SHENBAGAM & ORS. versus KK RATHINAVEL

[2022] 1 S.C.R. 346

[2022] 1 S.C.R.

ASHENBAGAM & ORS.

KK RATHINAVEL

(Civil Appeal No. 150 of 2022)

BJANUARY 20, 2022

[DR. DHANANJAYA Y CHANDRACHUD AND A. S.BOPANNA, JJ.]

Specific Relief Act: s.16 – Bars to the relief of specificperformance – Held: s.16 provides certain bars to the relief ofCspecific performance – These include, inter alia, person who failsto aver and prove that he has performed or has always been ‘readyand willing’ to perform the essential terms of the contract which areto be performed by him, other than terms the performance of whichhas been prevented and waived by the defendant.

Specific performance: Conduct of the parties – Generally inan agreement for sale of immovable property, time is not of theessence – In deciding whether to grant the remedy of specificperformance, specifically in suits relating to sale of immovableproperty, the courts must be cognizant of the conduct of the parties,Ethe escalation of the price of the suit property, and whether oneparty will unfairly benefit from the decree – The remedy providedmust not cause injustice to party, specifically when they are not atfault – In this case, three decades passed since the agreement tosell was entered into between the parties – The price of the suitproperty undoubtedly have escalated – In view of the blemishedFconduct of the respondent-plaintiff in indicating his willingness toperform the contract, grant of the remedy of specific performanceof the contract is declined – However, the consideration togetherwith interest at 6% per annum is ordered to be refunded.

Specific performance: Willingness to perform the contract –GThe foundation of suit for specific performance lies in ascertainingwhether the plaintiff has come to the court with clean hands andhas, through his conduct, demonstrated that he has always beenwilling to perform the contract – There is conspicuous absence injudgment of the trial court of any reference to evidence led by theHrespondent to indicate his willingness to perform the contract –

Trial court merely adverted to “document produced on behalf ofthe plaintiff” and concluded that he had sufficient means to purchasethe suit property – Apart from this observation, trial court did notanalyse the terms of the agreement, the obligations of the partiesand the conduct of the parties – Plaintiff withdrew the balanceconsideration deposited by him before the trial court in 2001 – Theinconsistency in his conduct, lack of communication with thedefendants urging them to discharge the mortgage and in showinghis willingness to pay the balance consideration, and delay of aboutthree years from the date fixed for performance of the contract infiling suit, are all indicative of the plaintiff ’s lack of will to performthe contract.Specific performance: Burden to prove readiness andwillingness to perform contract – Held: The terms of the agreementstipulated that the plaintiff was to pay the balance considerationwithin period of six months and “on receipt of the balanceconsideration”, the defendants were to execute the sale deed“pertaining to the property free from all encumbrances” – It isevident that plaintiff was required to pay the remainingconsideration (or indicate his willingness to pay) and only thencould have sought specific performance of the contract – Plea ofplaintiff that an additional amount of Rs. 10,000 was paid to thedefendants to discharge the mortgage – However, theacknowledgment signed by the defendants indicated that the moneywas to meet urgent family expenses – Since no further details havebeen provided and no evidence has been adduced by the plaintiff,it cannot be concluded that the money was for discharge of themortgage – Even assuming that the plaintiff is correct, the agreementstill required the plaintiff to pay the balance consideration – Theagreement clearly provided that the balance consideration wouldbe paid and then the sale deed would be executed – How thedefendant chose to discharge the mortgage was for them to decide– It is an established principle of law that the plaintiff must provethat he is ready and willing to perform the contract – Burden lies onthe plaintiff – Plaintiff has not led any evidence that he was readyor willing to perform his obligations under the agreement.

Specific performance: In evaluating whether the respondentwas ready and willing to perform his obligations under the contract,

Ait is not only necessary to view whether he had the financial capacityto pay the balance consideration, but also assess his conductthroughout the transaction – Further, the payment of income tax byitself does not show that the plaintiff had sufficient resources topay for the suit property.

BSpecific Relief Act: s.20 – Equitable relief – Discretion oncourt conferred under s.20 of the Act.

Allowing the appeal, the Court

HELD: 1. Section 16 of the Specific Relief Act providescertain bars to the relief of specific performance. These include,Cinter alia, person who fails to aver and prove that he hasperformed or has always been ‘ready and willing’ to perform theessential terms of the contract which are to be performed by him,other than terms the performance of which has been preventedand waived by the defendant. [Para 14][358-F; 359-A-B]

DJP Builders v. Ramadas Rao (2011) 1 SCC 429 :[2010] 15 SCR 538; His Holiness Acharya SwamiGanesh Dassji v. Sita Ram Thapar (1996) 4 SCC 526 :[1996] 2 Suppl. SCR 111; Atma Ram v. Charanjit Singh(2020) 3 SCC 311; P Meenakshisundaram v. PEVijayakumar (2018) 15 SCC 80 : [2018] 6 SCR 667 –relied on.

2.1 In the present case, the respondent and the appellantsentered into an agreement to sell the suit property on 7 February1990. Further, on 8 March 1990, the appellants issued receiptfor an additional sum of Rs. 10,000 as advance from theFrespondent. The terms of the agreement indicate that the suitproperty was to be sold for total consideration of Rs. 1,25,000,out of which the appellants had received Rs. 25,000 as advance.On 8 March 1990, further sum of Rs. 10,000 was given asadvance to the appellants “for [their] urgent family expenses”.GThe agreement stipulated that the respondent shall pay the balanceconsideration within period of six months, that is, by 7 August1990 and shall bear the cost of stamp duty. On receipt of thebalance sale consideration, the appellants were required toexecute the sale deed free from all encumbrances. By 19

