Supreme court of India
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This article is written by Arya Mittal from Hidayatullah National Law University. The article analyses the case of A.R. Madana Gopal v. Ramnath Publications Pvt. Ltd. in reference to the available grounds to deny specific performance.

Introduction

Recently, in April 2021, the Supreme Court gave its judgement in the case of A.R. Madana Gopal v. Ramnath Publications Pvt. Ltd. (2021) wherein it dealt with the issue of grounds for denying specific performance. Ever since the 2018 amendment, the Specific Relief Act, 1963 has made it compulsory for the courts to enforce the specific performance of a contract. Yet, the Supreme Court has laid down the grounds for denying specific performance. This article seeks to analyse these grounds in light of the afore-mentioned case and thereafter, discusses various Supreme Court judgements. 

The case of A.R. Madana Gopal v. Ramnath Publications Pvt. Ltd.

Facts of the case

  • The case relates to the sale of four properties by respondents to the appellants. The sale deeds were to be executed within four months. In furtherance of the same, the respondents requested the Income Tax authority to issue a clearance certificate. 
  • However, the authority ordered for compulsory acquisition of property which was challenged in the court by respondents by filing writ petitions. In between, the parties entered into four Memorandums of Understanding (MoUs)
  • Later, the appellants requested for the execution of the sale deed to which respondents replied that the execution could take place only after the disposal of the cases. 
  • After some time, it was brought to the notice of appellants that the property was already encumbered so they filed a suit for specific performance, which was passed in their favour by the Single Judge of High Court. The same was challenged by the respondents before the Division Bench which reversed the order of Single Judge. 
  • Therefore, an appeal was filed in the Supreme Court which relates to the current case. The timeline of events is provided in the form of tabular representation for simplicity and clarity since time is of the essence in the current case.

Date

Event

20.03.1991

The parties entered into four agreements for sale of property by the respondent to appellants

25.06.1991

Income Tax authority passed an order for compulsory acquisition of property

21.12.1992

Madras High Court directed the Income Tax authority to reconsider the matter

22.02.1993

Income Tax authority issued an order for the purchase of property which was challenged by the respondents by way of writ petitions

10.03.1993

Interim order of injunction by the Court to not change the nature of the property

24.01.1994

Parties entered into four MoUs according to which the title deeds were to be retained by the respondent till the sale of property and the balance amount was to be paid by the appellant immediately after disposal of writ petitions at time of execution of sale deed

11.09.1998

Writ petition disposed of by High Court in favour of respondents which was challenged by the Income Tax authority

10.2000 (Date not specified)

Appellants filed four suits for specific performance 

17.07.2003

Suits were decreed by the Single Judge of the High Court directing the balance amount to be deposited by the appellant along with twelve percent interest rate within eight weeks and respondents were directed to execute the sale deed and deliver possession to the appellant.

01.08.2003

Balance consideration deposited by appellants

25.07.2008

Appeal by respondents allowed by Division Bench of the High Court against the decree of Single Judge. Appeal reversed the order of Single Judge and passed judgement in favour of respondents. 

Issues of the Case

  1. Is the Division Bench of the High Court correct in denying specific relief to appellants on grounds of non-payment of balance amount immediately after disposal of writ petitions?
  2. What can be the possible grounds for denying specific performance?

Contentions of the parties to the case

Appellants

  • The appellants argued that they had already made 90 percent of the payment to the respondents back in August 1994 for which they received possession of part of the property. They were told that the agreements will be executed only after the disposal of the writ appeal. 
  • As regards the agreements and the MoU, they contended that the two should be read together. They emphasized the recital part wherein it was stated that ‘the payment should be made at the time of registration of sale deeds immediately after disposal of writ petitions. They were of the view that the High Court gave excessive emphasis on the word ‘immediately’ ignoring ‘at the time of registration of sale deeds’. 
  • Thus, when they were later informed that the property was encumbered, they filed a suit for specific performance. So, it cannot be said that the appellants delayed in filing the suit since they were always ready to perform their part of the agreement and pay the balance amount. 
  • Further, they contended that since the Income Tax authority had filed an appeal, they did not take any step to execute agreements. 
  • Also, the suit for specific performance was not barred by limitation so they were entitled to specific relief. 
  • Lastly, they placed reliance on the amended Section 10 of Specific Relief Act, 1963 which provides that specific performance is no more the discretion of the court and needs to be compulsorily enforced. 

Respondents

  • The respondents argued that time is of the essence in the agreements and MoU existing between the parties. 
  • They were of the view that even after the petitions were disposed of in the favour of the respondents, the appellants failed to file the suits for specific performance for two years and three months which is fatal since time is of the essence in the present situation. 
  • Further, they contended that escalation in prices is a relevant factor since the property is situated in Chennai.
  • Lastly, they argued that there was no clause in MoU to give possession to the appellants in the agreements yet they acquired possession of part of the property which they did not prove but also made attempts to disturb the possession of Indian Bank. 

