Plaintiff Must Prove Continuous Readiness And Willingness; Delay In Approaching Court Can Defeat Equitable Relief, Holds Supreme Court
New Delhi, June 23: The Supreme Court has reiterated that a suit for specific performance cannot be decreed merely because it has been filed within the prescribed period of limitation. The Court held that a plaintiff seeking specific performance must continuously prove readiness and willingness to perform his part of the contract, both through financial capacity and conduct.
A Bench comprising Justice Prashant Kumar Mishra and Justice N.V. Anjaria dismissed an appeal filed by the legal representatives of the original plaintiff, thereby upholding the Karnataka High Court’s judgment which had set aside the Trial Court’s decree for specific performance.
The Court held that the plaintiff failed to prove that he had the financial capacity to pay the balance sale consideration at the relevant time and also failed to approach the Court promptly after the defendant refused to perform the agreement.
Background
The dispute arose out of an agreement to sell dated 20.12.1990 between the original plaintiff, Mohammed Khaleel, and the defendant, Jayamma.
The agreement related to a vacant site measuring 100 feet by 78 feet. The total sale consideration was fixed at ₹3,00,000. The plaintiff paid ₹25,000 as earnest money, while the balance amount of ₹2,75,000 was to be paid at the time of registration of the sale deed.
The sale deed was required to be registered within four months.
Under the agreement, the defendant handed over several original title documents to the plaintiff, including the original will deed, settlement deed, katha extract, tax receipts, encumbrance certificate and other documents relating to the property.
Dispute Between Parties
According to the plaintiff, the defendant had also agreed that her siblings would execute an interim agreement for formation of an approach road to the suit property.
However, the defendant disputed this stand and contended that there was already an approach road to the property. She also stated that there was no vacant land available for carving out a separate approach road.
The plaintiff issued a legal notice dated 15.04.1991 calling upon the defendant to perform her part of the contract. However, the notice could not be served because of an incorrect house number.
Thereafter, the defendant issued a legal notice dated 26.04.1991 stating that since the plaintiff had failed to obtain permission under the Urban Land Ceiling and Regulation Act, 1976 and the time for execution of the sale deed had expired, she was rescinding the agreement and forfeiting the earnest money.
The plaintiff issued another notice dated 30.04.1991 stating that he was ready to sue for specific performance. Later, on 30.07.1992, he again issued a notice claiming readiness and willingness, subject to obtaining necessary permission under ULCRA.
The suit for specific performance was eventually filed on 20.12.1993.
Trial Court Decreed Suit
The Trial Court decreed the suit on 31.01.2002 in favour of the plaintiff.
It held that possession had been delivered to the plaintiff, time was not the essence of the contract, the plaintiff was ready and willing to perform his part, and the defendant had rescinded the agreement without justifiable cause.
High Court Reversed Trial Court
The Karnataka High Court reversed the Trial Court’s decree and dismissed the suit.
The High Court held that the plaintiff failed to prove readiness and willingness. It noted that both parties were required to apply for ULCRA permission, but the plaintiff did not take necessary steps.
The High Court also held that although the suit was filed within limitation, the delay of two years and nine months in approaching the Court after refusal by the defendant was significant and reflected lack of readiness and willingness.
Plaintiff Relied On Fixed Deposits
Before the Supreme Court, the appellants argued that the plaintiff had sufficient financial capacity to pay the balance sale consideration.
They relied on four fixed deposit receipts of ₹70,000 each, totaling ₹2,80,000, and submitted that this amount was sufficient to cover the balance consideration of ₹2,75,000.
It was further argued that the High Court erred in treating the plaintiff’s request for demarcation and formation of road as unwillingness to perform the contract.
The appellants also contended that the primary obligation to obtain ULCRA permission was on the defendant, who was the transferor of the property.
Supreme Court Explains Readiness And Willingness
The Supreme Court examined Section 16(c) of the Specific Relief Act, 1963 as it stood before the 2018 amendment.
The Court observed that specific performance is an equitable relief. A plaintiff seeking such relief must specifically plead and prove continuous readiness and willingness to perform his obligations under the contract.
The Court explained that “readiness” refers to financial capacity, while “willingness” refers to the conduct and intention of the party seeking enforcement of the contract.
Both must exist together. A plaintiff cannot succeed merely by alleging breach by the defendant.
Fixed Deposits Created Years After Suit Not Enough
The Supreme Court rejected the reliance placed on the fixed deposit receipts.
The Court noted that the four FDRs were dated 04.10.1999, 22.11.1999, 03.04.2001 and 23.08.2001.
Since the agreement was executed in 1990 and the suit was filed in 1993, the Court held that FDRs created several years after filing of the suit could not prove financial readiness at the relevant time.
The Court observed that it was not necessary for the plaintiff to physically deposit the sale consideration in Court. However, he was still required to place reliable evidence to show that he had sufficient funds to complete the transaction when performance was due.
In the present case, there was no material to show that the plaintiff had the balance amount available either at the time of agreement, within the four-month contractual period, or at the time of filing the suit.
Failure To Cooperate For ULCRA Permission
The Court also rejected the argument that the plaintiff could not be blamed for non-obtaining of ULCRA permission.
It noted that the record showed that permission was required to be obtained by both parties.
The testimony of the plaintiff’s son showed that the plaintiff had not furnished the necessary affidavit or requisite forms for obtaining permission. Instead, he remained passive and waited for the defendant to take steps.
The Court held that such conduct established failure to prove continuous readiness and willingness.
Delay Can Defeat Specific Performance
The Supreme Court further held that delay in filing a suit for specific performance is a relevant factor, even where the suit is technically within limitation.
The Court observed that a plaintiff seeking equitable relief must approach the Court promptly, diligently and with clean conduct.
In the present case, the defendant had categorically refused to perform the agreement by notice dated 26.04.1991. Despite such refusal, the plaintiff filed the suit only on 20.12.1993, after a delay of two years and nine months.
The Court held that this conduct reflected lack of continuous readiness and willingness, which is a mandatory requirement for grant of specific performance.
Suit Within Limitation Does Not Automatically Entitle Plaintiff To Decree
The judgment reiterates that limitation and equity are separate considerations.
Merely because a suit is filed within the limitation period of three years, the Court is not bound to decree specific performance. The plaintiff must also show that he acted with promptness and remained ready and willing throughout.
The Court relied on earlier decisions including N.P. Thirugnanam v. Dr. R. Jagan Mohan Rao, His Holiness Acharya Swami Ganesh Dassji v. Sita Ram Thapar, Umabai v. Nilkanth Dhondiba Chavan, Man Kaur v. Hartar Singh Sangha and Rajesh Kumar v. Anand Kumar.
Appeal Dismissed
After examining the facts and evidence, the Supreme Court held that this was not a fit case for grant of specific performance.
The Court concluded that the appellants failed to demonstrate the twin statutory requirements of readiness and willingness and also failed to approach the Court with promptitude.
Accordingly, the appeal was dismissed.
Key Takeaway
The judgment reinforces that specific performance is not granted as a matter of right. Even if there is an agreement to sell and the suit is filed within limitation, the plaintiff must prove continuous readiness and willingness from the date of agreement till decree.
Financial capacity must be shown with reference to the relevant period, not by relying on documents created years later. Delay after clear refusal by the seller can also disentitle the plaintiff from equitable relief.