December 1990, the respondent did not pay the balanceconsideration to the appellant and thus, the appellant rescindedthe contract and forfeited the advance money. The respondentsent reply on 26 December 1990 demanding that the appellantsexecute the sale deed free from encumbrances. The appellantsalleged that there was mortgage of Rs. 6,000 on the suit propertythat the respondent agreed to discharge from the saleconsideration. However, the respondent did not show any interestin getting the sale deed executed. In 1991, the respondent fileda suit for mandatory injunction. On 17 June 1992, the appellantdischarged the mortgage debt, and year after that the respondentinstituted suit for specific performance. [Paras 19-21][363-A,F, G-H; 364-A-C]

2.2 The trial court analysed the notice issued by theappellants and held that the appellants made no demand from therespondent to discharge the mortgage liability. Thus, theappellants’ plea that the respondent-plaintiff had to pay the loanand only thereafter, could the appellants execute the sale deedwas rejected. The court also accepted the respondent’s argumentthat the advance amount of Rs. 10,000 was paid to discharge themortgage. Further, the trial court observed that the documentssubmitted by the respondent indicate that he had sufficient meansto purchase the suit property. The judgment of the trial courtwas upheld by the first appellate court and, in second appeal, bythe High Court. [Para 24][365-A-C]

2.3 All the three courts, including the High Court, grosslyerred in the manner in which they have adjudicated upon thisdispute in suit for specific performance. In the first instance,the trial court failed to frame an issue on whether the respondent-plaintiff was ready and willing to perform his obligations underthe contract and instead assessed whether he is entitled to therelief of specific performance. In doing so, the trial court viewedthe legal issue from an incorrect lens. The foundation of suit forspecific performance lies in ascertaining whether the plaintiff hascome to the court with clean hands and has, through his conduct,demonstrated that he has always been willing to perform thecontract. There is conspicuous absence in judgment of the trialcourt of any reference to evidence led by the respondent to

Aindicate his willingness to perform the contract. The trial courtmerely adverted to “document produced on behalf of the plaintiff”and concluded that he had sufficient means to purchase the suitproperty. Apart from this observation, the judgment fails toanalyse the terms of the agreement, the obligations of the partiesand the conduct of the respondent or the appellant. In evaluatingBwhether the respondent was ready and willing to perform hisobligations under the contract, it is not only necessary to viewwhether he had the financial capacity to pay the balanceconsideration, but also assess his conduct throughout thetransaction. [Paras 25, 26][365-C-G]C3. The terms of the agreement stipulated that therespondent was to pay the balance consideration within periodof six months and “on receipt of the balance consideration”, theappellants were to execute the sale deed “pertaining to theproperty free from all encumbrances”. It is evident from theDagreement that the liability to deliver the property free from anyencumbrance was on the appellants. However, this obligation isprefaced by the condition that the appellants would be requiredto execute the sale deed free from encumbrance on the receiptof the balance consideration. Thus, the agreement did not specifywhen the appellants should discharge their mortgage- before theEexpiry of six months, after receipt of the advance amount, or afterreceipt of the balance consideration. It only obligated them toensure that after the balance consideration is received, the saledeed executed should be free from encumbrances. Based on aplain reading of the agreement, the respondent’s plea cannot beFaccepted that he was willing to perform his obligations under thecontract. It is evident that he was required to pay the remainingconsideration (or indicate his willingness to pay) and only thencould have sought specific performance of the contract. Therespondent has also urged that the additional amount of Rs.10,000 was paid to the appellants to discharge the mortgage. TheGacknowledgment signed by the appellants indicates that the moneywas to meet urgent family expenses. Since no further details havebeen provided and no evidence has been adduced by therespondent-plaintiff, it cannot be concluded that the money was

for discharge of the mortgage. Even assuming that the respondentis correct, the agreement still required the respondent to paythe balance consideration. [Para 28][366-B-G]

4.1 The respondent has failed to provide any documents orcommunication which would indicate that he called upon theappellants to perform their obligations or discharge the mortgagewithin the time period stipulated in the contract. Even after theexpiry of the six months, the respondent did not reach out to theappellants. It is only in response to the appellants’ legal noticethat the respondent demanded performance of their obligations.Merely averring that he was waiting with the balanceconsideration and believed that the appellants would clear theencumbrance is insufficient to prove that the respondent-plaintiffwas willing to perform his obligations under the contract.[Para 29][367-A-C]

4.2 The respondent withdrew the balance considerationdeposited by him before the trial court in 2001. The inconsistencyin the respondent’s conduct, the lack of communication with theappellants urging them to discharge the mortgage and showinghis willingness to pay the balance consideration, and the delay ofabout three years from the date fixed for performance of thecontract in filing suit, are all indicative of the respondent’s lackof will to perform the contract. The ‘readiness’ of the respondentto perform his obligations refers to whether he was financiallycapable of paying the balance consideration. Both the trial courtand the first appellate court have observed that the respondentwas ready to pay the balance consideration as (i) he was payingincome tax since 1988 and (ii) his bank passbooks indicate thathe had sufficient funds. The payment of income tax by itself doesnot show that the respondent had sufficient resources to pay forthe suit property. Moreover, the bank passbooks submitted inevidence by the respondent were for accounts opened after theexpiry of the period written in the contract. The first appellatecourt despite noting this, has chosen to hold that the respondentwas ready and willing to perform the agreement. The respondenthowever did not lead any evidence to indicate that in the year1990 he had the money to pay the balance consideration. The

DEF

Afirst appellate court shifted the burden on the appellants to provethat the respondent-plaintiff was incapable of paying the balanceconsideration. It is an established principle of law that the plaintiffmust prove that he is ready and willing to perform the contract.The burden lies on the plaintiff. The respondent has not led anyevidence that he was ready or willing to perform his obligationsBunder the agreement. [Paras 30, 31][367-D-H; 368-A-C]

Zarina Siddiqui v. A. Ramalingam (2015) 1 SCC 705 :[2014] 14 SCR 456; Satya Jain v. Anis Ahmed Rushdie(2013) 8 SCC 131 : [2013] 3 SCR 319; KS Vidyanadamand others v. Vairavan (1997) 3 SCC 1 : [1997] 1 SCRC993 – relied on.

