The article discusses the legal situations the buyer has to go through in executing an agreement for the sale of immovable property. In such situations, the seller forfeits in performing his part of liabilities as per the agreement and does not execute the sale deed in favour of the buyer. The buyer has to file a specific performance of the agreement for executing the said sale.
This article has provided a summary of three recent cases where disputes of such nature have been explained and the legal position of each party is required in such nature of disputes.
Courts to act in discretion as per Section 20 in a suit for specific performance of a contract.
[Bench: Hon’ Justice Smt. K.S Mudgal and Hon’ble Justice Shri Suraj Govindraj of Karnataka High Court, Bengaluru]
The case involves the question as to the defence from the side of the selling party where the issue of hardship may affect if specific performance of the agreement is executed and the reasons that may be necessary for proving the cause such hardship to the defendant.
Facts.– The subject matter of this First appeal is of immovable property of which the defendant is the owner and had executed an agreement of sale with the appellant/buyer. The appellant in compliance of the agreement submitted the sale consideration of Rs. 25 lakhs which was transferred in different tranches through cheque and other mediums to the defendant and a total of 98% of the sale consideration was paid, and the remaining was to be paid during the registration of the sale deed.
After several requests made by the plaintiff/buyer, the defendant defaulted in registration and transfer of title to the plaintiff/appellant and a suit of specific performance of the contract was filed.
The Defendant in her defences pointed out that the defendant is not the sole owner of the property and the daughter of the defendant who was later tried as defendant no.1(a) after the death of the original defendant, were the co-owners of the property.
It was also alleged that the signature of the defendant was obtained through fraud, misrepresentation and undue influence.
The Trial Court partly decreed the suit, wherein it rejected the relief of specific performance of the Contract but allowing the granting refund of the advance consideration made by the appellant/plaintiff.
Held.– The question and the grounds of appeal before the court was:
- On the allegation of fraud, misrepresentation and undue influence by the appellant.
- The Will by which the defendant alleged that the property was bequeathed to the defendant no.1 (a).
- On the readiness and willingness on part of the plaintiff and whether on the basis of the market value of the property and the ground of old age of the original defendant, the plaintiff is not entitled to specific performance of the agreement.
- On the relief granted by the trial court in her judgment.
During the pendency of the appeal the defendant no.1 (a) died, and respondents no. 1(a) to (f) were brought on record as the legal representatives of the respondent.
The defendant no.1 (a) mentioned in the civil suit about a compromise between the parties which was alleged by the respondent to be successful, though disputed by respondent no.1(f) which has been discussed later.
On, the allegation of fraud, misrepresentation and undue influence, it was observed that the registered agreement dated 22.11.2007 exhibited as Ex.P2 and Ex.P3 as a supplemental document in which the original defendant and the defendant no.1(a) didn’t disputed their signatures on the documents in their cross-examination.
It was noted that the no particulars were provided by the defending for proving the allegations of the signature obtained through fraud, misrepresentation and undue influence. The defendant even not pleaded as required per O.VI Rule 4 of the Code of Civil Procedure, 1908. There was no evidence brought, except a self-serving testimony of defendant No. 1(a). Therefore, the allegations were rejected.
On the question of joint agreement, the defendant no.1(a) produced mixed statement where at one place she contended that she had a share in the property, therefore the original defendant was not competent to sell the property. At another point, she claimed that the original defendant bequeathed the property in favour of herself and her children. Even, in her affidavit for chief examination, she admitted that her mother, the original defendant was the absolute owner of the property.
Thus, the Court further rejected the allegation of fraud, misrepresentation and undue influence on her share of property and maintainability of the suit for non-joinder of necessary party.
The Court relied on Section 20(2) of the Specific Relief Act, 1963 whereby the Court has the discretion not arbitrarily but by application of sound and reasonable reasons which are guided by judicial principles for not granting the decree of specific performance.
The three circumstances in not granting specific performance:
- If such decree gives an unfair advantage over the defendant.
- Cause hardship to the defendant.
- If such a decree is inequitable to the defendant.
Also as per Explanation I of section 20, which requires that in an issue of performance of the contract if involves hardship to the defendant then it has to be determined with reference to the circumstances existing at the time of the contract, except where the hardship has been caused from an act of the plaintiff, subsequent to the contract.
