In a significant ruling, the Supreme Court of India reiterated the principle that specific performance cannot be granted when the contractual time is of the essence and the deadline is missed. The court allowed the review petition filed by Siddamsetty Infra Projects Pvt. Ltd. against its earlier judgment, restoring the Telangana High Court’s decision to limit relief based on payment proportions rather than enforcing full specific performance. This decision by the bench comprising Chief Justice Dr. D.Y. Chandrachud, Justice J.B. Pardiwala, and Justice Manoj Misra underlines the Supreme Court’s stance on strict adherence to time-bound performance in real estate contracts.
Background of the Dispute
The case originated from a series of agreements involving a land parcel of 127.29 acres in Rajendernagar, Telangana. In 1994, the original owners entered into a sale agreement with a set of vendors, delivering partial possession but not completing the sale deed. The vendors, in turn, signed agreements in 1997 with Siddamsetty Infra Projects Pvt. Ltd., committing to transfer specific portions of the land against a payment of Rs. 40,20,000.
According to the agreements, Siddamsetty paid approximately 90% of the consideration amount but later issued multiple notices when the vendors failed to provide the requisite documentation for the transaction’s completion. In 2002, the company filed a suit seeking specific performance, arguing that it had fulfilled its part by paying a substantial amount, with only the vendors’ documentation obligations left unfulfilled.
Legal Proceedings and Key Issues
1. Trial Court Findings: The trial court dismissed Siddamsetty’s plea, holding that the company was neither in possession of the land nor entitled to specific performance as it had not completed payment within the stipulated time, which rendered the contract void for non-compliance with time clauses.
2. High Court Ruling: The Telangana High Court partially reversed this judgment, ruling that time was not of essence for the payment clause. It allowed specific performance proportionate to the consideration paid, directing the vendors to transfer a proportional land area, consistent with the amount Siddamsetty had already paid.
3. Supreme Court’s Initial 2022 Judgment: In August 2022, the Supreme Court overturned the High Court’s judgment, emphasizing that time was indeed of essence due to specific forfeiture provisions in the contract. The court ruled that Siddamsetty had missed the payment deadlines set forth in the agreement, and thus, the contract could not be enforced through specific performance. It concluded that Siddamsetty was in breach and dismissed the request for enforcing the sale agreement entirely.
Grounds for Review and Supreme Court’s Final Decision
In the review petition, Siddamsetty’s counsel, Senior Advocate Neeraj Kishan Kaul, argued that the original ruling contained apparent errors regarding the interpretation of the clauses on time and payment. The petitioner contended that time was not meant to be of essence for the completion of the contract, as the High Court had previously found.
On re-evaluation, the Supreme Court found merit in the petitioner’s arguments. Chief Justice Dr. D.Y. Chandrachud, in delivering the final judgment, reinstated the High Court’s decision. The court noted:
“A strict interpretation of time-bound clauses in contracts must be weighed against the parties’ mutual obligations, particularly when substantial consideration has already been received.”
The judgment held that, given Siddamsetty had paid 90% of the sale consideration, the vendors’ failure to provide documentation indicated that time was not the essence of the contract. Accordingly, the court allowed the partial specific performance as decided by the High Court.
Key Observations of the Court
The Supreme Court clarified that when time is explicitly set as the essence in a contract, missing the stipulated deadlines fundamentally affects the enforceability of specific performance. However, it emphasized that the “essence” of time must be consistently applied across all contractual terms.
Restoring the High Court’s judgment, the court stated:
“Specific performance remains a discretionary relief that must align with the principles of fairness and equity. When time-bound terms are unmet without substantial cause or payment, such enforcement cannot be granted.”
