CASE TITLE:
Smt. Katta Sujatha Reddy & Anr. Vs. Siddamsetty Infra Projects Pvt. Ltd. & Ors.
DATE OF ORDER:
25 August 2022
JUDGE(S):
Hon’ble CJI Mr. N.V Ramana, Hon’ble Justice Mr. Krishna Murari, Hon’ble Justice Hima Kohli
PARTIES:
Appellants: Smt. Katta Sujatha Reddy & Anr. (Vendor)
Respondents: Siddamsetty Infra Projects Pvt. Ltd.& Ors. (Purchaser)
SUBJECT
The Hon’ble Supreme Court (hereinafter referred to as ‘Supreme Court’ or ‘the Court', has set aside the judgment dated 23.04.2021 passed by High Court for the state of Telangana at Hyderabad in A.S. No. 998 of 2010 and held that the law on specific relief is a substantive law and any amendment in the same cannot have retrospective effect.
IMPORTANT PROVISIONS
The Specific Relief Act, 1963
- 10. Specific performance in respect of contracts. —The specific performance of a contract shall be enforced by the court subject to the provisions contained in sub-section (2) of section 11, section 14, and section 16.
- 12. Specific performance of part of contract.—(1) Except as otherwise hereinafter provided in this section, the court shall not direct the specific performance of a part of a contract.
(2) Where a party to a contract is unable to perform the whole of his part of it, but the part which must be left unperformed be a only a small proportion to the whole in value and admits of compensation in money, the court may, at the suit of either party, direct the specific performance of so much of the contract as can be performed, and award compensation in money for the deficiency.
(3) Where a party to a contract is unable to perform the whole of his part of it, and the part which must be left unperformed either—
(a) forms a considerable part of the whole, though admitting of compensation in money; or
(b) does not admit of compensation in money; he is not entitled to obtain a decree for specific performance; but the court may, at the suit of the other party, direct the party in default to perform specifically so much of his part of the contract as he can perform, if the other party—
(i) in a case falling under clause (a), pays or has paid the agreed consideration for the whole of the contract reduced by the consideration for the part which must be left unperformed and in a case falling under clause (b) pays or has paid the consideration for the whole of the contract without any abatement; and
(ii) in either case, relinquishes all claims to the performance of the remaining part of the contract and all right to compensation, either for the deficiency or for the loss or damage sustained by him through the default of the defendant.
(4) When a part of a contract which, taken by itself, can and ought to be specifically performed, stands on a separate and independent footing from another part of the same contract which cannot or ought not to be specifically performed the court may direct specific performance of the former part.
Explanation.—For the purposes of this section, a party to a contract shall be deemed to be unable to perform the whole of his part of it if a portion of its subject-matter existing at the date of the contract has ceased to exist at the time of its performance.
- 16 Personal bars to relief.—Specific performance of a contract cannot be enforced in favour of a person—
(a) who has obtained substituted performance of contract under section 20; or
(b) who has become incapable of performing, or violates any essential term of, the contract that on his part remains to be performed, or acts in fraud of the contract, or wilfully acts at variance with, or in subversion of, the relation intended to be established by the contract; or
(c) who fails to prove] that he has performed or has always been ready and willing to perform the essential terms of the contract which are to be performed by him, other than terms of the performance of which has been prevented or waived by the defendant.
Explanation.—For the purposes of clause (c),—
(i) where a contract involves the payment of money, it is not essential for the plaintiff to actually tender to the defendant or to deposit in court any money except when so directed by the court; (ii) the plaintiff must prove performance of, or readiness and willingness to perform, the contract according to its true construction.
The Limitation Act, 1963
- Article 47- For money paid upon an existing consideration which afterwards fails - Three years- The date of the failure.
- Article 54- For specific performance of a contract- Three years.- The date fixed for the performance, or, if no such date is fixed, when the plaintiff has notice that performance is refused.