In addition, the Court also referred to the Narinder Singh vs. North Star Estate Promoters Limited [(2012) 5 SCC 712] wherein, the trial court rejected the suit for specific performance because the price of the land will cause unfair hardship to the defendant if sale deed is executed and specific performance of the contract was granted. The Hon’ble Supreme Court negated the decision on the ground that, the defendant did not challenged on the execution of the agreement and the readiness and willingness on the part of the plaintiff on performing the contract rather pleaded that, the agreement was frivolous and was designed with the ill intent of the two parties in the suit.
Therefore, from the above inference mere inadequacy of consideration was not a ground to reject specific performance. Even, the defendant did not adduce to show that the value of the property agreed in the agreement was lesser than the market value prevailing at the time of the payment.
The Court also observed that the plaintiff has paid 98% of the agreed consideration, so he was covered under Section 20(3) of the Act, which gives Court to exercise discretion in a suit of specific performance such that, the rejection of specific performance by the Trial Court was reversed for being unsustainable in law as per Section 20 of the Act.
The Court awarded the specific performance of the agreement and directed the appellant to deposit the balance consideration of Rs. 50,000 to the trial court and the respondent shall execute a registered sale deed in favour of the appellant of the suit property.
Mere raising hardship by the seller as to the inadequacy of resources in making the payment of the consideration amount for the sale of immovable property cannot be without any concrete evidence to show such inadequacy.
[Bench: Hon’ble Justice Smt. K.S Mudgal and Justice Shri Suraj Govindraj]
Fact.– The defendant aggrieved by the trial court judgment passed for the specific performance of an agreement of a sale of land in Waghawade village in District Belgavi owned by the appellant/defendant.
As per the plaintiff’s/respondent’s contentions, the defendant for his family necessity agreed to sell the suit property and agreed in consideration of Rs. 34 Lacs. The defendant as per the agreement received advance considerations in several tranches, amounting to Rs.21 lakhs.
The defendant dodged the execution of the sale deed and also did not claimed the notice dated 05.09.2011 sent by the plaintiff demanding the execution of the sale deed, eventually no reply was produced by the defendant and the plaintiff instituted the suit for specific performance of a contract.
The trial court decreed that in favour of the plaintiff which proved the execution of the agreement of the sale, the payment of advance money, the readiness and willingness to perform his part of the contract and was thus, granted the decree of specific performance.
Aggrieved by the judgement of the trial court the defendant filed the Appeal.
Held.- The Court observed in the proceedings below the trial court that in the first written statement, the defendant disputed the execution of the agreement because plaintiff mentioned wrong registration number of the agreement. Whereas after amending the plaint, the defendant filed the additional written statement wherein, the defendant admitted the execution of the agreement of sale dated 31.05.2008 which was marked as Ex P1.
Also, the defendant, in his affidavit for chief-examination admitted the execution of the agreement and in the cross-examination admitted the signature on the documents. Therefore, the execution of the agreement of sale by virtue of Section 54 of the Indian Evidence Act, 1872 was proved.
The defendant raised the question of wrong identity of the property as per which, wrong boundaries of the properties were mentioned. However, the defendant accepted the linked registry or sale deed dated 21.05.2008 whereby the defendant accepted he purchases of the suit property as per the said sale deed and also from the cross-examination he has contended that as per the sale deed, the boundaries are not wrong and his name is in the records of rights with the revenue department of the government, thus the property belonged to the defendant.
The Court on the issue of wrong material of description of the property as raised by the defendant opined from the Supreme Court judgment in Sir Gangai Vinayagar Temple and another vs Meenaksi Animal & Ors, as non-framing of the issue regarding the identity of the property, the material on record is sufficient to show that the parties went to the trial with an understanding that the identity of the property is in issue and led their evidence.
Therefore, in the absence of framing of the specific issue on the point, no prejudice is caused to the defendant.
On the part of readiness and willingness to perform the part of Contract, the plaintiff contended that he had made several requests to receive the balance consideration and execute the sale deed. The plaintiff issued a legal notice dated 05.09.2011.
