Summary: This article examines the Supreme Court’s reinforcement of strict limits on second appeals and the equitable principles governing specific performance. For litigants, this clarifies that courts prioritise parties’ conduct and contractual good faith over rigid procedural requirements, fostering the need for a strategic approach to property dispute resolution.
In Annamalai v. Vasanthi and others[1], the Supreme Court addressed three critical issues arising from a dispute over specific performance of an agreement to sell immovable property. The judgment reaffirms principles of appellate restraintand equitable relief whilst clarifying the interplay between contractual waiver, readiness and willingness, and the interplay between the need for declaratory reliefs vis a vis maintainability of specific performance suits.
Factual Background
On January 8, 2010, Defendant No. 1 (“D1”) and her son, Defendant No. 2 (“D2”) agreed to sell an immovable property to the Appellant/ Plaintiff for INR 4,80,000/- (“Sale Agreement”). The Appellant paid INR 4,70,000/- as advance, and it was decided that the balance INR 10,000/- would be paid within six months. D1 and D2 subsequently demanded an additional INR 2,00,000/-. The Appellant agreed to, and paid INR 1,95,000/- on June 9, 2010, with an endorsement made on the Sale Agreement.
On August 17, 2010, D1 and D2 sold part of the immovable property to D1’s daughter (“D3”), and issued a termination notice qua the Sale Agreement on August 20, 2010. The Appellant sued for specific performance. D3 filed a declaratory suit to protect her interest in the property.
The Trial Court ruled in favour of D3 and dismissed the Appellant’s suit, holding that the Sale Agreement was actually intended to secure a loan, and that the endorsement had been fabricated. The First Appellate Court reversed these findings. It upheld the Sale Agreement as genuine, recognised the payment of INR 1,95,000/-, and decreed specific performance of the Sale Agreement. The Madras High Court, in second appeal, re-appreciated evidence, rejected the endorsement, and ordered refund of earnest money.
Views of the Supreme Court
Maintainability Without Declaratory Relief
The Defendants contended that a suit seeking specific performance, absent a declaration regarding the subsistence of the Sale Agreement, is not maintainable. The Supreme Court clarified that a declaratory relief is intended to remove uncertainties. If there are doubts regarding the plaintiff’s right, then without clearing it, no further relief can be granted, and hence declaratory relief becomes essential[2].
The Supreme Court further opined that where a contract confers a right to unilateral termination and such termination is exercised, a suit for specific performance without seeking a declaration that termination is invalid may not be maintainable, as doubt arises regarding the contract’s subsistence. However, where no termination right exists or has been waived, unilateral termination constitutes repudiatory breach. The aggrieved party may sue for specific performance without seeking a declaration on the validity of termination.
In the facts of the case, by accepting INR 1,95,000/- after six months, the Defendants waived their right to forfeit, and treated the Sale Agreement as subsisting. Transferring part of the property before issuing forfeiture notice constituted breach. The Plaintiff could treat the contract as subsisting and seek specific performance, as termination was void under the varied contract.
Payment of Additional Consideration vis-a-vis Readiness and Willingness
The Supreme Court held that the High Court exceeded its jurisdiction under Section 100 of the Code of Civil Procedure, 1908, by improperly interfering with the findings on payment of INR 1,95,000/- and the Plaintiff’s readiness and willingness. The Supreme Court opined that the First Appellate Court is the final court of facts and the High Court, under Section 100 of the CPC, could have interfered with such a finding of fact on limited grounds, viz. where findings are based on inadmissible evidence, ignorance of relevant evidence, involve misreading of evidence, or are perverse.
The Supreme Court further held that readiness and willingness must be assessed holistically based on proven facts and the parties’ conduct[3]. The plaintiff must satisfy the court that he treated the contract as subsisting and remained prepared to perform[4]. The Appellant had paid INR 4,70,000/- as advance, a further INR 1,95,000/- on demand, with only INR 10,000/- outstanding. By accepting additional payment after six months, the Defendants treated the agreement as subsisting and waived the right to forfeit. D1 and D2 admitted their signatures on the endorsement, but claimed they were obtained on blank paper. The Supreme Court emphasised that once signatures acknowledging receipt of money are admitted, a presumption arises that it was endorsed for good consideration[5]. Further, a heavy burden lay on the Defendants to explain the circumstances under which their signatures appeared, particularly when the endorsement was on the back of a registered document.
The Supreme Court held that time is generally not of essence in contracts relating to immovable property. The Defendants’ acceptance of additional payment after six months and endorsement of the Sale Agreement as subsisting, constituted waiver of their right to forfeit under Section 55 of the Indian Contract Act, 1872. Non-issuance of notice requesting performance within six months would not be fatal or determinative of readiness and willingness on part of the Appellant.
Conclusion
This judgment reinforces judicial restraint in appellate review and commitment to equity and good faith in contractual enforcement. Factual findings are not revisited unless perversity or substantial legal questions arise. Specific performance, though discretionary, prioritises parties’ conduct and intention over procedural formalities. Parties acting in good faith, with proper documentation and demonstrable willingness to perform, receive equitable protection despite technical objections. Attempts to reopen facts or raise hyper-technical defences at late stages are unlikely to succeed and, therefore, it is imperative that disputes be approached in a holistic manner from their inception.
For further information, please contact:
Aditya Mehta, Partner, Cyril Amarchand Mangaldas
aditya.mehta@cyrilshroff.com
[1] Civil Appeal @ SLP (C) Nos. 26848-26849 of 2018
[2] Anathula Sudhakar v. P. Buchi Reddy (dead) by L.R.s. and others, (2008) 4 SCC 594
[3] R.C. Chandiok and another v. Chuni Lal Sabharwal and others,(1970) 3 SCC 140
[4] Ardeshir H. Mama v. Flora Sassoon, AIR 1928 PC 208 = 1928 SCC Online PC 43
[5] Section 114 read with Illustration (c) of the Indian Evidence Act 1872
