2025 (6) TMI 1084 - HC - Indian Laws

Entitlement to enforce the contract of agreement for sale - failure to appreciate that the Plaintiffs had resources to execute their part of contract - sale agreement had recitals that after execution of sale deed the Plaintiffs on their own has to evict the tenant from the Suit property or not - grant of decree for specific performance of contract to the Plaintiffs - specific performance for sale of the property. HELD THAT - In this case the decree for specific performance is not only refused on the ground of efflux of time but the attitude of the Plaintiffs in not depositing the balance sale consideration atleast during the trial in the suit. The argument that the trial court did not insist the Plaintiffs to deposit the balance sale consideration does not augur well and it only goes against the interest of the Plaintiffs to seek for equitable relief. The documents under Ex.A-13 to Ex.A-145 were filed by the Plaintiffs to prove that they have sufficient means. On assessment of those documents the learned Trial Judge concluded that in those Bank statements there was amount of one lakh and two lakhs etc. for a few days and those amounts were withdrawn subsequently - The financial capacity or capability of the Plaintiffs after institution of the suit is immaterial. It must be shown that within the time granted under the sale agreement dated 14.11.1994 the Plaintiffs had wherewithal to perform their part of the argument. Therefore the documents which emanate after institution of the suit cannot be considered for grant of a decree for specific performance. As observed in the judgment by Justice R. Subramanian in A.S.No.863 of 2009 the value of the property increases every year. Therefore if the Plaintiffs are bona fide they should have voluntarily deposited the amount so as to retain their right and interest to purchase the property. They need not expect the Court to insist for depositing the balance sale consideration. Yet another aspect for consideration is that the Plaintiffs were heavily indebted. The Plaintiffs faced criminal proceedings for dishonour of cheque and ultimately got convicted for having committed the offence under Section 138 of The Negotiable Instruments Act 1881 and sentenced to undergo imprisonment. That apart there were also civil proceedings initiated against the Plaintiffs and a portion of the immovable property owned by them got attached - the Plaintiffs admit that now some other tenants are in occupation of the property. It is not known as to why the Plaintiffs are exhibiting enormous interest to purchase a property which is full of litigation lack of title etc. - Going by the above facts this Court is of the view that the Trial Court in a circumstance of this nature is wholly justified in dismissing the suit and directing the Defendant to repay the advance amount. It is to be mentioned that in cases of this nature Plaintiffs are reluctant to pay the balance of sale consideration after making initial advance amount. It is their intention or expectation that as they have paid a miniscule portion of the sale price they can get the sale deed executed at any time or they can assert ownership over such property without performing their duties embodied under the contract. By the time the suit is decreed one of the parties file an appeal the adjudication of the appeal takes time - Section 16 (c) of The Specific Relief Act confers a discretion to the Courts to award a decree for specific performance not for the sake of the Plaintiff asking for it but on the touchstone of equity by weighing the various considerations that are precedent for grant of such decree. Conclusion - The Trial Court ought to have dismissed the suit in entirety but instead the Trial Court was magnanimous enough to grant the alternative relief of refund of advance amount under the principles of equity. Such an exercise of discretion by the Trial Court in the facts and circumstances of this case is justified and it is proper. Accordingly all the points raised for determination are answered against the Plaintiffs and in favour of the Defendant. The appeal suit is dismissed.

Summary

The core legal questions considered in this judgment are:

1. Whether the Plaintiffs were entitled to enforce the contract of agreement for sale dated 14.11.1994 by seeking specific performance?

2. Whether the suit property was the exclusive property of the Defendant or whether the Defendant had absolute title to sell the property?

3. Whether the agreement of sale dated 14.11.1994 was an enforceable contract or whether it was unenforceable due to non-compliance of essential terms or lapse of time?

4. Whether the Plaintiffs had performed or were ready and willing to perform their part of the contract, including payment of the balance sale consideration within the stipulated time?

