Supreme Court: Completed Sale Under Specific Performance Decree Cannot Be Undone by Refund

In a significant ruling, the Supreme Court of India has held that once a decree for specific performance of an agreement to sell culminates in the execution of a sale deed and delivery of possession, the completed transaction cannot be undone by ordering an enhanced monetary refund merely to "settle equities". The Court restored a 1979 Trial Court decree that directed specific performance of a 1975 agreement for the sale of about five bighas of agricultural land near Agra.

The Case: A Four-Decade-Old Land Dispute

The dispute originated from a registered agreement to sell dated June 16, 1975, under which the appellant, Sobaran Singh (since deceased, represented by his legal representatives), agreed to purchase approximately five bighas of agricultural land from the respondent, Gordhan Singh (also deceased, through his LRs), for a total consideration of ₹20,000. An advance of ₹5,000 was paid. The defendant contended that the transaction was a mere loan with the agreement serving as security, but the Trial Court rejected this defense as an afterthought not pleaded in the written statement.

The Trial Court decreed specific performance on February 28, 1979. Pursuant to this decree, the sale was executed through the court on June 7, 1979, and the plaintiff took possession. The First Appellate Court reversed the decree, finding no material to show the plaintiff's readiness and willingness. In second appeal, the Allahabad High Court upheld the Trial Court's findings on the merits—acknowledging that the defendant had raised a "cooked-up defense"—but attempted to "settle equities" by directing the defendant to pay the plaintiff ₹15,00,000 (far exceeding the original advance) with interest, instead of restoring the sale.

The Supreme Court's Legal Analysis

The bench of Justice J. B. Pardiwala and Justice K. Vinod Chandran found the High Court's approach unsustainable. The Court emphasized that the sale had been completed in 1979, and the plaintiff had been in possession for over four decades. The High Court's attempt to substitute the completed transaction with a money payment was inequitable to the plaintiff who had parted with ₹20,000 more than 45 years ago and obtained ownership and possession.

The Court noted that the plaintiff had offered ₹5,00,000 as a refund—reflecting the property's value four decades later—while the defendant had counteroffered, but neither party accepted the other's proposal. The plaintiff clearly did not want to give up the land he had held since 1979.

Key Observations from the Judgment

The Supreme Court made a pivotal observation on the application of equity:

"Equity, hence, has to be applied in favour of the plaintiff who parted with Rs.20,000/- more than four decades and a half back, and obtained the ownership and possession of the property."

The Court also rejected the High Court's reliance on the decision in Pratap Lakshman Muchandi and Others v. Shamlal Uddavadas Wadhwa and Others , noting that in that case, the sale was allowed by enhancing the balance consideration, not by undoing a completed sale.

Final Decision and Implications

The Supreme Court allowed the appeal, reversed the decisions of the First Appellate Court and the High Court, and restored the Trial Court's decree for specific performance. The Court directed that the plaintiff's possession cannot be interfered with. The defendant had deposited ₹15,00,000 following the High Court judgment; this amount, along with any accrued interest, is to be refunded to the defendant within one month.

The ruling reinforces a crucial principle: courts cannot substitute a completed specific performance decree with monetary compensation simply because of the passage of time, especially when the plaintiff has remained in possession and the transaction was lawfully executed. The judgment provides clarity on the limits of equitable discretion under Section 20 of the Specific Relief Act, 1963.