Court Upholds Refund Of ₹3.30 Lakh With 9% Interest, Refuses Specific Performance Of Flat Sale Agreement
Shimla, June 29: The Himachal Pradesh High Court has held that a plaintiff seeking specific performance of an agreement to sell must prove continuous readiness and willingness to perform his part of the contract, including financial capacity to pay the balance sale consideration.
Justice Sushil Kukreja dismissed a first appeal filed by the legal representatives of the original plaintiff and upheld the judgment of the Additional District Judge, Solan, which had refused the relief of specific performance but partly decreed the suit for recovery of ₹3,30,000 with interest at 9% per annum.
The Court reiterated that a mere statement in the plaint or examination-in-chief that the plaintiff was ready and willing is not sufficient. Readiness must be proved by evidence showing availability of funds, while willingness must be inferred from the conduct of the plaintiff and surrounding circumstances.
Background
The dispute related to Flat No. 3 on the third floor of a building known as Amit Apartments, Solan.
The plaintiff had entered into an agreement to sell with the defendants, who were builders and owners of the apartment project. The total sale consideration was fixed at ₹13,00,000.
According to the plaintiff, he had already paid ₹3,30,000 to the defendants, including earnest money, and the balance amount of ₹9,70,000 was to be paid on or before 30.06.1999 at the time of execution and registration of the sale deed and handing over of possession.
The plaintiff alleged that he was always ready and willing to perform his part of the contract, but the defendants failed to complete the construction of the flat with all amenities and did not execute the sale deed in his favour.
Plaintiff Alleged Incomplete Construction
The plaintiff claimed that the flat was not complete in all respects. He alleged that wood work, plastering, polishing, steel grills, whitewashing, water connection, electricity connection, sewerage system, car parking, lift and other amenities were incomplete.
He further claimed that despite repeated requests and legal notices, the defendants failed to complete the flat and instead threatened to sell it to someone else and forfeit the amount already paid.
The plaintiff therefore sought permanent prohibitory injunction, specific performance of the agreement, recovery of interest on the amount paid, recovery of stamp paper expenses and mandatory injunction for restoration of his name plate allegedly removed from the flat.
Defendants’ Stand
The defendants admitted execution of the agreement but denied breach on their part.
They contended that the flat had been completed and that the delay, if any, was due to additions and alterations desired by the plaintiff.
According to the defendants, the plaintiff failed to pay the balance sale consideration of ₹9,70,000 within the stipulated time and was seeking possession by making only part payment.
The defendants further stated that the lift could not initially be installed due to certain site-related issues, but the plaintiff had been offered proportionate deduction towards the lift cost. It was also contended that the plaintiff was not ready with funds and was trying to avoid performance of his obligations under the agreement.
Trial Court Refused Specific Performance
The Trial Court partly decreed the suit.
It refused specific performance of the agreement and held that the plaintiff had failed to establish readiness and willingness to perform his part of the contract.
However, the Trial Court decreed recovery of ₹3,30,000 in favour of the plaintiff along with interest at 9% per annum from 17.04.2004 till recovery.
Aggrieved by refusal of specific performance, the plaintiff filed the present first appeal before the High Court.
High Court Examines Section 16(c) Specific Relief Act
The High Court observed that Section 16(c) of the Specific Relief Act, 1963 bars grant of specific performance in favour of a person who fails to aver and prove that he has performed or has always been ready and willing to perform the essential terms of the contract.
The Court explained that “readiness” and “willingness” are two separate requirements.
Readiness refers to financial capacity to perform the contract. Willingness refers to the intention and conduct of the plaintiff to complete the transaction.
Both must be proved by the plaintiff throughout the proceedings.
Mere Averment Not Enough
Justice Kukreja relied on Supreme Court judgments including N.P. Thirugnanam v. Dr. R. Jagan Mohan Rao, J.P. Builders v. A. Ramadas Rao, Janardan Das v. Durga Prasad Agarwalla, Saradamani Kandappan v. S. Rajalakshmi, Padmakumari v. Dasayyan and Man Kaur v. Hartar Singh Sangha.
The Court held that the plaintiff must prove readiness and willingness by cogent evidence. A bare averment in the plaint or statement in evidence is not sufficient.
The Court further observed that even if the defendant is alleged to have committed breach, the plaintiff cannot obtain specific performance unless he independently proves that he was always ready and willing to perform his obligations.
Plaintiff Did Not Appear Before Sub-Registrar With Balance Amount
The Court noted that the agreement required the plaintiff to pay the balance sale consideration at the time of execution and registration of the sale deed.
However, the record did not show that the plaintiff had appeared before the Sub-Registrar on or before the stipulated date with the balance amount for execution and registration of the sale deed.
The Court also noted that although stamp papers were purchased during the pendency of the suit, they were purchased for a lesser sale consideration value. The plaintiff did not satisfactorily explain why stamp papers of lower value were purchased.
No Proof Of Funds At Relevant Time
A crucial factor before the Court was the absence of evidence showing that the plaintiff had funds available on or before the contractual date.
The plaintiff relied upon certificates showing that he had applied for a loan in 2001 and that the loan was sanctioned in 2002. However, the Court noted that the balance amount was required to be paid by 30.06.1999.
There was nothing on record to show that the plaintiff had applied for or obtained any loan before the due date.
The Court therefore held that the plaintiff failed to prove financial readiness at the relevant time.
Defendants Had Completed Major Construction
The Court also examined reports of the Local Commissioner and experts regarding the condition of the flat.
The Court found that the defendants had completed the major portion of construction of the flat. The alleged incomplete items pointed out by the plaintiff were minor and did not require huge expenditure.
The Court observed that merely because some items remained incomplete, it could not be said that the defendants had failed to perform their part of the contract, especially when the major part of the construction had been completed.
The Court also noted that the plaintiff had not filed objections to the defendants’ expert report, which indicated that the flat was complete except for the lift.
Specific Performance Is Equitable Relief
The High Court reiterated that specific performance is an equitable and discretionary relief. It cannot be granted automatically merely because an agreement exists.
The Court must consider the totality of circumstances, including the conduct of the parties, payment schedule, availability of funds, delay, and whether the plaintiff genuinely intended to complete the transaction.
In the present case, the Court held that the plaintiff’s conduct showed reluctance to pay the balance sale consideration within the stipulated period.
Appeal Dismissed
The High Court concluded that the plaintiff had failed to prove continuous readiness and willingness to pay the balance sale consideration as required under Section 16(c) of the Specific Relief Act.
Finding no infirmity in the Trial Court’s judgment, the High Court dismissed the appeal and upheld the decree for recovery of ₹3,30,000 with interest.
Key Takeaway
The judgment reinforces that in a suit for specific performance, the plaintiff must prove more than the existence of an agreement and payment of earnest money.
The plaintiff must establish continuous readiness and willingness from the date of the agreement till final adjudication. Where the contract involves payment of money, financial capacity must be proved through cogent evidence relating to the relevant period.
A plaintiff who does not appear before the Sub-Registrar with the balance sale consideration, does not deposit the amount in Court, and fails to prove availability of funds at the relevant time, may be denied specific performance even if refund of the amount paid is granted.