5. Whether the Plaintiffs had the financial capacity or resources to pay the balance sale consideration as required under the contract?

6. Whether the Defendant was ready and willing to perform her part of the contract, including execution of the sale deed and delivery of possession?

7. Whether the Plaintiffs' suit for specific performance was maintainable given the circumstances and conduct of the parties?

8. Whether the Defendant had made fraudulent alterations in the sale agreement or annexed documents?

9. Whether the Plaintiffs were entitled to any relief, including specific performance or refund of advance amounts with interest?

Issue-wise Detailed Analysis:

1. Entitlement to enforce the agreement for sale and specific performance

The legal framework governing specific performance is primarily under the Specific Relief Act, 1963, particularly Section 16(c), which bars relief where the plaintiff fails to prove performance or readiness and willingness to perform essential terms of the contract. The courts have consistently held that readiness and willingness must be continuous from the date of agreement till the date of decree. It is also established that a plaintiff need not physically tender money unless directed by the court but must prove capacity to pay the balance sale consideration.

The Plaintiffs contended that they had entered into a valid agreement of sale with the Defendant for Rs. 8,20,000/-, paid Rs. 2,05,000/- as advance, and were ready and willing to pay the balance Rs. 6,15,000/-. They argued that extensions of time were granted at the Defendant's request due to her inability to vacate tenants and obtain necessary permissions. The Plaintiffs asserted their financial capacity through voluminous bank documents and other evidence.

The Defendant countered that the Plaintiffs were not ready and willing to perform their part, had no financial capacity, and had imposed impossible conditions such as eviction of tenants and obtaining signatures from her brother who had a share in the property. The Defendant also highlighted the pendency of Rent Control proceedings and the Plaintiffs' financial difficulties, including criminal convictions for dishonour of cheques and attachment of their properties.

The Trial Court found that the Plaintiffs failed to prove continuous readiness and willingness, particularly financial capacity to pay the balance consideration within the stipulated time. It noted that the Plaintiffs did not deposit the balance amount in court voluntarily and that the bank statements produced were insufficient to prove sustained financial capacity. The Trial Court concluded that the Plaintiffs' suit was not maintainable for specific performance and dismissed it, awarding refund of advance with interest.

The High Court initially allowed the appeal, directing the Plaintiffs to deposit the balance amount and ordering the Defendant to execute the sale deed. However, the Supreme Court set aside this order for lack of proper framing of issues and inadequate consideration of evidence, remanding the matter for fresh consideration.

On remand, the High Court confirmed the Trial Court's findings, emphasizing the Plaintiffs' failure to deposit the balance amount voluntarily, the lapse of nearly three decades since the agreement, and the increase in property value making enforcement inequitable. The Court underscored the principle that a purchaser cannot delay payment and expect specific performance at the original price after long delay.

2. Ownership and title to the suit property

The Defendant claimed that the property was originally allotted to her mother in a family partition and that both she and her brother had shares. She contended that she was not the absolute owner and that the Plaintiffs had been aware of the brother's claim. The Defendant also produced evidence of tenants in possession and initiated eviction proceedings.

The Trial Court and High Court found that the Defendant was the exclusive owner for the purposes of the suit, noting that the Defendant had not produced conclusive evidence of her brother's title, and the Will in her favour was not proved. The Courts observed that the Defendant's inconsistent pleas regarding ownership and the brother's share suggested an attempt to evade contractual obligations.

3. Performance and readiness of the parties

The Plaintiffs argued that they were ready and willing to perform, supported by documentary evidence of bank balances and financial means. They also contended that extensions of time were granted only at the Defendant's request due to her failure to deliver vacant possession.

The Defendant argued that the Plaintiffs were not ready and willing, pointing to their failure to deposit the balance consideration, their insistence on impossible conditions, and their financial insolvency as evidenced by criminal and civil proceedings. The Defendant maintained that she was ready to execute the sale deed upon receipt of the balance amount.

