Gujarat High Court Affirms Specific Performance Despite Vendor's Unilateral Cancellation of Property Deal

In a significant ruling reinforcing buyer protections in property transactions, the Gujarat High Court has upheld a trial court's decree granting specific performance of a 1985 agreement to sell, dismissing appeals by both the original vendor and a subsequent purchaser.

Dispute Over 1985 Property Pact Escalates into Decades-Long Legal Battle

The case revolves around an agreement to sell executed on October 1, 1985, between Miskinbanu Jahidkhan Pathan (plaintiff) and Alisher Subhanali Ansari (defendant no. 1) for a property in Ahmedabad's Sherkotda Ward for ₹16,000. The buyer paid ₹2,000 as earnest money upfront. What began as a straightforward transaction unraveled when the vendor issued a cancellation notice in July 1986, claiming the buyer failed to complete the deal within the six-month timeframe mentioned in the agreement.

During the pendency of the suit filed in 1986, the vendor defied an injunction and sold the property to defendant no. 2 in 1993 for ₹80,000. The trial court decreed specific performance in favor of the original buyer, cancelled the subsequent sale deed, and imposed a one-day imprisonment on the vendor for contempt of the injunction order.

Vendors Argue Time Was Essence: Buyers Counter with Payment Proof and Conduct

Appellants contended that the fixed six-month period made time the essence of the contract. Since the buyer allegedly failed to make full payment or seek permissions under the Urban Land Ceiling Act within that window, the agreement stood terminated. They heavily relied on precedents like I.S. Sikandar to argue that without a specific prayer declaring the termination illegal, the suit for specific performance was not maintainable.

Defendant no. 2 positioned himself as a bona fide purchaser who paid valuable consideration without notice of the pending litigation or injunction. He argued that he could not be bound by a decree when he had no knowledge of the prior agreement.

The plaintiff countered that she had paid an additional ₹6,000 (proved through an entry in the vendor's handwriting in her diary) and consistently expressed readiness to complete the transaction. The reply to the cancellation notice explicitly stated her willingness to proceed, and the suit was filed promptly in September 1986.

Court Clarifies 'Determinable' Contracts and Bona Fide Purchaser Duties

Justice J.C. Doshi conducted a detailed analysis of whether the agreement was inherently "determinable" under Section 14 of the Specific Relief Act. The court observed that the contract contained no clause authorizing unilateral termination or forfeiture of earnest money. Instead, Clause 8 explicitly provided that even if the vendor was unwilling, the buyer could approach the court for specific performance.

Drawing from the Supreme Court's recent pronouncement in K.S. Manjunath , the court held that where no contractual right to terminate exists, unilateral cancellation amounts to a repudiatory breach. The buyer need not seek a separate declaration that the termination is invalid; she can directly sue for specific performance.

On the question of time being the essence, the court reaffirmed the settled position that in contracts for sale of immovable property, time is not presumed to be of the essence unless the contract contains express stipulations making it so. The six-month clause, read alongside provisions for obtaining government permissions, did not render the timeline rigid.

Regarding the subsequent purchaser, the court noted that defendant no. 2 failed to make necessary inquiries, including publishing a public notice or obtaining a title clearance. His claim of being unaware of the dispute between the vendor and his brother was rejected as insufficient to establish good faith under Section 19 of the Specific Relief Act.

Key Observations from the Judgment

"Once the alleged termination of a non-determinable agreement to sell is found to be not for bona fide reasons and being done in a unilateral manner on part of the defendant, it cannot be said that any declaration challenging the alleged termination was required on part of plaintiff."

"Unilateral termination of the agreement to sell by one party is impermissible in law except in cases where the agreement itself is determinable in nature in terms of Section 14 of the Act of 1963."

"The readiness and willingness on the part of the plaintiff is a condition precedent to grant the relief of specific performance... The court may infer from the facts and circumstances whether the plaintiff was ready and always ready to perform his contract."

Decree Confirmed as Appeals Fail on Multiple Grounds

Both First Appeals (No. 2516 and 2776 of 1999) were dismissed. The High Court confirmed the trial court's direction requiring the vendor to execute the sale deed upon payment of the balance consideration with 9% interest, and declared the 1993 sale deed void. The operation of the judgment has been stayed for two weeks to allow the appellants to approach a higher forum.

This ruling serves as a cautionary tale for property vendors attempting to unilaterally walk away from agreements and for subsequent purchasers who fail to conduct proper due diligence.