In a significant judgment that reiterates the importance of conduct and financial readiness in disputes involving specific performance of contracts, the Supreme Court of India dismissed a buyer’s plea to enforce a property sale agreement, citing her lack of readiness and dubious conduct. The verdict, delivered by Justice Dipankar Datta and Justice Sanjay Karol, overturned a High Court ruling that had previously decreed in favor of the buyer, restoring the dismissal by the Trial Court.
The case involved a dispute over an agreement to sell a property in Coimbatore executed on January 20, 2005. The appellants, R. Kandasamy (since deceased) and others, were the sellers, while the respondents included T.R.K. Sarawathy, the buyer, and M/s. ABT Limited, a subsequent purchaser of the property.
Background of the Case
The sale agreement stipulated a consideration of ₹2.3 crore, of which ₹10 lakh was paid as an advance. The buyer was required to pay the balance within four months, by May 19, 2005. The sellers were to vacate tenants occupying the property before handing it over. Disputes arose when the buyer made partial payments beyond the agreed timeline and raised new demands, including the production of an encumbrance certificate and original title deeds, which were not part of the original agreement.
On February 23, 2006, the sellers canceled the agreement, citing the buyer’s failure to fulfill her obligations. They returned the advance and partial payments, totaling ₹25 lakh. The buyer, however, disputed the cancellation and filed a suit for specific performance in the Coimbatore District Court, which was dismissed. The High Court later reversed this decision, prompting the sellers to appeal to the Supreme Court.
Key Legal Issues
The Supreme Court addressed the following legal questions:
- Was Time the Essence of the Contract?
The agreement explicitly stated that time was of the essence, but the sellers’ acceptance of delayed payments without protest raised doubts. - Did the Buyer Demonstrate Readiness and Willingness?
A critical factor in specific performance suits, the Court scrutinized whether the buyer was financially prepared and willing to fulfill her contractual obligations. - Equitable Relief and Discretion:
The Court weighed whether the buyer’s conduct justified granting the discretionary relief of specific performance. - Maintainability of the Suit:
The absence of a prayer to declare the cancellation invalid was also examined, although not the sole ground for the judgment.
Court’s Observations
1. Readiness and Willingness:
The Court found that the buyer failed to demonstrate continuous readiness and willingness to complete the transaction. In her cross-examination, she admitted to insufficient funds in her bank account to pay the balance sale consideration, relying instead on vague claims of access to cash.
2. Buyer’s Conduct:
The Court highlighted inconsistencies in the buyer’s demands and her unexplained delays. Despite knowing by February 2006 that the tenants had vacated the property, the buyer did not act promptly to close the deal. Instead, she raised additional demands for documents not stipulated in the agreement.
3. Discretionary Relief:
Specific performance is an equitable remedy, not an automatic right. The judgment noted:
“The conduct of the buyer, seen cumulatively, does not inspire confidence in granting her the discretionary relief of specific performance.”
4. Maintainability:
The buyer did not include a declaratory prayer challenging the sellers’ cancellation of the agreement. While this omission was not the primary ground for dismissal, the Court emphasized its importance in such cases.
Verdict
The Supreme Court set aside the High Court’s decision and restored the Trial Court’s dismissal of the suit for specific performance. The judgment underscored:
“The buyer’s failure to demonstrate financial readiness and her inconsistent conduct bar her from the equitable relief of specific performance.”
The Court, however, directed the sellers to return ₹25 lakh to the buyer, representing the advance and partial payments, if not already refunded.
Representation in Court
- Appellants (Sellers): Represented by Senior Advocate Mr. Dwivedi.
- Respondents (Buyer): Represented by Senior Advocate Mr. Guru Krishna Kumar.
- Subsequent Purchaser (M/s ABT Limited): Represented by Senior Advocate Mr. Rana Mukherjee.
