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2026 Supreme(Online)(Kar) 18800

THE HIGH COURT OF KARNATAKA
Jayant Banerji, K. V. Aravind, JJ
Gopalappa – Appellant
Versus
Dwarakanath – Respondent
REGULAR FIRST APPEAL NO. 1661 OF 2012 (SP)

Advocates:
For the Appellants/Petitioners: B. R. Vishwanath
For the Respondents: S. Gangadhar Aithal

An agreement for the sale of property remains enforceable despite unilateral attempts at cancellation. Where a property is transferred during pending litigation, the doctrine of lis pendens binds the transferee, and the plaintiff's readiness and willingness need not involve an immediate deposit of funds.

Headnote:(A) Specific Relief Act, 1963 - Section 16(c) - Specific performance of contract - Readiness and willingness - A plaintiff seeking specific performance must establish readiness and willingness; this is not to be interpreted as a requirement for the deposit of money, but rather a capacity and intent to fulfill contractual obligations - Unilateral cancellation of a Memorandum of Understanding by a party does not absolve them of their obligations when the agreement persists. (Paras 34, 38, 39)

(B) Transfer of Property Act, 1882 - Section 52 - Lis pendens - Principles of lis pendens do not necessarily annul a transfer, but render it subservient to the rights of the parties to the litigation; an order is binding not only on the litigating parties but on those who derive title pendente lite. (Paras 57, 58)

(C) Contract Law - Time as essence - For time to be the essence of a contract, it must be explicitly stated or inferred from the nature of the transaction and surrounding circumstances; mere mention of a timeframe without consequences for default does not automatically render time the essence. (Para 31)

Facts of the case:
An agreement was entered into between parties for the transfer of property. The defendant attempted to unilaterally cancel the memorandum of understanding due to alleged delays, while the plaintiff asserted readiness to perform. The defendant subsequently transferred the property to a third party during the pendency of litigation. The trial court initially denied specific performance, awarding only a refund of the earnest money, leading to this appeal.

Findings of Court:
The court held that the initial document, despite its nomenclature, functioned as an agreement of sale. The plaintiff's readiness and willingness were demonstrated through prompt legal notices and the mobilization of funds, contrary to the findings of the trial court. The doctrine of lis pendens applies to the subsequent purchaser, who acquired the property during the pendency of the suit.

Issues: Whether the plaintiff is entitled to a decree of specific performance or alternatively, to damages, and whether the defendant's unilateral cancellation of the contract was valid.

Ratio Decidendi: Where a contract for the sale of property exists, time is not the essence unless expressly provided; a party cannot unilaterally resile from the contract to the detriment of the other. Although a subsequent purchaser may be a bona fide holder, the principles of lis pendens protect the plaintiff's interest in the litigation if the subject property is transferred during the suit.

Result: Appeal allowed in part; decree for refund of earnest money confirmed with modified interests.

Table of Content
1. nature of mou as a sale agreement. (Para 1 , 3 , 4 , 5)
2. court holds mou is an enforceable sale agreement. (Para 8 , 11 , 12 , 30)
3. readiness and willingness and time as essence. (Para 13 , 14 , 31 , 37 , 38)
4. third party owner's obligations in specific performance suits. (Para 17 , 32 , 33 , 43)
5. rights of bona fide purchasers versus lis pendens. (Para 18 , 19 , 28 , 57 , 58 , 64 , 65)
6. awarding monetary damages over specific performance due to hardship. (Para 55 , 56 , 66 , 67 , 68 , 69)

THIS REGULAR FIRST APPEAL IS FILED U/SEC.96 R/W ORDER XLI RULE 1 OF CPC AGAINST THE JUDGMENT AND DECREE DATED 04.08.2012 PASSED IN O.S.NO.9153/2004 ON THE FILE OF THE V ADDITIONAL CITY CIVIL JUDGE, BANGALORE, PARTLY DECREEING THE SUIT FOR SPECIFIC PERFORMANCE ETC.