Nirmala Anand v. Advent Corporation (P.) Ltd. andOthers (2002) 8 SCC 146 : 2002 (2) Suppl. SCR 706 –followed.

D5. Generally speaking, time is not of the essence in anagreement for the sale of immoveable property. In decidingwhether to grant the remedy of specific performance, specificallyin suits relating to sale of immovable property, the courts mustbe cognizant of the conduct of the parties, the escalation of theprice of the suit property, and whether one party will unfairlyEbenefit from the decree. The remedy provided must not causeinjustice to party, specifically when they are not at fault. In thepresent case, three decades have passed since the agreement tosell was entered into between the parties. The price of the suitproperty would undoubtedly have escalated. Given the blemishedFconduct of the plaintiff in indicating his willingness to performthe contract, in any event grant of the remedy of specificperformance of the contract is declined. However, theconsideration together with interest at 6% per annum is orderedto be refunded. [Para 36][372-A-D]

Case Law ReferenceG

CIVIL APPELLATE JURISDICTION: Civil Appeal No.150 of2022.

From the Judgment and Order dated 07.01.2019 of the High Courtof Judicature at Madras in S.A. No.1438 of 1999.

Mrs. V. Mohana, Sr. Adv., B. Ragunath, Mrs. N. C. Kavitha,Mrs. Ayushma, Vijay Kumar, Advs. for the Appellants.

Siddharth Naidu, V. Balachandran for M/s Ksn & Co., Advs. forthe Respondent.

The Judgment of the Court was delivered by

DR. DHANANJAYA Y CHANDRACHUD, J.

Factual Background

1. The appeal arises from judgment and order dated 7 January2019 of Single Judge of the High Court of Judicature at Madras. TheHigh Court dismissed the second appeal of the appellants, who aredefendants to the suit for specific performance. The High Courtconfirmed the decree for specific performance, and affirmed the decisionof the first appellate court against the decree for specific performance.

2. The appellants are owners of property located at Patta Nos.147, 240, 217, Madukkarai Village, Coimbatore Taluk, Coimbatoremeasuring about 12.60 acres[1]. The first appellant and her spouse enteredinto an agreement on 7 February 1990 with the respondent by which

Ed. Note - [*]denotes the actual pagination in the Original Judgment.1 “suit property”

Athey agreed to sell the suit property for consideration of Rs. 1,25,000.The respondent paid sum of Rs. 25,000 as an advance and agreed topay the balance within six months, with the stamp duty. On the paymentof the balance, the appellants were required to execute sale deedconveying the property, free from all encumbrances. The terms of theagreement also stipulated that the advance amount would be forfeited inBcase the appellants failed to complete the sale. Further, in the event therespondent was ready and willing to complete the sale but the appellantsdelayed or refused, the respondent could proceed before the court to getthe sale completed and seek possession of the suit property under theSpecific Relief Act 1963[2]. The suit property was also subject to mortgageCof Rs. 6,000 in favour of one Janaki Amma. The respondent-plaintiffalleged that the appellants had received the advance sum to dischargethe mortgage over the suit property. On the contrary, the appellants allegedthat the respondent was aware of the mortgage over the suit propertyand had agreed to discharge the mortgage from the sale consideration.

On 8 March 1990, the appellants received further sum of Rs. 10,000Dfrom the respondent as an advance under the sale agreement.

3. On 19 December 1990, the appellants sent legal notice to therespondent calling upon him to pay the balance consideration and performhis obligations under the agreement to sell. The appellants rescinded thecontract on the ground that the respondent was not ready and willing toEperform his obligations. In response, the respondent sent reply dated26 December 1990 calling upon the appellants to execute the sale freefrom encumbrance.

4. In 1991, the respondent instituted suit[3] before the PrincipalDistrict Munsif, Coimbatore seeking permanent injunction restrainingFthe appellants from alienating or creating any encumbrance on the suitproperty. The respondent obtained an ad interim injunction. In themeantime, the appellants discharged the mortgage debt.

5. On 17 June 1993, the respondent instituted suit[4] for specificperformance before the Sub-Judge, Coimbatore seeking in the alternative,Ga refund of the advance of Rs. 35,000 with interest at 24% per annumfrom the date of the suit till realization.

6. By its judgment dated 11 October 1996, the trial court decreedthe suit in favour of the respondent and directed the respondent to deposit2 “Specific Relief Act”3 O.S No. 615 of 1991H4 O.S No. 850 of 1993

the balance consideration of Rs. 90,000 within month. The appellantswere directed to receive this amount and execute the sale deed in favourof the respondent within period of three months. The trial court heldthat:

(i)The appellants had discharged the mortgage debt only on17 June 1992, after which the respondent-plaintiff couldBget the sale deed executed; and

(ii)The suit was filed within three years from the date ofdischarge of the mortgage and was not barred by limitation.

7. The appellant preferred an appeal[5] against the order of the trialcourt before the Principal District Judge, Coimbatore, which wasdismissed by judgment dated 24 February 1998. Following this, theappellant filed second appeal[6] before the Madras High Court. Whilethe appeal was pending, the respondent moved an application to withdrawthe balance consideration of Rs. 90,000 which was deposited before thetrial court. The application was allowed by the High Court on 24 July2001. In the meantime, the spouse of the appellant passed away and hislegal heirs were substituted on record.

8. The Single Judge of the High Court dismissed the second appealand upheld the judgment of the trial court and the first appellate court.The High Court held that:

(i)The agreement to sell provides that the discharge of themortgage by the appellants was condition precedent forthe completion of the sale transaction. Since the appellantstook no steps to discharge the mortgage, it cannot beaccepted that the respondent-plaintiff was not ready andwilling to perform his part of the contract;

(ii)There is no clause in the agreement to sell that indicatesthat time was of the essence to the contract. If time was ofthe essence, then the appellants would have discharged themortgage before the expiry of the term mentioned in theGagreement;

(iii)The trial court did consider the bank passbook and incometax returns of the respondent-plaintiff and rightly concluded

5 A.S No. 67 of 1997

6 Second Appeal No. 1438 of 1999

Athat he was ready and willing to perform the agreementand had sufficient resources to purchase the property;

(iv)The plea that the suit was barred by Order II Rule 2 of theCode of Civil Procedure 1908[7] had not been raised in thewritten statement and could not be taken for the first timeBin the second appeal; and

(v)The withdrawal of the balance of the sale consideration bythe respondent cannot disentitle him to the reliefs sought asit was pursuant to an order of the High Court, after takinginto account that the amount in deposit was not earning anyCinterest.

