The exercise of discretion in granting specific performance of a contract must be sound and reasonable, guided by judicial principles and capable of correction by a court of appeal.

1. This appeal arises out of the judgment and decree passed by the District Judge, Khamgaon in Regular Civil Appeal No.68 of 1988 on 14.10.1997 thereby partly allowing the appeal and setting aside the decree of specific performance granted in favour of appellant in Regular Civil Suit No.86 of 1987, decided on 22.4.1988.

2. This appeal is being heard afresh on merits after the Hon'ble Supreme Court allowed the appeal filed by the respondent bearing Civil Appeal No.10537538 of 2011 (arising out of SLP (C) Nos.2859728598 of 2010) filed against the judgment of this Court in this appeal delivered on 17.12.2009. By this judgment, this Court had allowed the present appeal and decreed the suit as ordered by the trial Court. The Hon'ble Apex Court, however, for the reasons stated in the order dated 2nd December, 2011 passed in aforestated Civil Appeal, set aside the said judgment and remitted the matter to the High Court for fresh disposal on merits.

3. It was the case of the appellant/original plaintiff that the respondent/original defendant was in need of money to pay all the debts in respect of the agricultural field and to meet household expenses. The respondent, therefore, agreed to sell to the appellant agricultural field bearing Gat No.36 admeasuring 1.20 hectare Situated at village Bramhanwada, Taluka Shegaon, District Buldhana (suit field) for a consideration of Rs.17,000/. The appellant contended that it was agreed between him and the respondent that amount of Rs.5,000/would be paid to the respondent as an earnest money and it was accordingly paid to the respondent. The respondent had also then agreed that he would clear all the debts and encumbrances on the land and would deliver unencumbered title in respect of the suit field and its possession to the appellant on or before 31.3.1987. Agreement to sell on these terms was executed between the appellant and the respondent on 13.1.1987. The appellant further submitted that since the respondent gave no indication that he would be acting upon the terms of agreement to sell, he issued him a notice on 24.3.1987 calling upon him to execute the sale-deed, as agreed, on 31.3.1987. The appellant further submitted that accordingly he presented himself before the Sub-Registrar, Shegaon on 31.3.1987. But, the respondent did not turn up there and resultantly, sale-deed could not be executed. He submitted that in order to show his presence at the office of the Sub-Registrar on 31.3.1987 he purchased a stamp-paper of Rs.1/. He further submitted that the respondent avoided to pay the loan of Vivid Karyakari Sahakari Society, Matargaon and the loan amount, which was then due against the respondent was of Rs.11,620/. The appellant submitted that the respondent gave a false reply to the notice of the appellant on 2.4.1987 and, therefore, appellant sent a counter-reply on 27.4.1987 to the respondent. By the counter-reply, the appellant called upon the respondent to execute the sale-deed, but in vain. Since the appellant was always ready and willing to perform his part of contract and there had been a breach of obligations committed by the respondent, the appellant filed a suit against the respondent for specific performance of contract in which he alternatively claimed refund of earnest amount of Rs.5,000/- together with damages of Rs.10,000/-.

4. The respondent resisted the suit by filing his written statement. While he admitted his ownership of the suit field, he denied that the agreement dated on 13.1.1987 was an agreement to sell the suit field. He submitted that this agreement was basically in the nature of a money lending transaction and that it was executed to secure repayment of amount of Rs.2,000/- borrowed by him from the appellant. The respondent submitted that he was assured by the appellant that the agreement executed on 13.1.1987 though ostensibly about sale of the suit field, would not be acted upon or enforced by the appellant. He further submitted that the appellant a