Plaintiff had already paid a substantial amount of Rs. 21 Lakhs as a part performance of a contract which was also recorded in the chief examination on which the defendant did not assessed in the cross-examination.
Also, before the trial court, the plaintiff deposited Rs. 13 lakhs the balance sale consideration, thus it was proved as per the facts, and the trial court held that readiness and willingness on the part of the plaintiff to perform was justifiable.
The defendant then raised the contention of the inadequacy of the consideration and the property was worth crores of rupees. For which, the defendant as per Section 20(2) of the Specific Relief Act, 1968 has to prove hardship to the defendant which was not foreseen at the time of the agreement.
However, the defendant did not lead any evidence in support of inadequacy before the Trial Court and also as per Explanation I to Section 20(2), mere inadequacy of consideration does not constitute an unfair advantage within the meaning of hardship to the defendant under the Act.
Also, as per Section 20(3) of the Act, the Court has to exercise discretion to grant a decree of specific performance in any case where the plaintiff has done substantial acts or suffered losses in consequence of the contract.
It was already proved, that there were no grounds for the defendant on unfair advantage or hardship or inequity against him. Therefore, the Court on the merits did not find any illegality on the trial court judgment and did not interfere with the said judgement.
A party who wants specific performance of a contract has to prove that he has performed or has always been ready and willing to perform the essential terms of the contract.
[Bench: Hon’ble Justice Shri Sanjay Dwivedi of High Court of Madhya Pradesh in F.A/615/2018]
The case describes the necessary action the buyer in a contract has to perform before claiming the readiness and willingness in a suit for specific performance. Though readiness describes the financial position of the buyer in paying the consideration and the willingness is the constant communication of the desire to acquire the holding of the seller of the property on the said consideration. The case gives complete detail of the fact necessary in proving the existence of readiness and willingness.
Facts- The First Appeal filed by the appellant who is the seller/defendant before the trial Court which was rejected on the ground the actions of the defendant.
In brief, the appellant/defendant executed an agreement for the sale of immovable property to the respondent/plaintiff for a total consideration of Rs. 25 lakhs. The plaintiff on the day of execution of the agreement advanced and Rs. 10 lakhs and was agreed to pay the remaining Rs.15 lakhs in tranches within three months period from the date of the agreement.
It was also agreed that before getting the sale deed registered the appellant would get the land demarcated at his own expense and deliver such documents to the plaintiff.
On several requests by the plaintiff, the defendant didn’t get the land demarcated and the defendant delayed the mater for a reason or another.
The plaintiff sent a legal notice on 24.10.2011 but no reply nor the sale deed got executed in favour of him by the defendant.
A suit for specific performance of the contract was filed against the defendant, which was decreed ex parte on 26.06.2012 and the plaintiff got the sale deed executed as per the said ex parte decree. The possession over the disputed land was also handed over to the plaintiff.
However, the defendant moved an application under Order 9 Rule 13 of the CPC for setting aside the ex parte decree dated 26.06.2012 and it was set aside by the Trial Court and the execution proceeding initiated by respondent No.1 whereby the sale deed was executed, but after which the possession of the disputed land was given to back to the defendant.
However, the trial court after framing issues, decreed in favour of the plaintiff, aggrieved by which the defendant filed the First Appeal upon the allegation that the trial court has wrongly decreed and that, the plaintiff has proved his readiness and willingness though the facts show differently.
Held.- The appellant/defendant in the case pointed out that as per the recital of the agreement, the condition upon the appellant to get the land demarcated was not mandatory one as the agreement clearly mentions the condition in two-part.
In the first part, there is a mandatory condition under which the plaintiff has to pay Rs. 15 lakhs, the remaining amount of total sale consideration to the defendant within the three months’ time period from the date of the agreement.
Secondly, the appellant has to get the land demarcated which was not a mandatory one. The appellant contended that the two conditions cannot be read together as they should be read separately as the same is an isolated condition.
the appellant also pointed out that, during the execution of the sale deed in pursuance to the ex parte decree, the plaintiff had deposited only Rs. 13 Lakhs with the CCD but had a liability of Rs. 15 Lakhs which indicated that the plaintiff did not performed his part of the contract fully.
