Specific Performance vis à vis Readiness and Willingness

The Specific Relief Act, 1963 [“the Act”] inter alia provides redressal of grievances of a contractual party whose right has been violated due to breach of contract committed by the other party to the contract. The objective of the Act is to restore the affected party to the position he or she would have been had the terms of the contract not been breached. The Act provides a carefully crafted mechanism to approach the Court to enforce the contract and claim specific performance thereof. The following kinds of remedies are granted by the court under the provisions of the Act, viz. –

  1. Recovering possession of the property– This remedy is granted to a person who has been unlawfully dispossessed from the possession of his property.
  2. Specific Performance of Contracts- This remedy is granted to a person whose rights have been violated due to breach of the terms of the contract committed by the other party.
  3. Rectification of instruments- This remedy is granted to parties when, due to fraud or mutual mistake of the parties, the contract or other instrument does not express or reveal their real intention.
  4. Rescission of Contracts– This remedy is granted to a party who seeks rescission of contract on the grounds laid down in Section 27 of the Act viz. if the contract is voidable or terminable by the Plaintiff or if the contract is unlawful.
  5. Cancellation of instruments- This remedy is granted to a person who has reasonable apprehension that a written instrument issued in his name is void or voidable, and if not cancelled, may cause him serious injury. In that case, the aggrieved person may sue to have it adjudged void or voidable.
  6. Declaratory Decrees– This remedy is granted to a person who is being denied the enjoyment of the lawful title of his property by another person. In that case, the aggrieved person may apply to court to declare upon him the lawful title of the property.
  7. Injunctions– Injunctions are a preventive relief and granted at the discretion of court to prevent a party from committing a breach of contract or acting in any manner detrimental to the interests of the Plaintiff due to no fault of the Plaintiff. Injunction granted may be temporary, perpetual, or mandatory, depending upon the nature and facts and circumstances of the case.

Before advancing further, it is pertinent to mention that the scope of this article is restricted to the analysis of the pre amended Act of 1963 and not the Specific Relief Amendment Act of 2018 [“the 2018 Amendment”] whereby the specific performance of contract was made a general rule rather than an exception in contrast to the pre amended Act of 1963 which confers wide discretionary powers upon the courts to grant specific performance and gives primacy to damages as a relief over a decree of specific performance. The Supreme Court in Katta Sujatha Reddy v. Siddamsetty Infra Projects Pvt. Ltd12022 SCC OnLine SC 1079  has categorically held that the 2018 Amendment to the Specific Relief Act, 1963 is prospective and cannot apply to those transactions that took place prior to it coming into force i.e. 01.10.2018. Therefore, a large number of cases still continue to be governed by the pre amended Act of 1963.

Essentials of Specific Performance

Under the pre amended Act, one cannot claim specific performance of a contract as a right as the Act equips the Courts with wide discretionary powers to exercise its discretion as to whether to grant specific performance of the contract or not. Section 10 of the Act, at the very outset, clarifies in which type of cases specific performance of contract can be decreed viz.

  1. Where there exists no standard for ascertaining the actual damage caused by the non-performance of the act agreed to be done; or
  2. When the act agreed to be done is such that compensation in money for its non-performance would not afford adequate relief.

The logical corollary to the above is that, if the Defendant is able to prove that damages suffered by the Plaintiff on the account of breach of contract committed by the Defendant, are ascertainable or if the Defendant is able to prove that the non-performance of the contract can be adequately compensated by the Defendant, then the court would be disinclined to use its discretionary power of granting specific performance of the contract and give primacy to awarding damages. Section 20 of the Act further makes it categorically clear that the jurisdiction to decree specific performance is discretionary and the court is not bound to grant such relief merely because it is lawful to do so, but the discretion of the court is not arbitrary but sound and reasonable, guided by judicial principles and capable of correction by court of appeal. The aforementioned sections of the Act came under heavy criticism as the said sections provided a window of opportunity to the errant parties, who found it more viable to breach a contract than perform it as the cost of damages may still be less than the cost of performance. It was in this backdrop, that the 2018 amendment was introduced which made grant of specific performance a general rule and award of damages an exception.

The Supreme Court in the matter of Kamal Kumar vs Premlata Joshi22019 2 SCC (Civ) 405, after expounding upon the provisions of the Act, held that there are five material questions which are required to be gone into for grant of relief of specific performance viz.-

  1. Whether there exists a valid and concluded contract between the parties for sale/purchase of the suit property.
  2. Whether the Plaintiff has been ready and willing to perform his party of the contract and whether he is still ready and willing to perform his part as mentioned in the contract.
  3. Whether the Plaintiff has, in fact, performed his part of the contract and, if so, how and to what extent and in what manner he has performed and whether such performance was in conformity with the terms of the contract.
  4. Whether it will be equitable to grant the relief of specific performance to the Plaintiff against the Defendant in relation to suit property or it will cause any kind of hardship to the Defendant and, if so, how and in what manner and the extent if such relief is eventually granted to the Plaintiff.
  5. Whether the Plaintiff is entitled to grant of any other alternative relief, namely, refund of earnest money, etc. and, if so, on what grounds.

