The Supreme Court of India, in a judgment dated October 29, 2025, has ruled that a suit for specific performance of a contract is maintainable without a separate prayer to declare a termination notice invalid, especially when the vendor has waived their right to terminate by accepting additional payment after the stipulated period.
The bench, comprising Justice J.B. Pardiwala and Justice Manoj Misra, allowed the appeals filed by Annamalai (appellant), setting aside the judgment of the High Court of Judicature at Madras and restoring the decree for specific performance passed by the First Appellate Court.
The legal issue centered on whether a plaintiff, having paid over 90% of the sale consideration plus an additional demanded amount, was “ready and willing” to perform the contract, and whether his suit was maintainable despite a termination notice from the vendors.
Background of the Case
The appeals arose from two consolidated suits concerning a property agreement dated January 8, 2010.
- O.S. No. 73 of 2010: Instituted by the appellant, Annamalai, for specific performance of the sale agreement against Saraswathi (D-1), Dharmalingam (D-2), and Vasanthi (D-3).
- O.S. No. 32 of 2011 (renumbered O.S. No. 60 of 2012): Instituted by Vasanthi (D-3, the first respondent) for a declaration of her title and an injunction against Annamalai regarding the same property.
Annamalai’s suit (O.S. No. 73 of 2010) alleged that D-1 and D-2 had agreed to sell him two items of property for Rs. 4,80,000. An advance of Rs. 4,70,000 was paid, with the remaining Rs. 10,000 to be paid within six months. The appellant claimed that D-1 and D-2 later demanded an additional Rs. 2,00,000, against which he paid Rs. 1,95,000 on June 9, 2010, which was endorsed on the agreement.
The appellant alleged that on August 20, 2010, D-1 and D-2 sent a notice terminating the contract. He later discovered that D-1 and D-2 had already sold the first item of the property to D-3 (Vasanthi, who is the daughter of D-1) on August 17, 2010, three days before the termination notice.
The Trial Court dismissed Annamalai’s suit, holding the agreement was a loan security, not a sale, and that the appellant was not ready and willing. It decreed Vasanthi’s suit.
The First Appellate Court reversed this, finding the Trial Court’s “loan” theory perverse, as the defendants’ own notice (Exb. A-4) acknowledged the sale agreement. It accepted the additional payment of Rs. 1,95,000 and held Annamalai was ready and willing. It also found Vasanthi was not a bona fide purchaser.
The High Court, in a common judgment on February 2, 2018, allowed the respondents’ second appeals, setting aside the specific performance decree. It held Annamalai was not ready and willing for not acting within the six-month period and found the additional payment was not proved.
Arguments Before the Supreme Court
The appellant argued that the First Appellate Court’s findings of fact—that the agreement was for sale, that the additional payment was made, and that the appellant was ready and willing—were based on evidence and should not have been overturned by the High Court under Section 100 of the Code of Civil Procedure (CPC).
The respondents contended that the appellant was not entitled to the discretionary relief of specific performance, alleging he set up a false case of possession, fabricated the document for additional payment, and failed to act within the six-month period. They also argued the suit was not maintainable without seeking a declaration that the contract termination was invalid.
Supreme Court’s Analysis and Findings
The Supreme Court identified three main issues for consideration:
- Whether the High Court was justified in interfering with the finding of fact regarding the additional payment of Rs. 1,95,000.
- Whether the suit for specific performance was maintainable without a declaration that the termination was invalid.
- Whether the appellant was entitled to the discretionary relief of specific performance.
On Issue A: Additional Payment and Readiness & Willingness
The Court found the High Court “committed a mistake” in discarding the endorsement (Exb.A-2) for the additional payment. The judgment noted that the First Appellate Court had based its finding on the fact that D-1 and D-2 had admitted their signatures on the endorsement, merely claiming they were obtained on blank paper.
The Supreme Court held: “once existence of signature(s) on a document acknowledging receipt of money is admitted, a presumption would arise that it was endorsed for good consideration. Therefore, a heavy burden lay on D-1 and D-2 to explain the circumstances…”
The Court concluded that the High Court, exercising its limited power in a second appeal under Section 100 CPC, “ought not to have interfered with the finding of fact returned by the first appellate court.”
Once this additional payment was established, the bench held, “there appears no logical reason to hold that the plaintiff (Annamalai) was not ready and willing to perform its part under the contract.”
Crucially, the Court observed that by accepting this additional sum after the initial six-month period had expired, D-1 and D-2 “treated the agreement as subsisting and thereby waived their right to forfeit the earnest money on non-payment of balance consideration within six months.”
On Issue B: Maintainability of the Suit
The Court addressed the argument that the suit must fail for not seeking a declaration to invalidate the termination notice. It clarified the law, stating that such a declaration is required “where a doubt or a cloud is there on the right of the plaintiff” which is typically “where a contract may give right to the parties… to terminate the contract… and in terms thereof, the contract is terminated.”
However, the Court found this did not apply to the present case. It held: “in the case on hand, by accepting Rs.1,95,000 after expiry of six months, D-1 and D-2, firstly, waived their right… to forfeit the advance consideration… secondly, by such acceptance and endorsement… they treated the contract as subsisting and, thirdly, by transferring part of the subject matter of the agreement in favour of D-3, even before serving a forfeiture notice, they committed a breach of the contract.”
The Court concluded that the termination was “a void act” and a “breach of contract by repudiation.” Therefore, the appellant “had an option to treat the contract as subsisting and sue for specific performance” directly.
On Issue C: Discretionary Relief
The Court, applying the pre-2018 amendment law (where specific performance was discretionary), found the High Court’s reasons for denying the relief to be unsustainable. The claim of a “false” additional payment was already overturned.
Regarding the High Court’s finding that the appellant made a “false plea” of being in possession, the Supreme Court observed: “A claim, if not proved, does not make it false. A statement is false when its maker knows the same is incorrect.” The bench stated that even if the claim for possession was not accepted, it was not sufficient to deny the primary relief, “particularly, when the plaintiff had already paid over 90% of the agreed consideration and paid additional amount also as demanded by D-1 and D-2.”
The Court also noted that D-3 (Vasanthi) “was a related party of D-1 and D-2 and, therefore, not a bona fide purchaser.”
Final Decision
The Supreme Court concluded that “this was not a fit case where discretionary relief of specific performance should have been denied.”
The judgment stated: “For the aforesaid reasons, we are of the considered view that the High Court erred in law by interfering with the decree of specific performance passed by the first appellate court. These appeals are therefore allowed.”
The Supreme Court set aside the judgment and decree of the High Court and restored the judgment and decree of the First Appellate Court. The appellant, Annamalai, was directed to deposit the balance amount of Rs. 10,000 in the execution court within one month.
