M.K. Chabbra v. Damanjit Kaur (2019) - Proof of Financial Capacity for Specific Performance

• DATE: 7^th January 2019
• JUDGES: Valmiki Mehta
• PARTIES: M.K. Chabbra (APPELLANT) Damanjit Kaur (RESPONDENT)

SUBJECT

The following judgement mainly deals with section 16(c) of the Specific Relief Act, 1963 which lays down in what circumstances specific performance cannot be enforced in favour of a person. Also, the judgement deals with section 15(5) of Limitation Act, 1963 which lays down provision for period of limitation when the defendant is not present in India.

AN OVERVIEW

1. In the present case, the Delhi High Court is dealing with an appeal in which the appellant Mr. M.K. Chabbra has challenged the decision of the trial denying him the relief of specific performance of contract.
2. The appellant entered into an agreement to sell with the defendant for the purchase of a plot. However, the said plot was allotted to in her draw of lots but the execution of lease and handing over of the property was not conducted. Her name was not cleared by the office of Registrar.

Contention of appellant

• The plaintiff contended that the defendant said that she lived in Canada and could not come before the authority in India. So, he spent his money, time and energy in meeting the officials for the execution of the agreement, and by his efforts the letters were issued by the office of Registrar. In the meantime the price of the plot increased and the defendant wanted to increase the price. So, a document was executed which stated the addendum to the previous agreement.
• In his further contention, he stated that when he asked the defendant to come to India for the execution of the deed, she did not come nor did she make any contact with the plaintiff. Also, she contacted with property dealers for the sale of the concerned property.
• In the legal notice the plaintiff contended that “he was and still is ready and willing to pay balance sale consideration and addendum” and seek for relief of specific performance.

Contention of defendant

• The defendant contended that she came in contact with the plaintiff and he told her that she was not eligible for the allotment of the plot and he with his influence in the office of Registrar can get the sub-lease deed executed in her favour
• The defendant also contended that the plaintiff asked her to agree to sell her property to him at 50% of the then market price, else she would lose the property altogether.
• The main contention of the defendant was that the agreement was for 50% of the market value, thus, prima facie without consideration. Also the suit was barred by limitation act.

Trial Court’s opinion

• In its decision the trial court held that the plaintiff not entitled to relief of specific performance as he was not able to prove his readiness to pay the consideration amount.
• Also, the court held the suit within the period of limitation under section 15(5) of the Limitation Act, 1963.

IMPORTANT PROVISIONS

SPECIFIC RELIEF ACT, 1963

• Section 16(C) - Specific performance of a contract cannot be enforced 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 which are to be performed by him, other than terms the performance of which has been prevented or waived by the defendant.

LIMITATION ACT,1963

• Section 15(5)- In computing the period of limitation for any suit the time during which the defendant has been absent from India and from the territories outside India under the administration of the Central Government, shall be excluded.

ISSUES

In the present case, the key issues before the Delhi High Court are as follows:

• Whether the appellant as per section 16(c) of specific relief act can be said to have readiness to go ahead with the agreement to sell?
• Whether the relief of specific performance be granted to the appellant?
• Whether the Trial Court was right in applying section 15 of the limitation act?

ANALYSIS OF THE JUDGEMENT

The Delhi High Court in this judgement agreed with the Trial Court in denying the relief of specific performance to the appellant. However, regarding the third issue, the court set aside the decision of the Trial Court that the suit is within limitation.

• Challenging the Trial Court’s decision, the appellant’s principal contention was that there was readiness because the appellant was an income tax payee having various bank accounts the respondent did not ask any document for. Also the appellant seeks to file his fixed deposit receipt before the court. To answer this contention, the court stated-

1. Mere ipse dixit not sufficient to pay balance sale consideration
2. In a suit for specific performance, the onus lies upon plaintiff to prove financial capacity satisfactory to judicial conscience of court

• The High Court quoting the judgement of Apex Court stated- financial capacity has to be proved to exist right from the date of entering the agreement till the date of disposal of suit. The date of entering the agreement in the present case was March 1993 and suit was filed after 8 years, i.e; December 2001. No document was filed by applicant in the trial court to show financial capacity within that time period
• Further, the court stated that even the FD receipts filed in this court were also not filed in the time period within the date of entering into agreement to the date of suit. It proves financial capacity from 2001 onwards. Thus, the appellant clearly failed to prove readiness.
• To answer the second issue of specific performance, the relied on the judgement of Supreme Court in Saradamani Kandappan case that after the payment of nominal advance sale consideration, sometimes many years and even decades pass in disposal of suit for specific performance.
• The court stated that the object of an agreement to is to also see that the seller is able to purchase an equivalent property for the price received, which was clearly not the case in the present circumstances, which will not be possible with the increase in prices during the years consumed in suit for specific performance. Only alternative relief of damages can be granted if proven. Thus, the trial court rightly denied relief of specific performance.
• Answering the issue of limitation the Court was of the opinion that the trial erred in considering the suit within limitation. The reasoning the court gave behind this opinion is that section 15(5) of Limitation Act applies when the defendant is a citizen of India and for and goes out of the territory for a particular period. As per the facts of the case, the refusal of performance came to knowledge in 1995, the suit for specific performance had to be filed in 1998 but was filed in 2001, which is beyond the period of limitation. Also, the respondent is settled in Canada. Thus, suit was not filed within limitation.

CONCLUSION

• The court in this judgement relied on the previous interpretations made in various cases when it comes to section 16(c). The sections states that the person who has failed to proved readiness and willingness is not entitled to relief of specific performance. This is absolutely necessary as one cannot merely say that he was ready and willing to pay the balance. If the relief of specific performance is granted in such situations it will cater for unfair advantage to the person who seeks it.
• Also, the court was right in not applying section 15(5) of limitation act. Section 15(5) provides an exclusion of the time period in which a citizen is out of India for the application of the article 15(5) which was not proved by the defendant. The word limitation implies the time period in which a suit can be filed. Under article 54 of the said act, the time period of limitation begins when from the date of notice refusal of performance which is 3 years. The appellant however filed a suit after a period of 8 years. Such long time period provides ample amount of time to gather false evidences and also on the other hand, it also might become difficult for defendant to obtain evidence. Thus, to maintain the reliability, the suit not considered under limitation period can be regarded as wise decision.

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