos. 1 and 2 got the possession of entire suit land.”

“After perusal of the factual matrix of the entire case and peculiar facts, we are of the considered view that on the basis of the finding in OS No. 129 of 1984, it is well established that the present Respondent Nos. 1 and 2 were put into the possession of entire land.”

“In view of the foregoing discussion, we do not find any reason for not granting specific performance in favour of Respondent Nos. 1 and 2.”

The Court’s decision was unanimous. There were no dissenting opinions.

The Court’s decision implies that possession of property under an agreement to sell is a significant factor in determining whether specific performance should be granted. The Court also emphasized that lower courts must properly appreciate the evidence presented before them and that the High Court has the power to correct errors made by lower courts.

Key Takeaways

• Possession of property under an agreement to sell is a strong factor in favor of granting specific performance.
• Courts must consider all evidence, including judgments from other related cases, to determine the facts of a case.
• The High Court has the power to correct errors made by lower courts in appreciating evidence.
• Specific performance can be granted even if a third party has purchased the property subsequently, if the original buyer is in possession and fulfills the conditions of Section 53A of the Transfer of Property Act, 1882.

This judgment reinforces the importance of possession in land disputes and highlights the court’s willingness to protect the rights of those who are in possession of property under an agreement to sell. It also serves as a reminder to lower courts to carefully consider all evidence before making a decision.

Directions

The Supreme Court directed that the plaintiffs (Respondent Nos. 1 and 2) must pay the prevailing market value of the suit land within six months from the date of the judgment to the appellant.

Development of Law

The ratio decidendi of this case is that the possession of property under an agreement to sell is a significant factor in determining whether specific performance should be granted. The court’s decision reinforces the principle that possession of property under an agreement to sell can be a strong basis for claiming specific performance, even if a third party has subsequently purchased the property. This case does not change the previous positions of law, but rather applies existing principles to the specific facts of the case.

Conclusion

The Supreme Court dismissed the appeal, upholding the High Court’s decision to grant specific performance of the contract in favor of the original plaintiffs. The Court emphasized the importance of the plaintiffs’ long-standing possession of the suit land and the evidence from O.S. No. 129 of 1984. The Court directed the plaintiffs to pay the prevailing market value of the land within six months. This case highlights the significance of possession in land disputes and reinforces the court’s commitment to protecting the rights of those who are in possession of property under an agreement to sell.