THIS REGULAR FIRST APPEAL HAVING BEEN HEARD AND RESERVED FOR JUDGMENT COMING ON FOR ‘PRONOUNCEMENT OF JUDGMENT’ THIS DAY, JAYANT BANERJI J., MADE THE FOLLOWING:

CORAM: HON'BLE MR. JUSTICE JAYANT BANERJI

AND

HON'BLE MR. JUSTICE K. V. ARAVIND

CAV JUDGMENT

(PER: HON'BLE MR. JUSTICE JAYANT BANERJI)

1. This is the plaintiff's appeal seeking modification of the judgment and decree dated 04.08.2012 passed by the 5th Additional City Civil and Sessions Judge, Bangalore, in OS No. 9153/2004 and to decree the suit filed by the plaintiff as prayed for. The plaintiff filed a suit for specific performance in respect of the suit schedule property, which was partly decreed with costs. It was decreed that the 1st defendant, who is the respondent no. 1 herein shall refund the earnest money of Rs.5,00,000/- (Rupees Five Lakhs) to the plaintiff with costs and interest at the rate of 18% per annum from the date of suit till the date of realisation of the decreetal amount. The suit against the defendant nos. 2 to 4 was dismissed.

2. For the sake of convenience, the parties are being referred to as per their ranking before the trial Court.

Pleadings:

3. The suit was filed by the plaintiff on 10.12.2004 with the following prayers:-

“PRAYER

“WHEREFORE, the plaintiff prays for a Judgment and Decree against the Defendants for Specific Performance:

a) directing the Defendants to execute the sale deed in favour of the plaintiff in pursuance of the Agreement/Memorandum of Understanding dated 07.01.2004.

b) if the defendants fail to execute the sale deed in favour of the plaintiff. This Hon’ble Court be pleased to execute the same in favour of the Plaintiff.

c) Restraining the Defendants their workmen, agents or anybody claiming through them from interfering with the peaceful possession and enjoyment of the suit schedule property by decree of permanent injunction.

IN ALTERNATIVE

d) If the specific performance cannot be granted by this Hon’ble Court to direct the Defendant to pay Rs.5,00,000/- with interest at the rate of 24% p.a. from the date of agreement till the date of payment and also damages of Rupees Fifty Lakhs to the plaintiff.”

e) for such other and further reliefs as this Hon’ble Court deems fit to grant under the circumstances of the case with costs in the interest of justice and equity”

4. The plaint case in brief is that the 1st defendant entered into a Memorandum of Understanding¹MOU with the plaintiff on 07.01.2004 in respect of suit schedule property, by which the plaintiff was nominated to be the purchaser of the suit schedule property, in which MOU, a representation was made by the 1st defendant that he has an understanding with the 3rd defendant for the purchase of the suit schedule property. The price agreed for the nomination and assignment inclusive of the sale consideration to be paid to the owner, that is, the 3rd defendant in respect of the suit schedule property was agreed as Rs.78,00,000/- (Rupees Seventy Eight Lakhs). As per the terms of MOU, the plaintiff is entitled to make payment of sale consideration to the 3rd defendant directly and get the sale deed executed in his favour or in favour of his nominee. An advance of a sum of Rs.5,00,000/- (Rupees Five Lakh

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2026 Supreme(Online)(Kar) 18800

THE HIGH COURT OF KARNATAKAJayant Banerji, K. V. Aravind, JJGopalappa – AppellantVersusDwarakanath – RespondentREGULAR FIRST APPEAL NO. 1661 OF 2012 (SP)

Cases Referred (2)

THE HIGH COURT OF KARNATAKA
Jayant Banerji, K. V. Aravind, JJ
Gopalappa – Appellant
Versus
Dwarakanath – Respondent
REGULAR FIRST APPEAL NO. 1661 OF 2012 (SP)