Contracts for specific performance may be enforced even if a sum is named in the contract for breach, provided it was named only for the purpose of securing performance of the contract and not for giving an option of paying money in lieu of specific performance.

Amit Rawal, J.

The appellant-defendant is aggrieved of the concurrent finding of fact whereby the suit seeking specific performance of agreement to sell dated 26.05.2005 for piece of land measuring 8 kanals for total sale consideration of Rs.2,13,000/- against the earnest money of Rs.1,50,000/-, has been decreed by both the Courts below.

2. Mr. P.S. Jammu, learned counsel appearing for the appellant has drawn attention of this Court to the notice of motion order to contend that the agreement to sell did not contain the recital of seeking specific performance of agreement to sell through the intervention of the Court. At the best when the vendor fails to perform his part of the agreement, the vendee would be entitled to double the amount.

3. I am afraid that the aforementioned argument is not only fallacious but perverse in view of the law laid down by the Hon'ble Supreme Court in P. D'souza Vs. Shondrilo Naidu (2004)6 SCC 649 whereby the judgment rendered in Dadarao Vs. Ramrao (1999) 8 SCC 416 has been held to be not a good law. For the sake of brevity, findings rendered by the Hon'ble Supreme Court in P. D’souza's case (supra) are reproduced as under:-

30. Section 23 of the Specific Relief Act, 1963 read as under:

"23. (1) A contract, otherwise, proper to be specifically enforced, may be so enforced, though a sum be named in it as the amount to be paid in case of its breach and the party in default is willing to pay the same, if the court, having regard to the terms of the contract and other attending circumstances, is satisfied that the sum was named only for the purpose of securing performance of the contract and not for the purpose of giving to the party in default an option of paying money in lieu of specific performance.

(2) When enforcing specific performance under this section, the court shall not also decree payment of the sum so named in the contract."

31. In M.L. Devender Singh & Ors. v. Syed Khaja, the following statement of law appears: (SCC p. 522 para 16)

"The question always is: What is the contract? is it that one certain act shall be done, with a sum annexed, whether by way of penalty or damages, to secure the performance of this very act? Or, is it that one of the two things shall be done at the election of the party who has to perform the contract, namely, the performance of the act or the payment of the sum of money? If the former, the fact of the penal or other like sum being annexed will not prevent the Court's enforcing performance of the very act, and thus carrying into execution the intention of the parties; if the latter, the contract is satisfied by the payment of a sum of money, and there is no ground for proceeding against the party having the election to compel the performance of the other alternative.

From what has been said it will be gathered that contracts of the kind now under discussion are divisible into three classes:

(i) Where the sum mentioned is strictly a penalty-a sum named by way of securing the performance of the contract, as the penalty is a bond;

(ii) Where the sum named is to be paid liquidated damages for a breach of the contract;

(iii) Where the sum named is an amount the payment of which may be substituted for the performance of the act at the election of the person by whom the money is to be paid or the act done.

Where the stipulated payment comes under either of the two first - mentioned heads, the Court will enforce the contract, if in other respects it can and ought to be enforced just in the same way as a contract not to do a particular act, with a penalty added to secure its performance or a sum named as liquidated damages, may be specifically enforced by means of an injunction against breaking it. On the other hand, where the contract comes under the third head, it is satisfied by the payment of the money, and there is no ground for the Court to compel the specific performance of the other alternative of the contract."

This Court further stated: (SCC p.523, paras 20-21)

"20