9. Against the judgment and order of the High Court, the appellantsfiled Special Leave Petition before this Court under Article 136 of theConstitution.

SubmissionsD

10. Ms V Mohana, Senior counsel appearing on behalf of theappellants urged the following submissions:

(i)The trial court failed to frame an issue on whether therespondent-plaintiff was ready and willing to perform hispart of the agreement to sell;E

(ii)The trial court failed to consider any evidence or reach anyfinding as to whether the respondent was ready to performthe contract and merely noted that he had sufficient meansto purchase the suit property;

F(iii)After the legal notice was served on the respondent by theappellant, the respondent filed suit for permanent injunctionand not suit for specific performance. This indicates thathe was not ready to perform the contract;

(iv)The finding that the respondent was ready to perform theGcontract as he had sufficient means to purchase the propertyis erroneous as the passbooks produced by the respondentwere for the accounts opened on 11 March 1992 and 22July 1994. Thus, the accounts were not contemporary tothe period of the contract;

(v)Merely because the respondent was paying income tax sinceA1988 does not indicate his willingness to perform the contract;

(vi)The respondent filed the suit for specific performance on17 June 1993 and the remaining consideration of Rs. 90,000was deposited on 15 November 1996. This amount wasthen withdrawn in 2001. Thus, the conduct of the respondentBdoes not indicate that he was ready and willing to performthe contract;

(vii)Until the appellants issued notice to the respondentinforming him about the rescission of the contract, therewas no communication from the respondent to seekperformance of the agreement by the appellants. Thus,merely filing suit three years after the agreement doesnot prove the readiness and willingness of the respondent;

(viii) The jurisdiction of courts under Section 20 of the SpecificRelief Act is discretionary and should not be exercised inDthe present case as the appellants would be dispossessedof the suit property for meagre sum that was arrived atthirty years ago;

(ix)Clearing the mortgage over the property was not conditionprecedent of the agreement. In fact, the clause in theagreement stipulates that it was only on receipt of thebalance consideration that the appellants would be requiredto execute the sale deed free from all encumbrances;

(x)The agreement clearly notes that the balance considerationis to be paid within period of six months. Thus, time wasof essence of the agreement; and

(xi)The respondent’s suit for specific performance is barredby Order II Rule 2 of the CPC as he had filed suit forpermanent injunction in 1991 and relinquished his right toseek the relief of specific performance.

11. Opposing these submissions, Mr Siddharth Naidu, counselappearing on behalf of the respondents, submitted that:

(i)The respondent-plaintiff in his reply dated 26 December1990 specifically stated that he was ready and willing to

Apay the balance consideration and get the sale deedexecuted, provided the mortgage is discharged;

(ii)The terms of the contract and the conduct of the partiesmade it clear that time was not of the essence of the contract;

(iii)Under the agreement, it was the obligation of the appellantsBto discharge the mortgage, after which the respondent wasto pay the balance consideration. The appellants dischargedthe mortgage on 17 June 1992, and thereafter, the respondentfiled suit for specific performance of contract;

(iv)The respondent deposited the balance consideration beforeCthe trial court which was withdrawn in 2001 pursuant toorder of the High Court dated 24 July 2001; and

(v)The respondent had sufficient means to purchase the suitproperty and was ready and willing to perform his part ofthe contract.

12. We shall now consider the rival submissions.

Analysis

13. The present appeal involves suit for specific performanceof an agreement to sell the suit property between the appellants andErespondent. The core of the dispute arising from the suit seeking therelief of specific performance under the Specific Relief Act is whetherthe respondent-plaintiff has performed or has always been ‘ready andwilling’ to perform his obligations under the contract.

14. Section 16[8 ]of the Specific Relief Act provides certain bars tothe relief of specific performance. These include, inter alia, personFwho fails to aver and prove that he has performed or has always been‘ready and willing’ to perform the essential terms of the contract which

8 “16. Personal bars to relief.- Specific performance of contract cannot be enforcedin favour of person— [(a) who has obtained substituted performance of contractunder section 20; or]G(b) who has become incapable of performing, or violates any essential term of, thecontract that on his part remains to be performed, or acts in fraud of the contract, orwilfully acts at variance with, or in subversion of, the relation intended to be establishedby the contract; or

(c) [who fails to prove] that he has performed or has always been ready and willing toperform the essential terms of the contract which are to be performed by him, otherHthan terms of the performance of which has been prevented or waived by the defendant.

are to be performed by him, other than terms the performance of whichhas been prevented and waived by the defendant. In JP Builders v. ARamadas Rao[9], two-judge Bench of this Court observed that Section16(c) mandates ‘readiness and willingness’ of the plaintiff and is acondition precedent to obtain the relief of specific performance. TheCourt held:

“25. Section 16(c) of the Specific Relief Act, 1963 mandates“readiness and willingness” on the part of the plaintiff and it is acondition precedent for obtaining relief of grant of specificperformance. It is also clear that in suit for specificperformance, the plaintiff must allege and prove acontinuous “readiness and willingness” to perform thecontract on his part from the date of the contract. The onusis on the plaintiff.

27. It is settled law that even in the absence of specific plea bythe opposite party, it is the mandate of the statute that theplaintiff has to comply with Section 16(c) of the Specific ReliefAct and when there is non-compliance with this statutorymandate, the court is not bound to grant specificperformance and is left with no other alternative but todismiss the suit. It is also clear that readiness to performmust be established throughout the relevant points of time.“Readiness and willingness” to perform the part of the contracthas to be determined/ascertained from the conduct of the parties.”