The Court observed that the trial court ignored the fact on the part the plaintiff for non-payment of Rs. 15 Lakhs, which was not sustainable and the reason for the same was based upon presumption or assumptions as no cogent and strong evidence was produced by the plaintiff to substantiate that he had Rs. 15 lakhs for the defendant.
Also, from the fact, that at the time of execution of ex parte decree, the Court below got the sale deed executed in favour of respondent without the condition for getting the land demarcated, even that the time plaintiff did not perform the part of the contract and demarcated the land otherwise.
The Court relied upon the judgement in Acharya Swami Ganesh Dassiji vs. Sita Ram Thapar [(1996) 4 SCC 526], where the distinction between readiness to perform the contract and willingness to perform the contract was described. Readiness meant the capacity of the plaintiff to perform the contract which would include the financial position to pay the purchase price. Willingness means to perform the contract by the conduct of the buyer to be properly scrutinized along with the attendant circumstances.
Thus, the facts of the case should demonstrate that the buyer is ready or has the capacity to perform his part of the contract if he had no financial capacity to pay the consideration in cash as contracted and intended, then this will disentitle him as time is of the essence of the contract.
Similarly, in Ritu Saxena vs J.S Grover & another [AIR 2011 Chattisgarh 66] wherein, the material was produced by the plaintiff to show his readiness and willingness. It was observed that the statement of the plaintiff and his witness was in the nature of ipse dixit and without the support of any corroborating evidence to show the financial condition to perform his part of the contract.
The plaintiff did not produce any evidence except the oral evidence to substantiate his readiness, willingness and his financial capacity to pay the remaining sale consideration of Rs 15 Lakhs. He did not produce any income tax return, bank statement and financial business condition of his family on the basis of which, the trial Court has presumed in the judgment that it was not difficult for the plaintiff to pay Rs.15 Lakhs. Therefore, the Court opined that plaintiff did not prove his readiness and willingness.
Also, in Surinder Kaur vs Bahadur Singh [(2019) 8 SCC 575] it was observed that as per Section 16(c) of the Specific Relief Act, 1963 which lays down that in a specific performance of a contract cannot be enforced in favour of a person who fails to prove that he has performed or was always ready and willing to perform his essential terms of the contract which were to be performed by him.
Also, where issues involving reciprocal promises, a party cannot claim that though he may not perform his part of the contract because of no compliance of the reciprocal promise, that does not mean he is entitled to perform specific performance of the same even he did not performed his part of the promise to the fullest. Explanation (ii) of Section 16(c) of the Act lays down that it is incumbent on the party who wants specific performance of a contract to prove that he has performed or has always been ready and willing to perform the essential terms of the contract.
As from the evidence in the case, the plaintiff did not give any notice to the defendant showing that he had the arrangement to pay Rs. 15 lakhs, the remaining sale consideration. Even, in the notice dated 24.10.2011 he has asked the defendant to perform his part to get the land demarcated and then execute the sale deed but in the said notice there was no reference of readiness on the part of plaintiff of the arrangement the remaining consideration.
Thus, as mentioned in the Supreme Court judgment of Syed Datagir vs T.R Gopalkrishna Shetty [(1999) 6 SCC 337] it was not necessary on the party of plaintiff to deposit in court any money but the plaintiff must as per Explanation (ii) of Section 16(c) of the Act, at least aver his performance or readiness and willingness to perform his part of contract.
The plaintiff has to discharge his obligation to deposit the remaining amount of sale consideration even though he has not been directed by the Court to deposit the said amount. It is the duty of the plaintiff to plead and then lead evidence to show that he had the capacity from the stage of filing of the suit to perform his part of the contract.
The Court on the basis of judgment in Shankarla Bijera vs Ashok B Ahuja [AIR 2011 CHHATTISGARH 66] of the High Court of Chhattisgarh which opined that where agreement without forfeiture clause and plaintiff failed to prove his readiness and willingness, then it is proper and settled law to direct refund the amount which has been paid by the plaintiff even though it is not claimed in the plaint.
Therefore, from the above inference the Court ordered, to refund the amount Rs. 10 lakh, from the defendant to the plaintiff and the advance money of Rs. 13 lakh which was deposited in the CCD. The plaintiff failed to prove readiness and willingness on this basis the trial court judgment was set aside.