BRIEF FACTS:
- One late D Narayana was the owner of agricultural land admeasuring 141.05 acres, situated in Hyderabad. The appellants herein acquired the land from the aforesaid through an agreement dated 19.03.1994. in pursuance of the same, two GPAs dated 28.03.1994 were executed in the name of the defendant Nos. 5 and 6 from the abovementioned owners, for an extent of Acs. 127.27 gts. of land.
- However, the aforementioned agreement could not be materialized, so the parties entered into two new agreements dated 26.03.1997 and 27.03.1997 to purchase an extent of Acs. 40.08 gts. The agreement dated 26.03.1997 pertained to Acs. 35.15 gts. and for consideration of Rs.38,37,500/while the agreement dated 27.03.1997 pertained to Acs 1.33 gts of land for a consideration of Rs.1,82,500/.
- Total consideration amount was Rs. 40,20,000/- out of which Rs. 34,80,850/- was paid by the purchaser. (undisputed)
- The remaining amount of Rs. 5,39,150 was to be paid within 3 months as per clause 3 of the agreement which the purchaser admittedly failed. The purchaser sent two notices dated 08.02.2000 and 06.07.2002 requesting the vendor to accept the balance payment which the vendor did not. Having no other remedy, the purchaser filed a suit for specific performance against the vendors. (OS No. 88 of 2002)
- The trial Court held that the suit is barred by limitation. In the light of the above findings, the trial Court dismissed the suit holding that the plaintiff is not entitled for the relief of specific performance.
- Aggrieved by the aforesaid order, purchaser preferred first appeal to the High Court being A.S. No. 998/2010. it partly allowed the appeal and directed the vendors to register the suit property in favour of the purchaser, to the extent of the amount paid by the purchaser, i.e., 90% of the total sale consideration, within a period of 3 months. Further, it was ordered that the sum of Rs.5,39,150/deposited by the purchaser, by virtue of the trial Court order dated 11.07.2005 in IA No. 925/2005, was to be refunded to the purchaser with interest, if any accrued thereon.
- Aggrieved by the impugned judgment, both the vendors and the purchaser are in appeal before this Court.
QUESTIONS RAISED:
- Whether the amended Section 10 of the Specific Relief Act is prospective or retrospective in operation?
- Whether the suit for specific performance is barred by limitation?
- Whether the purchaser is entitled to the relief of specific performance?
- In any case, whether the purchaser is entitled to take benefit of Section 12 of the Specific Relief Act in view of the part payment made in respect of the contract?
ARGUMENTS ADVANCED BY THE APPELLANT
- Senior Counsels Mr. Mukul Rohtagi and Mr. Harish Salve argued that the Purchaser has not approached the court with clean hands. Purchasers did not pay the balance amount within stipulated time.
- Purchasers statement that they were put in possession of the suit property was found false by the trial court as there was a prayer made for possession in the suit which would not have been made if they were already in possession. Moreover, there is no mention of the date they were put in possession. The draft sale deed as prepared by the purchaser does not mention that they were in possession of the suit property. It instead mentions that they would be put in possession upon execution of the sale deed. Further, the deposition of PW2 about the construction of rooms, roads, etc has been falsified by the documents (photographs) on record.
- As held by the trial court, the suit filed by the purchaser is barred by limitation.
- Notice dated 08.02.2000 was dispatched only on 31.03.2000 and was purposely backdated.
- That the purchaser was not ready and willing to perform the contract is clear from the fact that they failed to pay the balance amount not only within the stipulated time of 3 months but also within 3 years of the agreement.
- Specific relief cannot be granted in a piecemeal manner.
- The amendment being substantive, can only have prospective application.
- Section 12 of the Specific Relief Act will not be applicable as ‘inability to perform a contract does not arise.
ARGUMENTS ADVANCED BY THE RESPONDENT
- Senior Advocates Mr. Dushyant Dave and Mr. Harin P. Raval appearing on behalf of Purchaser, Respondent No. 1 herein that the High court’s judgment granting relief of specific performance is based on oral and documentary evidence and reasons for the same are in accordance with the law.
