SC Denies Specific Performance Due to Buyer's Acceptance of Refund and Lack of Continuous Willingness

The appeal is directed to a suit for specific performance of an unregistered Agreement to Sell executed in 2008 between the Respondent No. 1 (buyer) and the deceased original defendant (seller) for a property in Patna. The seller had allegedly fraudulently signed the agreement and subsequently sent a letter to the buyer cancelling it, along with a refund of a majority of the earnest money through demand drafts and the return of two post-dated cheques.

The buyer encashed these demand drafts after filing a suit for specific performance without raising any objection to the partial refund. The Trial Court decreed the suit in favour of the buyer, and this decision was upheld by the Patna High Court. The appellant, the beneficiary of a Will by the original seller, challenged these concurrent findings before the Supreme Court.

The primary legal issue before the Supreme Court was whether a suit for specific performance of an Agreement to Sell is liable to be decreed if the buyer had accepted the refund of the majority of the earnest money deposit/advance consideration during the pendency of the civil suit. The Court observed that continuous readiness and willingness to perform the contract from the date of the agreement until the decree is a condition precedent for the grant of specific performance.

The Court noted that the buyer's act of encashing the demand drafts, representing the refund of a significant portion of the earnest money after filing the suit for specific performance and without protest, unequivocally demonstrated a lack of willingness to perform their part of the contract. Furthermore, the Apex Court reiterated that, the existence of a valid agreement is a sine qua non for the grant of specific performance.

Supreme Court also emphasized that while a unilateral cancellation of a bilateral agreement might be contested, the acceptance of the refund by buyer in this case amounted to an acceptance of the seller's repudiation, leading to the cancellation of the agreement.

The Apex Court further observed that the failure of buyer to seek a declaratory relief challenging the cancellation of the agreement was a significant factor, and that a party seeking the equitable remedy of specific performance must come to court with full disclosure of material facts, and the buyer's failure to disclose the receipt and encashment of the demand drafts amounted to suppression of material facts, disentitling them to this relief.

It was held by the Supreme Court that the buyer's encashment of the demand drafts demonstrated a lack of continuous willingness to perform the agreement, and the agreement itself stood cancelled due to the seller's repudiation and the buyer's acceptance of the refund.

Consequently, the Supreme Court allowed the appeal and set aside the judgments and decrees of the Trial Court and High Court. The sale deed executed in favour of the respondent was declared null and void, and the appellant was directed to refund the balance sale consideration deposited by the buyer. The Apex Court also found that the appellant, as the beneficiary under the seller's Will, had the locus standi to file the appeal.

CORAM: JUSTICE DIPANKAR DATTA & JUSTICE MANMOHAN
BETWEEN: SANGITA SINHA VS BHAWANA BHARDWAJ AND ORS 2025 INSC 450
DATE OF JUDGMENT: 04-04-2025