Stating the above, the Supreme Court held that the above questions are statutory requirements (see Sections 16(c), 20, 21, 22, 23, of the Act and Forms47/48 of Appendix A to C of Code of Civil Procedure) and have to be properly pleaded by the parties in their respective pleadings and proved with the aid of evidence in accordance with law.

What kind of pleadings are required to seek specific performance?

Section 16(c) of the Act mandates that the Plaintiff must plead and prove that he was always ready and willing to perform the contract and in absence of the above crucial pleadings the court would be disinclined to grant specific performance. In J. Samuel v. Gattu Mahesh3(2012) 2 SCC 300,  the Supreme Court held that in the absence of specific averment that the Plaintiff has performed and is always ready and willing to perform essential terms of contract, suit for specific performance is liable to be dismissed and decree for specific performance cannot be granted. To adjudge that the Plaintiff has been ready and willing to perform his part of the contract the court will take into consideration the conduct of the Plaintiff prior and subsequent to filing of the suit4N.P. Thirugnam v. R. Jagan Mohan Rao(1995) 5 SCC 115. Mere plea of readiness and willingness is not sufficient, it must also be proved. 5Pushparani S. Sundaram and Ors. v. Pauline Manomani James MANU/SC/2493/2000

The Plaintiff must prove his readiness and willingness not only at the time of filing of the suit but throughout the period from the date of contract.6Vishwanath and Ors vs Lakshmi Ammal and Ors App. No 85 of 1983 and 89 of 1983. The Plaintiff must plead and prove continuous readiness and willingness to perform the contract on his part from the date of contract and the onus to prove the same is solely on the Plaintiff.7P. D’Souza v. Shondrilo Naidu [MANU/SC/0561/2004] The courts will apply greater scrutiny and strictness when considering whether the purchaser was ready and willing to perform his part of the contract.8Saradamani Kandappan v. S. Rajalakshmi MANU/SC/0717/2011

Scope of Readiness and Willingness

The Supreme Court, in the matter of His Holiness Acharya Swami Ganesh v. Sitaram Thapar9(1996) 4 SCC 526 drew out distinction between ‘Readiness’ and ‘Willingness’. The Supreme Court observed that ‘readiness’ refers to the capacity of the Plaintiff to perform the contract which includes his financial position to pay the purchase price. On the other hand, ‘willingness’ refers to the conduct of the Plaintiff wanting performance. The Supreme Court in J.P. Builders vs A. Ramadas Rao10(2011) 1 SCC 429 also held in the similar lines. Furthermore, in P daivasigamani v S Sambandan11(2022) 14 SCC 796 the Supreme Court held that readiness and willingness are not one, but two separate elements. Therefore, it is essential for the Plaintiff to plead and prove both the factors and proof of only one of the factors would not fulfill the mandate of Section 16(c). In Umabai and Ors. Vs. Nilkanth Dhondiba Chavan12MANU/SC/0285/2005, the Supreme Court held that a bare averment in the Plaint or a statement made in the examination-in-chief would not suffice and the conduct of the Plaintiff must be judged having regard to the entirety of the pleadings as also to the evidences brought on record.

Financial Capacity of the Plaintiff

The mandate of Section 16(c) of the Act does not indicate that it is necessary for the Plaintiff to be financially replete throughout the performance of the contract in order to prove his readiness and willingness. The explanation to Section 16(c) of the Act states that where a contract involves payment of money, it is not essential for the Plaintiff to actually tender to the Defendant or to deposit in court any money except when so directed by the Court. However, the Supreme Court, in Abdullakoya Haji v. Rubis Tharayil13(2019) 17 SCC 216 categorically held that the Plaintiff must prove his financial capacity to pay balance consideration of the contract not only on the agreed date but also-

  1. When demand notice was issued; and
  2. On date of filing of suit

The court further made it clear that temporary arrangement made on agreed date alone cannot be treated as financial capacity to complete transaction and adducing proof of availability of funds even if amount was not insisted upon in court is necessary. In C.S. Venkatesh vs A.S.C. Murthy14AIR 2020 SC 930, the Supreme Court held that it is mandatory for the Plaintiff to prove that he had the means to generate the consideration amount within the timeframe contemplated under the contract and a mere plea that the Plaintiff was ready to pay the consideration in absence of material to substantiate the plea would not be accepted.

