Landmark Judgments On Specific Performance Of A Contract

Specific performance of a contract is one of the legal remedies for breach of contract. It compels the breaching party to fulfil his obligations provided under the contract. General principles governing specific performance are provided in the Specific Relief Act, 1963 (hereinafter referred to as “the Act”). Over time, Indian Courts have passed numerous landmark judgments through which the principles of specific performance have been evolved.

Landmark Judgements On Specific Performance Are As follows

Manjunath Anandappa Urf. Shivappa vs. Tammanasa & Ors (2003)

In this case, the Court held the following with respect to specific performance of contract:

• Mandatory Averment and Proof: Section 16(c) of the Act provides that a party seeking specific performance must plead and prove readiness and willingness to perform their contractual obligations.
• Lack of Readiness and Will: In this regard, the Court found that there was a failure on the part of the plaintiff to satisfactorily demonstrate such readiness and willingness.
• Relevance of Timely Action: While time was not explicitly stated to be the essence of the contract, the Court focussed on the importance of promptness from the plaintiff's side.

Aniglase Yohannan vs. Ramlatha And Ors (2005)

The Court held the following regarding specific performance of contract l:

• The Court affirmed that specific performance is a form of remedy which compels a party to fulfil the precise terms of the contract. It shall be granted if monetary damages are insufficient to compensate the aggrieved party.
• The Court emphasises that Section 16(c) of the Act is important to ascertain who is entitled for the order of specific performance. This Section provides to receive orders of specific performance, the plaintiff shall aver and also prove that they have always been ready and willing to perform and do their part for the contract.
• The Court clarified that demonstrating 'readiness and willingness' is not about reciting a specific formula but rather displaying consistent and genuine conduct. It is the actions of a plaintiff and the circumstances surrounding such acts that are looked into to determine the true intent and commitment to the contract.
• The Court further helped in detailing how a plaintiff can effectively show their 'readiness and willingness'. Factors such as serving legal notices within a reasonable timeframe, acting to fulfil contracts by communicating, and demonstrably preparing financially by depositing funds all establish a justifiable case for specific performance.
• The Court observed that the rationale behind Section 16(c) is to provide a safeguard ensuring that only parties with demonstrably clean track record can avail themselves of this equitable remedy. The finding of the Court is to evaluate the conduct of the plaintiff and grant specific performance only in circumstances that align with tests of fairness and equity.

Zarina Siddiqui vs. A. Ramalingam (2014)

The Court held the following regarding specific performance:

• Specific performance is an equitable remedy and not an automatic right. That is to say, the Court has discretion as to grant or withhold it based on principles of fairness and reasonableness.
• This discretion shall not be arbitrary, but exercised judicially according to well-established legal and equitable principles.
• Significant increase in property value is no cause for denial of specific performance by the Court. Conduct of parties also is relevant.
• The Court can impose conditions while granting specific performance.

B. Santoshamma & Another vs. D. Sarala & Another (2020)

The case laid down following principles related to specific performance of contract:

• Discretionary Relief: Specific performance has been historically a discretionary equitable remedy under the Specific Relief Act, 1963. Though discretionary, it has to follow established legal principles.
• Move from Discretion to Obligation: The 2018 amendment to Section 10 of the Act made specific performance a duty and not merely a discretionary remedy because Courts are now compelled by law to enforce such a remedy subject to certain provisions.
• Agreements Related to Immovable Property: The Court reiterated that agreements to sell immovable property typically confer a personal right upon the buyer to claim specific performance.
• Enforceability in Entirety and Exceptions: Ordinarily, a contract is enforced in entirety; nevertheless, Section 12 of the Act makes an exception, where partial specific performance may be ordered.
• Partial Specific Performance: Section 12 of the Act provides cases wherein one party is unable to perform the entire contract. The Court can order specific performance of the performable part, especially when the unperformed part is proportionally small in value and monetarily compensable.
• Factors for Partial Performance: The Court held that for partial specific performance, the party seeking it must agree to pay the full agreed consideration, reduced by the value of the unperformed part.
• Reason Behind Partial Performance: The Court noted that this interpretation to Section 12 of the Act prevents a seller from intentionally frustrating a contract by partially selling the property to create third-party interests. The Court reinforced that a party acting in bad faith breaching a contract should not escape liability.

Katta Sujatha Reddy vs. M/S Siddamsetty Infra Projects Pvt. Ltd. & Ors. (2022)

The Court held that the amendment in 2018 to the Act, which made specific performance a mandatory remedy instead of a discretionary remedy, is prospective and does not apply to contract formed before the amendment. Before this amendment, the discretion lay with the Courts to grant specific performance on principles of equity.

The reasoning adopted by the Court was that the 2018 amendment introduced substantial changes by changing specific performance from a discretionary remedy based on equity to an enforceable right based on fulfilling legal requirements. Such amendments, according to the Court, strengthened the sanctity of contracts by forcing parties to comply with the terms of the contract, thus eliminating the conception of “efficient breaches.” The Court clarified that the legislature must explicitly state whether such substantive amendments are to apply retrospectively or prospectively.

