Summary
A buyer who had sued for specific performance of an unregistered agreement to sell, after the seller had written cancelling the agreement and refunding most of the advance, encashed the seller's demand drafts during the pendency of the suit without protest. The Supreme Court held that this conduct showed she was not continuously willing to perform the contract, that her encashment amounted to acceptance of the seller's repudiation so the agreement stood cancelled, that without a prayer for a declaration that the cancellation was bad the suit for specific performance was not maintainable, and that her failure to disclose the cancellation letter and refund in the plaint was suppression of a material fact. The decree of specific performance was set aside and the consequent sale deed declared void.
Issues
- Whether a suit for specific performance of an agreement to sell can be decreed when the buyer accepted a refund of the major part of the earnest money/advance consideration during the pendency of the suit.
- Whether the buyer proved continuous readiness and willingness to perform the agreement from its execution until the decree.
- Whether the seller's cancellation letter with refund, followed by the buyer's encashment of the demand drafts, brought the agreement to sell to an end.
- Whether a suit for specific performance is maintainable without a prayer for a declaration that the seller's cancellation/termination of the agreement is bad in law.
- Whether the appellant, a legatee under the seller's will who was impleaded as a defendant, had locus standi to appeal.
- Whether non-disclosure in the plaint of the cancellation letter and refund disentitled the buyer to the discretionary relief of specific performance.
Provisions considered
- Section 16(c), Specific Relief Act, 1963Through the precedents it followed (Kamal Kumar, Gomathinayagam Pillai, J.P. Builders, Umabai, Mehboob-Ur-Rehman, C.S. Venkatesh), the Court applied the statutory requirement that a plaintiff must aver and prove that she has always been ready and willing to perform her part of the contract. Readiness (financial capacity) and willingness (intention, inferred from conduct) are distinct, and both must subsist continuously from the agreement until the decree; readiness and willingness at the date of the plaint alone is not enough. Encashment of the seller's refund during the suit negated willingness. (¶¶ 16, 17, 18, 19, 20, 28)
Held
- Under the Specific Relief Act, 1963 as it stood before the 2018 amendment, specific performance is a discretionary and equitable relief; the court must consider whether a valid and concluded contract exists, whether the plaintiff was and remains ready and willing, whether and how she performed her part, whether the relief is equitable or causes hardship, and whether any alternative relief such as refund of earnest money is due. (¶ 16)
- Readiness and willingness are two separate elements: readiness is the buyer's capacity, including the financial means to pay the price; willingness is the buyer's intention to perform, inferred from her conduct and the attending circumstances. Both must be shown continuously from the date of the agreement through the pendency of the suit up to the decree; readiness and willingness at the time of institution of the suit loses relevance if not shown to have continued throughout. (¶¶ 17, 18, 19)
- The buyer's admitted encashment, in July 2008 after filing the suit, of the demand drafts sent by the seller with the cancellation letter, without any objection to the shortfall, established beyond doubt that she was not willing to perform the agreement and have the sale deed executed. Once unwillingness is established, the fact that a small part of the advance consideration had not been refunded is irrelevant. (¶¶ 15, 20)
- The seller's letter of 7 February 2008 enclosing the refund by demand drafts and returning two of the three post-dated cheques was a repudiation of the agreement to sell, and the buyer's encashment of the demand drafts was acceptance of that repudiation; the agreement therefore stood cancelled. The argument that a bilateral agreement cannot be unilaterally cancelled was contrary to the facts, and there was no evidence that the drafts were encashed under protest. (¶¶ 21, 22, 23)
- Existence of a valid agreement is a sine qua non for specific performance. Where the seller cancelled the agreement before the suit was filed, that cancellation is a jurisdictional fact: until it is set aside the buyer is not entitled to specific performance. Absent a prayer for a declaration that the termination or cancellation is bad in law, a suit for specific performance is not maintainable. Following R. Kandasamy v. T.R.K. Sarawathy, the appellate court may examine whether this jurisdictional fact exists even though the trial court framed no issue on maintainability, the earlier view in A. Kanthamani v. Nasreen Ahmed notwithstanding. (¶¶ 24, 25, 26, 27)
- A legatee under the seller's will, impleaded as a defendant in the suit, is a necessary and interested party to the lis and has locus standi to appeal against the decree of specific performance. The onus of proving readiness and willingness lies on the buyer, and her failure to discharge it disentitles her to the relief regardless of who raises the point. (¶ 28)
- A plaintiff seeking the discretionary relief of specific performance must come to court with full disclosure. The buyer's failure to disclose in her plaint that the seller had issued a cancellation letter enclosing demand drafts refunding the advance and returning two post-dated cheques was suppression of a material fact which, following Citadel Fine Pharmaceuticals v. Ramaniyam Real Estates, disentitled her to specific performance. (¶ 29)
Result
Appeal allowed. The trial court's judgment dated 27 April 2018, its decree dated 10 May 2018 and the High Court's judgment dated 9 May 2024 set aside; the sale deed executed in favour of the respondent-buyer pursuant to those decrees declared null and void; the appellant directed to refund the balance sale consideration of Rs.24,61,000 deposited by the respondent-buyer.