(emphasis supplied)

The Court further observed that ‘readiness’ refers to the financialcapacity and ‘willingness’ refers to the conduct of the plaintiff wantingthe performance.

Explanation.—For the purposes of clause (c),—

(i) where contract involves the payment of money, it is not essential for the plaintiffto actually tender to the defendant or to deposit in court any money except when sodirected by the court; (ii) the plaintiff [must prove] performance of, or readiness andwillingness to perform, the contract according to its true construction.”9 (2011) 1 SCC 429

A15. Similarly, in His Holiness Acharya Swami Ganesh Dassjiv. Sita Ram Thapar[10], two-judge Bench of this Court observed that‘readiness’ means the capacity of the plaintiff to perform the contractwhich would include the financial position to pay the purchase price. Toascertain ‘willingness’, the conduct of the plaintiff has to be properlyscrutinised. The Court noted:B

“2. There is distinction between readiness to perform the contractand willingness to perform the contract. By readiness may bemeant the capacity of the plaintiff to perform the contract whichincludes his financial position to pay the purchase price. Fordetermining his willingness to perform his part of the contract, theCconduct has to be properly scrutinised. […] The factum ofreadiness and willingness to perform the plaintiff’s part ofthe contract is to be adjudged with reference to the conductof the party and the attending circumstances. The courtmay infer from the facts and circumstances whether theDplaintiff was ready and was always ready and willing toperform his part of the contract. The facts of this case wouldamply demonstrate that the petitioner/plaintiff was not ready norhad the capacity to perform his part of the contract as he had nofinancial capacity to pay the consideration in cash as contractedand intended to bide for the time which disentitles him as time isEof the essence of the contract.”

(emphasis supplied)

16. The precedents of this Court indicate that the plaintiff mustestablish that he was ‘ready and willing’ to perform the contract. In thisFregard, the conduct of the plaintiff must be consistent.

17. In another decision in Atma Ram v. Charanjit Singh[11], atwo-judge Bench of this Court dealt with case where an agreementfor sale of immovable property was entered into between the petitionerand respondent. The date for performance of the contract was fixed asG7 October 1996. legal notice was issued by the petitioner on 12November 1996 seeking performance of the contract by the respondent,and thereafter suit was filed. The plaintiff sought mandatory injunction

10 (1996) 4 SCC 526H11 (2020) 3 SCC 311

to direct the respondent to execute documents for transfer of the property.However, the trial court chose to treat it as suit for specific performanceof the contract. In declining the relief of specific performance, the Courtobserved:

“9. Coming to the second aspect revolving around Section 16(c),a look at the judgment of the trial court would show that noissue was framed on the question of readiness andwillingness on the part of the petitioner-plaintiff in terms ofSection 16(c) of the Specific Relief Act, 1963. The fact thatthe petitioner chose to issue legal notice dated 12-11-1996 andthe fact that the petitioner created an alibi in the form of an affidavitexecuted before the Sub-Registrar on 7-10-1996 (marked as Ext.P-2) to show that he was present before the Sub-Registrar forthe purpose of completion of the transaction, within the timestipulated for its performance, was not sufficient to conclude thatthe petitioner continued to be ready and willing even after threeyears, on 13-10-1999 when the plaint was presented. Noexplanation was forthcoming from the petitioner for the longdelay of three years, in filing the suit (on 13-10-1999) afterissuing legal notice on 12-11-1996. The conduct of aplaintiff is very crucial in suit for specific performance. Aperson who issues legal notice on 12-11-1996 claimingreadiness and willingness, but who institutes suit only on13-10-1999 and that too only with prayer for mandatoryinjunction carrying fixed court fee relatable only to thesaid relief, will not be entitled to the discretionary relief ofspecific performance.”

(emphasis supplied)

In assessing the conduct of the plaintiff, the Court in Atma Ram(supra) observed that the delay in filing suit, specifically one formandatory injunction, indicates the inconsistent behaviour of the plaintiff.The failure of the trial court to frame an issue relating to the readinessand willingness of the plaintiff to perform the contract is also critical indeclining the remedy of specific performance.

18. This Court in P Meenakshisundaram v. P Vijayakumar[12],dealt with suit for specific performance of contract for sale of an

12 (2018) 15 SCC 80

[2022] 1 S.C.R.

Aimmovable property, which had mortgage over it. In evaluating whetherthe respondent-plaintiff had established that he was ‘ready and willing’to perform the contract, the two-judge Bench, held:

“8. As regards suit for specific performance, the law is veryclear that the plaintiff must plead and prove his readinessBand willingness to perform his part of the contract all throughi.e. right from the date of the contract till the date of hearingof the suit. If Respondent 1 was well aware about theencumbrance and the parties had chosen that the balanceconsideration be paid to the appellant before 20-3-2001 sothat the sale deed could be registered without anyCencumbrance, it was for Respondent 1 to have takenappropriate steps in that behalf for completion oftransaction. The facts on record disclose that the first step takenby Respondent 1 after the suit agreement was well after fourmonths, when further amount of Rs 2 lakhs was paid on 21-1-D2001. Thereafter nothing was done till 20-3-2001 by which thetransaction had to be completed. The record is completely silentabout any communication sent around 20-3-2001 towardscompletion of transaction. As matter of fact the first stepthereafter was six months after the deadline, namely, on 22-9-2001 when the communication (Ext. A-6) was sent along withEamount of Rs 10 lakhs. The written submissions filed on behalf ofRespondent 1 also do not indicate any steps till this time so as tosay that he was all the while ready and willing to complete thetransaction.

9. The assertion made by Respondent 1 in Para 7 of the plaint isFa mere assertion without any relevant details as to what exactlyhe had done towards fulfilment of his obligations and completionof the transaction.”

