Case Law
Subject : Law - Contract Law
New Delhi, India
– In a significant judgment, the Supreme Court of India has overturned decisions favouring a buyer seeking specific performance of an Agreement to Sell, ruling that the buyer's act of encashing a refund of the majority of the earnest money deposit indicated a lack of willingness to proceed with the purchase. The bench comprising
Justices Dipankar Datta and
Manmohan
delivered the verdict in the case of
The case originates from a 2008 Agreement to Sell between
Senior Counsel Shri S.B. Upadhyay, representing the appellant
Conversely, Mr. Mungeshwar Sahoo, representing the buyer
The Supreme Court meticulously examined the evidence and conduct of the buyer. The court underscored the settled legal principle that for specific performance, a buyer must prove continuous "readiness and willingness" from the date of the agreement until the decree.
Justice Manmohan , writing the judgment, stated: "The conduct of the Respondent No.1-buyer in encashing the demand drafts establishes beyond doubt that the Respondent No.1-buyer was not willing to perform her part of the Agreement to Sell... for the Respondent No.1-buyer would not have encashed the demand drafts if she was indeed willing to perform the contract and have a sale deed executed."
The Court reiterated that "readiness" refers to financial capacity, and "willingness" pertains to the intention to perform the contract, evidenced by conduct. Referencing judgments like Gomathinayagam Pillai vs. Palaniswami Nadar and C.S. Venkatesh vs. A.S.C. Murthy , the Court emphasized that readiness and willingness must be continuous throughout the suit's pendency.
Furthermore, the Court held that the seller's cancellation letter and refund, coupled with the buyer's encashment of the refund, effectively cancelled the Agreement to Sell. "…the encashment of the demand drafts was acceptance of such repudiation by the Respondent No.1-buyer, leading to cancellation of the Agreement to Sell dated 25th January 2008."
The Supreme Court further noted that the buyer did not seek a declaratory relief challenging the validity of the cancellation. Citing R. Kandasamy and I.S. Sikandar vs. K. Subramani , the judgment underscored that a suit for specific performance is not maintainable without first challenging the cancellation of the agreement.
Moreover, the court criticized the buyer for suppressing the fact of receiving the cancellation letter and refund in her plaint, deeming it a suppression of material facts that disentitles her from the equitable relief of specific performance, referencing Citadel Fine Pharmaceuticals v. Ramaniyam Real Estates Private Limited .
Allowing the appeal, the Supreme Court set aside the judgments of the Trial Court and the High Court, declaring the sale deed executed in favour of
This judgment reinforces the importance of continuous readiness and willingness in specific performance suits and highlights that a buyer's conduct, especially concerning refunds of earnest money, can significantly impact the outcome of such cases. It also reiterates the necessity of disclosing material facts and, where applicable, seeking declaratory relief against contract cancellations before pursuing specific performance.
#SpecificPerformance #ContractLaw #SupremeCourt #SupremeCourtSupremeCourt
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