In U.N. Krishnamurthy (since deceased) vs A.M. Krishnamurthy15MANU/SC/0875/2022, the Supreme Court held that the Plaintiff needs to plead and adduce evidence to show availability of funds to make the balance payment and if the Plaintiff does not have the necessary funds, then the Plaintiff needs to plead how he would be able to arrange the funds to make the payment. For example, the Plaintiff can aver and prove, by adducing evidence, an arrangement with a financier for disbursement of adequate funds. The Plaintiff, in the said case attempted to prove his readiness and willingness by stating he had deposited the balance consideration in court. However, the Supreme Court noted that the Plaintiff deposited the balance consideration seven years after the date by which the sale had to be concluded and there was no evidence adduced by the Plaintiff as to how the Plaintiff was in a position to pay or make arrangements for payment of the balance sale consideration within time. In R. Shama Naik vs G.Srinivasiah16SLP (C) No. 13933 of 2021 the Supreme Court reiterated that the Plaintiff must adduce necessary oral and documentary evidence to show the availability of funds to make payment in terms of the contract in time.

Therefore, financial capacity of the Plaintiff, in the sense that the Plaintiff had the requisite funds all along the performance of the Agreement till the decision of the suit, forms a crucial part of readiness and willingness under the Act.

Even if all the essential ingredients of specific performance and of readiness and willingness have been complied, still specific performance can be declined.

The provisions to grant specific performance are quite stringent. Equitable consideration comes into play.17Ravi Setia v. Madan Lal(2019) 9 SCC 381 As also noted by the Supreme Court in Kamal Kumar (supra) that before decreeing the suit for specific performance the court has to consider whether it will be equitable to grant the relief of specific performance to the Plaintiff against the Defendant in relation to suit property or it will cause any kind of hardship to the Defendant. The Supreme Court in Surinder Kaur v. Bahadur Singh18(2019) 8 SCC 575 held that even if contract is otherwise not voidable, but circumstances make in inequitable to enforce specific performance, courts can refuse to grant such discretionary relief.

In Kanshi Ram vs Om Prakash19MANU/SC/2149/1996, the Supreme Court was dealing with a special leave petition arising out of order dated 18.04.1995 passed by the Delhi High Court decreeing the suit for specific performance. The Agreement to Sell the immoveable property was executed on 07.04.1969 for a consideration of Rs 16,000/- out of which Rs 2500 were paid by the Plaintiff. When the Defendant refused to execute the sale deed, the Plaintiff filed suit for specific performance and in the alternative sought damages for Rs 12,00/- along with interest. The courts below decreed the suit for specific performance. In Appeal, the Supreme Court reiterated the position that grant of specific performance is not automatic and is one of discretion and the court ought to be guided by principles of  justice, equity, good conscience, and fairness to both the parties. The Court noted that despite the fact the Plaintiff has proved his readiness and willingness, there has been an increase in the prices of the suit property which would make it inequitable and unjust to grant specific performance. Therefore, in view of the aforesaid and the fact that the Plaintiff itself has, in alternative, sought damages, the Supreme Court set aside the decree of Specific Performance and awarded damages to the Plaintiff. In U. Krishnamurthy (supra) the Supreme Court held that the court can take judicial notice of steep rise in the price of the suit property.

Conclusion

The grant of specific performance is purely a discretionary relief and it is immaterial whether the Plaintiff has complied with all the necessary ingredients to prove his readiness and willingness and has proved that he is financial viable, as once the court enters into equity jurisdiction, it would be guided by principles of justice, equity good conscience and fairness to both parties.20Kashi Ram (Supra) However, there are numerous conflicting judgments in the realm of specific performance. There are judgments which hold a contrary view and hold that inadequacy of consideration and rise in price of property is not a ground to decline specific performance.21K. Prakash Vs. B.R. Sampath Kumar MANU/SC/0850/2014; P.S. Ranakrishna Reddy Vs. M.K. Bhagyalakshmi and Ors MANU/SC/7148/2007; Jai Narain Parasrampuria (Dead) and Ors. Vs. Pushpa Devi Saraf and Ors. MANU/SC/8451/2006 In Narinderjit Singh vs North Star Café22(2012) 5 SCC 712, in similar facts and circumstances as that in Kashi Ram (supra), the Supreme Court held that escalation in price of property, cannot, by itself be a ground to deny specific relief.  In Sughar Singh vs Hari Singh (Dead) through Lrs and Ors23AIR 2021 SC 5581, the Supreme Court held that if the decree of specific performance is not granted despite the fact that the execution of the agreement to sell is proved, part sale consideration is proved and the plaintiff is always ready and willing to perform his part of the contract, then it would encourage dishonesty and in such a case the balance should tilt in favour of the Plaintiff. Therefore, the exercise of discretionary power of courts in decreeing suits for specific performance entirely depends upon the facts and circumstances of a case and no hard and fast rule can be applied.

By Daksh Pandit

Daksh is a lawyer and an avid reader. You can reach him at daksh.lawyer@gmail.com. Views expressed in the Article are of the Author and need not be construed as an absolute authority on the subject under discussion.

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