(emphasis supplied)

GIn P.Meenakshisundaram (supra), the Court dealt with similarcase in which the suit property was encumbered and the sale deed, freefrom encumbrances, had to be executed after payment of theconsideration. The Court noted that there was no communication of theplaintiff with the defendant till the date on which the transaction was tobe completed, showing his lack of willingness to perform the contract.H

19. In the present case, the respondent and the appellants enteredinto an agreement to sell the suit property on 7 February 1990. Therelevant terms of the agreement are reproduced below:

“Whereas the SELLERS agreed to sell the property to thePURCHASER for sale consideration of Rs. 1,25,000/- (RupeesOne lakh and twenty five thousand only) and the PURCHASERalso agreed to purchase the same.

Now this agreement witnesseth as follows:

The PURCHASER has paid sum of Rs. 25,000/- as advance,the receipt of which sum the SELLERS acknowledge

The PURCHASER agreed to pay the remaining sale considerationwithin period of six months from this day of agreement to theSELLERS and to bear the cost of stamp duty. On receipt of thebalance sale consideration, the SELLERS agreed to execute saledeed pertaining to the property free from all encumbrances to thePURCHASER or to his nominee.

If the SELLERS fail to complete the Sale, the advance amountshall be forfeited.

If the PURCHASER is ready and willing to complete the Saleand the SELLERS refuse or delay to execute Sale, thePURCHASER is at liberty to proceed before the Court of lawand to get the sale completed and to get possession of the propertythrough Court under the Specific Relief Act., holding the SELLERSliable for the loss.”

Further, on 8 March 1990, the appellants issued receipt for anadditional sum of Rs. 10,000 as advance from the respondent:

“On this day of 8th March 1990 we received sum ofRs.10,000/- (Rupees Ten thousand only) from you in the presenceof the witnesses for our urgent family expenses in addition to theadvance amount received under the sale agreement dated07.02.1990.”

20. The terms of the agreement indicate that the suit propertywas to be sold for total consideration of Rs. 1,25,000, out of which theappellants had received Rs. 25,000 as advance. On 8 March 1990, afurther sum of Rs. 10,000 was given as advance to the appellants “for[their] urgent family expenses”. The agreement stipulated that therespondent shall pay the balance consideration within period of sixmonths, that is, by 7 August 1990 and shall bear the cost of stamp duty.

AOn receipt of the balance sale consideration, the appellants were requiredto execute the sale deed free from all encumbrances.

21. By 19 December 1990, the respondent did not pay the balanceconsideration to the appellant and thus, the appellant rescinded the contractand forfeited the advance money. The respondent sent reply dated 26BDecember 1990 demanding that the appellants execute the sale deedfree from encumbrances. The appellants alleged that there was amortgage of Rs. 6,000 on the suit property that the respondent agreed todischarge from the sale consideration. However, the respondent did notshow any interest in getting the sale deed executed. In 1991, therespondent filed suit for mandatory injunction. On 17 June 1992, theCappellant discharged the mortgage debt, and year after that therespondent instituted suit for specific performance.

22. In the plaint, the respondent claimed that it was agreed betweenthe parties that the appellants should clear the title to the suit propertyand execute the sale deed. The respondent further alleged that for thisDreason he had paid an additional amount of Rs. 10,000 on 8 March 1990.In order to demonstrate his readiness and willingness to perform thecontract, the respondent alleged that:

(i)He was waiting with the balance consideration and believedthat the appellants would clear the encumbrance andEproduce all necessary documents;

(ii)He replied to their legal notice demanding the discharge ofthe mortgage over the suit property;

(iii)After filing suit for mandatory injunction, the respondentapproached the appellants and requested them to performFtheir obligations under the contract; and

(iv)He instituted suit for specific performance when hebecame aware of the discharge of mortgage by theappellants.

G23. The trial court decreed the suit for specific performance infavour of the respondent. The trial court only framed the following twoissues:

“1. Whether the plaintiff [is entitled] for the relief of specificperformance?

H2. To what other reliefs?”

24. No issue on readiness and willingness was framed by the trialcourt. The trial court analysed the notice issued by the appellants andheld that the appellants made no demand from the respondent to dischargethe mortgage liability. Thus, the appellants’ plea that the respondent-plaintiff had to pay the loan and only thereafter, could the appellantsexecute the sale deed was rejected. The court also accepted therespondent’s argument that the advance amount of Rs. 10,000 was paidto discharge the mortgage. Further, the trial court observed that thedocuments submitted by the respondent indicate that he had sufficientmeans to purchase the suit property. The judgment of the trial court wasupheld by the first appellate court and, in second appeal, by the HighCourt.

25. All the three courts, including the High Court, grossly erred inthe manner in which they have adjudicated upon this dispute in suit forspecific performance. In the first instance, the trial court failed to framean issue on whether the respondent-plaintiff was ready and willing toperform his obligations under the contract and instead assessed whetherhe is entitled to the relief of specific performance. In doing so, the trialcourt viewed the legal issue from an incorrect lens. The foundation of asuit for specific performance lies in ascertaining whether the plaintiffhas come to the court with clean hands and has, through his conduct,demonstrated that he has always been willing to perform the contract.There is conspicuous absence in judgment of the trial court of anyreference to evidence led by the respondent to indicate his willingness toperform the contract. The trial court merely adverted to “documentproduced on behalf of the plaintiff” and concluded that he had sufficientmeans to purchase the suit property. Apart from this observation, thejudgment fails to analyse the terms of the agreement, the obligations ofthe parties and the conduct of the respondent or the appellant.

26. In evaluating whether the respondent was ready and willingto perform his obligations under the contract, it is not only necessary toview whether he had the financial capacity to pay the balanceconsideration, but also assess his conduct throughout the transaction.