Findings of the court

  • The Hon’ble Court agreed with the view of appellants that the High Court failed to consider the words ‘at the time of registration of sale deeds’ which led to its erroneous decision. It held that the clause meant that the balance amount will be payable at the time of registration which should be done immediately after disposal of petitions. 
  • The Court also agreed with the view of appellants that the delay in filing suit was due to the appeal filed by the Income Tax authority and held them correct in doing so. 
  • It held that non-payment of the balance amount cannot be a sole ground for denying specific relief. 
  • Not pleading the manner in which the possession was received by appellants cannot be a ground to deny relief. 
  • Specific relief cannot be denied on account of trespass by appellants and causing disturbance since Indian Bank was not a tenant and only a creditor. The frivolous complaint of a party, non-pleading the manner of possession and trespass cannot be grounds for denying equitable relief.
  • Moreover, escalation of prices of a property cannot also be considered as the sole factor for denying relief. 
  • Suit for specific performance cannot be denied on the sole ground of delay or laches except in the case of immovable property where time is of the essence. In the current case, the delay was not a result of the default of appellants and can thus, not be denied relief. 
  • The court may decide to provide or not provide an additional amount depending on the circumstances of each case. In this case, since ninety percent of the amount had already been paid before 1994 so the respondents were not entitled to any additional amount. 

The possible grounds to deny specific performance

Section 10 of the Specific Relief Act, 1963

Section 10 of the Act deals with the specific performance of contracts. It provides that the court shall enforce the specific performance of the contract subject to certain provisions of the Act. However, before the amendment of 2018, providing such relief was the discretion of the court since the former provision used the word ‘may’. Therefore, as per the current provisions, the court should compulsorily enforce specific performance subject to Sections 11(2), 14 and 16 of the Act. Apart from these provisions, certain judgements of the Supreme Court have also iterated the grounds wherein specific performance can be denied. These cases have been discussed hereafter.

Mehboob-ur-Rehman v. Ahsanul Ghani (2019)

In this case, the court has held that even post-amendment, the Court may deny specific performance if it is evident that the plaintiff was not ready or willing to perform his part of the contract in accordance with Section 16 of the Act. A similar view has been held by the Court even in the case of Umabai v. Nilkanth Dhondiba Chavan (2005).

K.S. Vidyanadam and Others v. Vairavan (1997)

In this case, the plaintiff failed to make payment for the balance amount and thereafter executed the sale deed within six months of the agreement by the parties and filed suit for specific performance only after two and a half years. The Supreme Court held that though the case might not be barred by limitation, yet total inaction on part of the plaintiff can be a ground for denying specific performance. It held that, in the Indian context, specific relief cannot be denied on the sole ground of delay or laches, yet total inaction on part of the plaintiff can be a ground for denying specific performance. 

A. Kanthamani v. Nasreen Ahmed (2017)

In this case, the court held that though it is important for the plaintiff to show his willingness and readiness for his part of the performance of the contract, yet if the plaintiff does not deposit money, then it cannot be said that he was not ready and cannot be disentitled from the specific relief. A similar ratio was also given by the Privy Council in the case of Bank of India Ltd. v. Jamsetji A.H. Chinoy (1949).

I.S. Sikandar v. K. Subramani (2013)

In this case, a contract was terminated and as a result, a suit for specific performance was filed. However, the plaintiff failed to pray for setting aside the termination of the contract. The court held that since the plaintiff did not seek declaratory relief to set aside the termination so it would be deemed that the plaintiff had accepted such termination and this would show acceptance on his part. As a result, he cannot sue for specific performance since the contract has come to an end from his side.

A similar decision was given by Supreme Court in Adcon Electronics (P) Ltd. v. Daulat (2001) wherein it held that the party asking for specific performance for execution of sale deed, needs to specifically ask for possession of such immovable property, else the same will not be permissible. 

Nirmala Anand v. Advent Corpn. (P) Ltd. (2002)

In this case, the Supreme Court held that though the rise in prices is an important factor for consideration, yet it cannot be the sole ground on which the relief can be denied to the plaintiff. It concluded that escalation of prices may be relevant when the decree is being granted for the first time, yet it cannot become the sole consideration for denying the relief. 

Conclusion

The case of A.R. Mardana Gopal is yet another achievement of the Supreme Court to clarify the grounds on which the court may grant or deny specific performance. Factors such as escalation in prices, non-pleading of the manner of possession, non-payment of balance amount etc. cannot be grounds for denial of specific performance and thereby reject equitable relief. 

References


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