C. Haridasan vs. Anappath Parakkattu Vasudevakurup (2023)

In this case, the Court dealt with the issue of specific performance, in the context of contracts relating to sales of land. The judgments highlighted an essential issue of specific performance: it is not an automatic right, not even with a valid contract. Courts consider the conduct of the parties, the rise in property prices, and the fact that whether specific performance would be grossly prejudicial to one party.

Although the amendments made to Section 20 of the Act in 2018 declared specific performance as a statutory remedy, the principles underlying Section 16 regarding demonstration of readiness and willingness are still important.

Sabir (Dead) Through LRs vs. Anjuman (Since Deceased) Through LRs. (2023)

In this case, the Court clarified the manner of application of limitation periods in suits for specific performance:

• Limitation Start Point: The limitation period starts when the party seeking specific performance is aware of the other party's refusal to perform according to Article 54 of the Limitation Act, 1963. Article 54 prescribes a limitation period of 3 years from the date fixed for performance or from the date when such refusal is known.
• Obligation to Act Promptly: In this case, the Court observed that the buyer had an obligation to be vigilant and act promptly after the eight-day period had lapsed. In this case, the suit was filed after five and a half years elapsed, and thus the claim was time-barred with the buyer showing no diligence required of the case.
• Impact of Contract Terms: The emphasis of the judgement was on the importance of adhering to contract-specific terms and timelines. These terms and timelines affect the calculation of limitation periods.
• Purpose of Limitation Statutes: The purpose of limitation statutes is to preserve the principle of legal certainty and fairness by requiring that persons assert their rights within specified time limits, and Courts shall apply such laws consistently.

A. Valliammai vs. K.P. Murali And Ors. (2023)

In this case, the Court determined that the suit for specific performance, which had been filed on 27 September 1995 was time barred. This reasoning was based on an interpretation of Article 54 of the Limitation Act, 1963, which states that a suit for specific performance should be filed within three years. The Court held that the remedy of specific performance compels a party to perform his part of the obligations according to the terms of a contract. It is typically granted in a case where monetary compensation is deemed to be inadequate compensation for a breach.

In order to determine the period from which the limitation period commences, the Court laid down the following rules:

• Date Fixed for Performance: If the date was fixed for performance, then the three year period runs from that date. However, the Court acknowledged that the dates initially provided in the agreement to sell and its endorsement were not “of the essence of the contract”.
• Notice of Refusal to Perform: If no such date of performance is provided, the running of the three-year period commences on when the plaintiff has received notice of the defendant's refusal to perform.

Rajesh Kumar vs. Anand Kumar & Ors. (2024)

The Court in this case decided that though the limitation period stipulated to sue for specific performance of any contract is three years, nothing must be misconstrued as that every suit filed within the said period is always decreed. It held that time limits specified within the agreement hold significance and should not be overlooked merely because time is not explicitly specified as the essence of the contract.

The Courts made the following points regarding limitation periods in suits for specific performances:

• The discretion of Courts to grant specific performance lies in the situation as to whether the action has been brought within a reasonable time or not, according to Sections 10 and 20 of the Act.
• Determining “reasonable time” depends upon the circumstances of the case. Factors like the conduct of the parties concerned and the time limits in the agreement should be taken into consideration.
• Unreasonable delay in filing suits, even within the limitation period, may amount to a denial of specific performance. The three-year limitation period, therefore, should not be understood to be a licence given to the purchasers to wait extensively before approaching the Courts to seek remedy.

Some of the important findings regarding the doctrine of specific performance as discussed in the case are as follows:

• Proof of Readiness and Willingness: The Court observed that an action in specific performance required proof on the part of a plaintiff that they were ready and willing to perform.
• Delay in Filing a Suit and Its Impact: The Court highlighted that extraordinary delays in filing a suit to obtain specific performance, though well within the limitation period, result in prejudice to the case of the plaintiff. Courts have generally treated such delays unfavourably, primarily when the plaintiff had become aware of contract breaches or actions from the other party.
• Relevance of Time Limits in the Contract: Even though time is not declared as the essence of the contract itself, the Court emphasised that the time limitations mentioned in the contract are of great significance. These timeframes can be taken into consideration by the Courts while determining whether to grant specific performance or not.
• Specific Performance and Co-ownership: The Court reiterated the principle that where all co-owners of a property have agreed and executed the contract then alone can specific performance be decreed. Where, the agreement does not bear the signatures of all the co-owners then no decree for specific performance can be granted. This principle stems from the requirements that the parties who seek specific performance must themselves be capable of performing their own obligations under the contract.

Conclusion

The doctrine of specific performance in India has been developed from a series of landmark judgments that emphasise various elements including readiness and willingness, the discretionary nature of the remedy, and the equitable considerations for enforcing contracts. Through these decisions, the Court has consistently maintained the principle that specific performance is not an automatic right. Specific performance of contract is a remedy subject to the discretion of the Court based on the principles of fairness, feasibility, and justice in enforcing the contract.