The Trial Court found the Plaintiffs' evidence insufficient to prove continuous readiness and willingness, particularly financial capacity at the relevant time. It noted that the Plaintiffs' bank statements showed only transient balances and that many documents were produced after suit institution, which was immaterial. The Court also found that the Plaintiffs' failure to deposit the balance amount voluntarily undermined their claim.

4. Effect of delay and lapse of time

The Courts emphasized that nearly three decades had elapsed since the agreement, during which the Plaintiffs failed to perform their obligations. The increase in property value over time and the delay in seeking specific performance weighed against the Plaintiffs. The principle that time is of the essence and that delay can disentitle a party to equitable relief was applied.

5. Fraudulent alterations and additional issues

The additional issues framed regarding fraudulent alterations in the sale agreement and annexed sketch were not substantially discussed in the judgment, indicating no evidence was found to support such allegations.

6. Relief and alternative relief

The Trial Court dismissed the suit for specific performance but granted the alternative relief of refund of the advance amounts paid with interest at 12%. The High Court confirmed this order. The Court also warned the Defendant against breaching undertakings given to the Court, though it declined to initiate contempt proceedings considering the long litigation period.

Treatment of competing arguments and application of law to facts

The Plaintiffs' arguments centered on their readiness and willingness, financial capacity, and the Defendant's failure to perform. The Defendant's arguments focused on the Plaintiffs' inability and unwillingness to pay, the existence of tenants and title disputes, and the Plaintiffs' conduct amounting to delay and mala fide intentions.

The Courts applied settled principles that specific performance is an equitable remedy requiring continuous readiness and willingness, financial capacity at the relevant time, and that delay and failure to perform disentitle the claimant. The Courts also considered the equities involved, including the Defendant's right to recover possession and the Plaintiffs' financial difficulties and criminal convictions.

Significant holdings and core principles established:

"Specific performance of a contract cannot be enforced in favour of a person who fails to prove that he has performed or has always been ready and willing to perform the essential terms of the contract which are to be performed by him."

"It is incumbent upon the buyer to satisfy the Court that he was ready and willing, had the capacity to pay for the property, and had made proper and reasonable arrangements for securing the purchase money."

"The financial capacity of the Plaintiff must be assessed as on the date of or soon after the execution of the agreement of sale. Documents produced after institution of the suit are immaterial for this purpose."

"Delay in performance and failure to deposit the balance sale consideration disentitle the Plaintiff to the equitable relief of specific performance."

"Where a purchaser fails to deposit the balance sale consideration voluntarily, the Court is not obliged to direct such deposit, and the failure adversely affects the claim for specific performance."

"The increase in property value over time and the lapse of nearly three decades since the agreement weigh heavily against granting specific performance at the original price."

"A suit for specific performance filed without readiness and willingness to perform, and without financial capacity, is liable to be dismissed."

"The Court's discretion in granting specific performance is guided by principles of equity and justice, balancing the conduct and circumstances of the parties."

Final determinations on each issue:

1. The Plaintiffs were not entitled to enforce the agreement for sale by specific performance due to failure to prove continuous readiness and willingness and financial capacity.

2. The suit property was held to be exclusively owned by the Defendant for the purposes of the suit, with no conclusive evidence of competing title.

3. The agreement of sale was enforceable in principle but was rendered unenforceable by the Plaintiffs' failure to perform and delay.

4. The Plaintiffs had not performed their part of the contract and were not ready and willing to do so at the relevant time.

5. The Plaintiffs lacked the financial capacity to pay the balance sale consideration within the stipulated period.

6. The Defendant was ready and willing to perform her part of the contract, subject to payment of the balance sale consideration.

7. The Plaintiffs' suit for specific performance was not maintainable and was dismissed.

8. No evidence supported the allegations of fraudulent alterations by the Defendant.

9. The Plaintiffs were entitled only to refund of the advance amounts with interest, as granted by the Trial Court and confirmed by the High Court.