27. The respondent has alleged that he did not pay the balanceconsideration as the appellants failed to remove the encumbrance on thesuit property. First of all, we note that the agreement to sell the suitproperty did not specifically record the mortgage over the suit property.However, neither has the appellant denied the existence of the mortgage

Anor has the respondent claimed that he was unaware of the encumbranceover the suit property at the time of entering into the agreement. Theagreement did not expressly detail whose liability it is to discharge themortgage.28. Having said that, the terms of the agreement stipulated thatBthe respondent was to pay the balance consideration within period ofsix months and “on receipt of the balance consideration”, theappellants were to execute the sale deed “pertaining to the propertyfree from all encumbrances”. It is evident from the agreement that theliability to deliver the property free from any encumbrance was on theappellants. However, this obligation is prefaced by the condition that theCappellants would be required to execute the sale deed free fromencumbrance on the receipt of the balance consideration. Thus, theagreement did not specify when the appellants should discharge theirmortgage- before the expiry of six months, after receipt of the advanceamount, or after receipt of the balance consideration. It only obligatedDthem to ensure that after the balance consideration is received, the saledeed executed should be free from encumbrances. Based on plainreading of the agreement, we are unable to accept the respondent’s pleathat he was willing to perform his obligations under the contract. It isevident that he was required to pay the remaining consideration (orindicate his willingness to pay) and only then could have sought specificEperformance of the contract. The respondent has also urged that theadditional amount of Rs. 10,000 was paid to the appellants to dischargethe mortgage. The acknowledgment signed by the appellants indicatesthat the money was to meet urgent family expenses. Since no furtherdetails have been provided and no evidence has been adduced by theFrespondent-plaintiff, we cannot conclude that the money was for dischargeof the mortgage. Even assuming that the respondent is correct, theagreement still required the respondent to pay the balance consideration.In this regard, the High Court, while holding in favour of the respondent,has noted that the appellants were free to demand further amount for

discharging the mortgage. This finding ignores the plain terms of theGcontract. The agreement clearly provided that the balance considerationwould be paid and then the sale deed would be executed. How theappellants chose to discharge the mortgage was for them to decide. Therespondent had to prove his readiness and willingness to perform thecontract.

29. We shall now advert to the respondent’s conduct throughoutthe sale transaction. The respondent has failed to provide any documentsor communication which would indicate that he called upon the appellantsto perform their obligations or discharge the mortgage within the timeperiod stipulated in the contract. Even after the expiry of the six months,the respondent did not reach out to the appellants. It is only in responseto the appellants’ legal notice that the respondent demanded performanceof their obligations. Merely averring that he was waiting with the balanceconsideration and believed that the appellants would clear theencumbrance is insufficient to prove that the respondent-plaintiff waswilling to perform his obligations under the contract.30. Further, in 1991 the respondent instituted suit for mandatoryinjunction for restraining the appellants from alienating the suit property.He did not however, institute suit for specific performance of thecontract until 17 June 1993. The respondent has taken the plea that hewas waiting for the appellants to discharge the mortgage to file suit forspecific performance. We are unable to accept this submission. Byextending the respondent’s argument, if the appellants had failed todischarge the mortgage, the respondent would not have filed suit forspecific performance of the contract at all. We also note that therespondent has withdrawn the balance consideration deposited by himbefore the trial court in 2001. The inconsistency in the respondent’sconduct, the lack of communication with the appellants urging them todischarge the mortgage and showing his willingness to pay the balanceconsideration, and the delay of about three years from the date fixed forperformance of the contract in filing suit, are all indicative of therespondent’s lack of will to perform the contract.

31. The ‘readiness’ of the respondent to perform his obligationsrefers to whether he was financially capable of paying the balanceconsideration. Both the trial court and the first appellate court haveobserved that the respondent was ready to pay the balance considerationas (i) he was paying income tax since 1988 and (ii) his bank passbooksindicate that he had sufficient funds. The payment of income tax byitself does not show that the respondent had sufficient resources to payfor the suit property. Moreover, the bank passbooks submitted in evidenceby the respondent were for accounts opened on 11 March 1992 and 22July 1994, that is, after the expiry of the period written in the contract.The first appellate court despite noting this, has chosen to hold that the

Arespondent was ready and willing to perform the agreement. Therespondent however did not lead any evidence to indicate that in theyear 1990 he had the money to pay the balance consideration. The firstappellate court shifted the burden on the appellants to prove that therespondent-plaintiff was incapable of paying the balance consideration.It is an established principle of law that the plaintiff must prove that he isBready and willing to perform the contract. The burden lies on the plaintiff.The respondent has not led any evidence that he was ready or willing toperform his obligations under the agreement.

32. Even assuming that the respondent was willing to perform hisobligations under the contract, we must decide whether it would beCappropriate to direct the specific performance of the contract in thiscase. In Zarina Siddiqui v. A. Ramalingam[13], two-judge Bench ofthis Court while dealing with suit for specific performance of contractregarding the sale of immovable property observed that the remedy forspecific performance is an equitable remedy and Section 20 of the SpecificDRelief Act confers discretion on the Court. The Court held:

“24. It is well settled that remedy for specific performance is anequitable remedy. The court while granting decree of specificperformance exercises its discretionary jurisdiction. Section 20 ofthe Specific Relief Act specifically provides that the Court’sEdiscretion to grant decree of specific performance is discretionarybut not arbitrary. Discretion must be exercised in accordance withsound and reasonable judicial principles.”

33. In the context of the discretion under Section 20 of the SpecificRelief Act, several decisions of this Court have considered whether it isFappropriate to direct specific performance of contract relating to thetransfer of immovable property, especially given the efflux of time andthe escalation of prices of property. In Satya Jain v. Anis AhmedRushdie[14], this Court held:

“39. The long efflux of time (over 40 years) that hasGoccurred and the galloping value of real estate in themeantime are the twin inhibiting factors in this regard. Thesame, however, have to be balanced with the fact that the plaintiffsare in no way responsible for the delay that has occurred and

13 (2015) 1 SCC 705H14 (2013) 8 SCC 131

their keen participation in the proceedings till date show the liveinterest on the part of the plaintiffs to have the agreement enforcedin law.

