The Supreme Court of India denies specific performance to a buyer in a property sale dispute.

Supreme Court of India overturned the Madras High Court Judgment in Specific Performance matter of a contract for the sale of property in case of R. Kandasamy & Ors (the sellers) and T.R.K. Sarawathy (the buyer), and had reversed the Trial Court's decision and granted specific performance in favor of the seller.

The case revolves around an agreement for sale executed on January 20, 2005, for a property with tenanted buildings. The buyer agreed to pay Rs. 2.3 crore as consideration. The agreement stipulated that the buyer was required to pay the balance sale consideration within four months, with time being of the essence. The sellers were obligated to deliver vacant possession of the property after evicting the tenants.

The current disputes arose concerning the deadline for payment and the provision of an encumbrance certificate. While the buyer made partial payments, the sellers canceled the agreement twice, arguing that the buyer failed to adhere to the payment deadline and demonstrated unwillingness to finalize the purchase. The buyer, in turn, filed a suit for specific performance or a refund of the advance payment.

The Trial Court, after examining the facts and evidence, dismissed the buyer's suit, concluding that while a valid agreement existed, the buyer was not ready and willing to fulfill her obligations.

The High Court, upon appeal, reversed the Trial Court's judgment and granted specific performance to the buyer. The High Court, in its analysis, found that the seller's acceptance of payments beyond the stipulated deadline itself implied that time was not of the essence of the contract.

The Supreme Court, after analyzing the facts, evidence, and applicable legal precedents, while dismissing the buyer's suit for specific performance, allowed the seller's appeals and reinstated the Trial Court's judgment. The Supreme Court further acknowledged that while the agreement explicitly stated time as being of the essence, the clause mandating the sellers to provide vacant possession suggested that the four-month payment period would begin after the last tenant vacated the property. This occurred on February 2, 2006.

Crucially, the Supreme Court found that the buyer had not demonstrated the requisite readiness and willingness to fulfill her contractual obligations. The Court highlighted several factors supporting this conclusion:

The buyer introduced delays by raising concerns about the encumbrance certificate, despite no such obligation being stipulated in the agreement. Even during cross-examination, the buyer admitted to lacking sufficient funds in her bank accounts to cover the remaining sale price, casting doubt on her financial capacity. The buyer repeatedly failed to meet payment deadlines and execute the sale deed, even after receiving multiple extensions from the sellers.

The buyer strategically waited until the last day of its validity to return the demand draft representing the advance payment, raising suspicions about her genuine intent.
Based on these findings, the Supreme Court determined that the buyer's conduct suggested a lack of genuine interest in purchasing the property and a potential attempt to capitalize on the property's appreciated value.

The Court concluded that the buyer was not entitled to the equitable relief of specific performance due to her demonstrated lack of readiness and willingness.

In addition to its decision on the specific performance issue, the Supreme Court also clarified the legal position concerning the maintainability of a suit for specific performance in cases where the seller unilaterally cancels the agreement for sale. The Court reaffirmed the principle established in previous decisions, stating that a buyer seeking specific performance in such situations must request a declaration invalidating the cancellation. This is essential because a canceled agreement ceases to exist in the eyes of the law and, therefore, cannot be enforced.

The Supreme Court in the present case of R. Kandasamy & Ors Vs T.R.K. Sarawathy & Anr(click to download) reiterated the legal principle that specific performance, being an equitable remedy, requires the party seeking it to demonstrate "Readiness and Willingness" to fulfill their contractual obligations. The Court referenced N.P. Thirugnanam v. R. Jagan Mohan Rao (Dr) (click to download) and has held that "The continuous readiness and willingness on the part of the plaintiff is a condition precedent to grant the relief of specific performance.", and relying on the C.S. Venkatesh vs. A.S.C. Murthy (click to download) the court emphasized that the continuous readiness and willingness is a condition precedent for granting specific performance and quoted "15. The words "ready and willing" imply that the plaintiff was prepared to carry out those parts of the contract to their logical end so far as they depend upon his performance. The continuous readiness and willingness on the part of the plaintiff is a condition precedent to grant the relief of performance."

The Court further clarified that this must be proven through conduct and circumstances, including the availability of funds to make timely payments. The Court also highlighted and refered to the case of U.N. Krishnamurthy v. A.M. Krishnamurthy (click to download) to emphasize the need for specific pleadings and evidence demonstrating the availability of funds to discharge contractual obligations.

In applying these principles to the case, the Court found the buyer's conduct indicated a lack of readiness and willingness, thus denying the equitable relief of specific performance

The Court emphasized the trial court's fundamental duty to ensure the existence of the 'jurisdictional fact' before granting relief, irrespective of whether the parties explicitly raise this point. In essence, the trial court must be satisfied that the necessary evidence supports the existence of the jurisdictional fact, which is a prerequisite for the court's authority to grant the requested relief.

Coram: Justice Dipankar Datta, Justice Sanjay Karol.
Between: R. Kandasamy & Ors Vs T.R.K. Sarawathy & Anr.
Date of Judgment: 21-11-2024