- As held by both the trial court and the High Court, time was not the essence of the contract in question and no time was fixed for the performance of the contract. The time of 3 months stipulated in clause 3 of the contract is only for payment of consideration. So when no time is stipulated for the performance of the contract, limitation commences from the specific date of refusal which comes down to 14.04.2000 and 22.07.2002, hence, the suit was filed within limitation.
- Purchasers have established their willingness to perform their part of the contract by issuing notices dated 08.02.2000 and 06.07.2002 to the vendors indicating their willingness to pay the balance amount.
- The statement by Defendant 5 that purchasers were never put in possession of the suit property was never challenged by the vendors in the rejoinder nor it was mentioned in the evidence.
- In view of the amendment to section 10 of the specific relief act, it has become mandatory for the courts to grant such relief unless the case falls under statutorily carved out exceptions.
ANALYSIS BY THE COURT:
- On the issue of limitation, the Honourable Court observed that clause 23 of the agreement places a moratorium on any enhancement of sale consideration. This cannot be done without any fixed time period. The vendors were entitled to rescind the contract for breach of condition as time was of the essence in the said contract. The argument of the purchasers that the notice issued by them on 31.03.2000 would be sufficient to get past the bar of limitation cannot be sustained as the party cannot take the plea of equity to escape the consequences of breach of condition. Hence, owing to the agreements dated 26/27.03.1997, the suit was barred by limitation according to Article 54 of the Limitation Act,1963 (The limitation expired in June 2000).
- On the issue of operation of the amendment, The Court held that for determining the nature of the amendment, reference to the nature of the parent act may not be material. Instead, it is the nature of the amendment itself which determines whether it is substantive or procedural. In the present case, the amendment in section 10 converted court’s discretion into a mandatory provision, increasing the sanctity of contracts. Hence, the said amendment is substantive in nature and cannot be given a retrospective effect in view of Shyam Sunder & Ors. Vs. Ram Kumar and Anr. It may be noted that 01.10.2018 was the appointed date on which the amended provisions would come into effect. Hence, the amendment shall not be applicable to transactions that took place before 01.10.2018.
- On the issue of Purchaser’s entitlement to the relief of specific performance court held that as it is clear that amendment shall not be applicable, the emphasis has to be placed on the earlier law. Earlier law made the grant of specific relief by the courts discretionary. But such discretion was supposed to be used in a principled manner to avoid arbitrariness. The court relied on its judgment in Saradamani Kandappan vs. Rajalakshmi and others and held that the purchasers had to be vigilant to enforce their right. The 3 months’ time stipulated in the contracts dated 26/27.03.1997 was the last opportunity given to the purchasers to rectify the lapse on the earlier occasion. On the question of the existence of willingness to comply with the terms of the contract on part of purchasers, the court held that it is clear from the deposition of PW1 in cross-examination purchaser did not voluntarily adhere to the time stipulation under the contract. Hence, Section 16 (c) would not apply and hence he would not be entitled to a grant of specific performance. On the question of possession, the court held that the purchaser was never in possession of the suit property as rightly held by the trial court.
- On the question of application of Section 12 of the Limitation Act, the court held that in this case, the purchaser himself breached the essential condition of the contract, which altogether disentitles him to claim specific performance. Therefore, section 12 shall not be applicable.
Though there was a forfeiture clause in the agreement, the court directed the vendors to return the amount paid by purchasers with the interest of 7.5% p.a. in the interest of justice.
CONCLUSION
Affirming the order of the trial court as to the applicability of the 2018 amendment to the Specific Relief Act (section 10), the trial court held that as the amendment shifts the granting of specific relief by the courts from being discretionary to mandatory, it becomes a substantive law for the parties. Hence, it cannot and would not have retrospective application.
Learn the practical aspects of CrPC HERE, CPC HERE, IPC HERE, Evidence Act HERE, Family Laws HERE, DV Act HERE
Click here to download the original copy of the judgement