40. The discretion to direct specific performance of anagreement and that too after elapse of long period of time,undoubtedly, has to be exercised on sound, reasonable,rational and acceptable principles. The parameters for theexercise of discretion vested by Section 20 of the SpecificRelief Act, 1963 cannot be entrapped within any preciseexpression of language and the contours thereof will alwaysdepend on the facts and circumstances of each case. Theultimate guiding test would be the principles of fairness andreasonableness as may be dictated by the peculiar facts of anygiven case, which features the experienced judicial mind canperceive without any real difficulty. It must however be emphasisedthat efflux of time and escalation of price of property, by itself,cannot be valid ground to deny the relief of specific performance.[…]

41. The twin inhibiting factors identified above if are to be read asa bar to the grant of decree of specific performance wouldamount to penalising the plaintiffs for no fault on their part; todeny them the real fruits of protracted litigation wherein theissues arising are being answered in their favour.”

(emphasis supplied)

In directing specific performance of the agreement, this Court inSatya Jain (supra) held that sale deed must be executed for the currentmarket price of the suit property.

34. In Nirmala Anand v. Advent Corporation (P.) Ltd. andOthers[15], three-judge Bench of this Court observed that in case of aphenomenal increase in the price of the land, the Court may impose areasonable condition in the decree such as payment of an additionalamount by the purchaser. In decreeing the suit for specific performance,the Court observed:

“6. It is true that grant of decree of specific performance lies inthe discretion of the court and it is also well settled that it is not

Aalways necessary to grant specific performance simply for thereason that it is legal to do so. It is further well settled that thecourt in its discretion can impose any reasonable condition includingpayment of an additional amount by one party to the other whilegranting or refusing decree of specific performance. Whetherthe purchaser shall be directed to pay an additional amount to theBseller or converse would depend upon the facts and circumstancesof case. Ordinarily, the plaintiff is not to be denied the relief ofspecific performance only on account of the phenomenal increaseof price during the pendency of litigation. That may be, in givencase, one of the considerations besides many others to be takenCinto consideration for refusing the decree of specific performance.As general rule, it cannot be held that ordinarily the plaintiffcannot be allowed to have, for her alone, the entire benefit ofphenomenal increase of the value of the property during thependency of the litigation. While balancing the equities, oneof the considerations to be kept in view is as to who is theDdefaulting party. It is also to be borne in mind whether aparty is trying to take undue advantage over the other asalso the hardship that may be caused to the defendant bydirecting specific performance. There may be othercircumstances on which parties may not have any control.EThe totality of the circumstances is required to be seen.”

(emphasis supplied)

35. In KS Vidyanadam and others v. Vairavan[16], an agreementto sell immovable property was entered into between the plaintiff-buyerand the defendant-seller for consideration of Rs. 60,000, where earnestFmoney of Rs. 5,000 had been paid in advance. The agreement stipulatedthat the plaintiff had to purchase stamp papers and pay the balanceamount within six months and call upon the defendants to execute thesale deed. The plaintiff filed suit for specific performance after lapseof two and half years seeking performance of the contract. The CourtGheld:

“10. It has been consistently held by the courts in India, followingcertain early English decisions, that in the case of agreement ofsale relating to immovable property, time is not of the essence ofthe contract unless specifically provided to that effect. The period

of limitation prescribed by the Limitation Act for filing suit isthree years. From these two circumstances, it does not followthat any and every suit for specific performance of theagreement (which does not provide specifically that time isof the essence of the contract) should be decreed providedit is filed within the period of limitation notwithstanding thetime-limits stipulated in the agreement for doing one orthe other thing by one or the other party. That would amountto saying that the time-limits prescribed by the parties in theagreement have no significance or value and that they meannothing.

In this case, the suit property is the house property situated inMadurai, which is one of the major cities of Tamil Nadu. The suitagreement was in December 1978 and the six months’ periodspecified therein for completing the sale expired with 15-6-1979.The suit notice was issued by the plaintiff only on 11-7-1981, i.e.,more than two years after the expiry of six months’ period. Thequestion is what was the plaintiff doing in this interval of morethan two years? […] There is not single letter or noticefrom the plaintiff to the defendants calling upon them toget the tenant vacated and get the sale deed executed untilhe issued the suit notice on 11-7-1981. It is not the plaintiff’scase that within six months’, he purchased the stamp papers andoffered to pay the balance consideration.

13. In the case before us, it is not mere delay. It is case oftotal inaction on the part of the plaintiff for 2 1/2 years inclear violation of the terms of agreement which requiredhim to pay the balance, purchase the stamp papers and thenask for execution of sale deed within six months. Further,the delay is coupled with substantial rise in prices —according to the defendants, three times — between thedate of agreement and the date of suit notice. The delayhas brought about situation where it would be inequitableto give the relief of specific performance to the plaintiff.”

(emphasis supplied)

A36. True enough, generally speaking, time is not of the essence inan agreement for the sale of immoveable property. In deciding whetherto grant the remedy of specific performance, specifically in suits relatingto sale of immovable property, the courts must be cognizant of the conductof the parties, the escalation of the price of the suit property, and whetherone party will unfairly benefit from the decree. The remedy providedBmust not cause injustice to party, specifically when they are not atfault. In the present case, three decades have passed since the agreementto sell was entered into between the parties. The price of the suit propertywould undoubtedly have escalated. Given the blemished conduct of therespondent-plaintiff in indicating his willingness to perform the contract,Cwe decline in any event to grant the remedy of specific performance ofthe contract. However, we order refund of the consideration togetherwith interest at 6% per annum.

Conclusion

37. For the above reasons, we allow the appeal and set aside theDjudgment dated 7 January 2019 of the High Court of Judicature atMadras. The appellants are directed to refund the advance amount ofRs. 35,000/- received from the respondent with interest at the rate of6% per annum from the date of the filing of the suit for specificperformance by the respondent, till the payment of the refund.E38. Pending applications, if any, shall stand disposed of.

Devika Gujral

Appeal allowed.