THE BEYOND OBITER LAW BLOG: Legal News
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The Supreme Court has reiterated that a party seeking specific performance of an agreement to sell must continuously demonstrate readiness and willingness to perform its contractual obligations from the date of the agreement until the institution of the suit. The Court held that financial documents created years after the filing of the suit cannot be relied upon to establish such readiness.
A Bench of Justice Prashant Kumar Mishra and Justice N.V. Anjaria dismissed an appeal arising from an agreement to sell executed in December 1990 concerning a vacant site in Mysore. The plaintiff had paid an earnest amount of ₹25,000, while the balance sale consideration of ₹2.75 lakh was to be paid at the time of registration within four months as stipulated in the agreement.
The plaintiff instituted a suit for specific performance in December 1993, nearly two years and nine months after the defendant had rescinded the agreement. Although the Trial Court decreed the suit, the Karnataka High Court reversed the decree, finding that the plaintiff had failed to establish continuous readiness and willingness to perform his obligations.
Before the Supreme Court, the plaintiffs sought to demonstrate their financial capacity by relying on four Fixed Deposit Receipts (FDRs) aggregating ₹2.80 lakh. However, the Court found that all the FDRs had been created between 1999 and 2001, several years after the institution of the suit.
Rejecting the contention, the Bench observed:
“In the present case, there is no material whatsoever to show that the appellant/plaintiff had the balance sale consideration available either at the time of execution of the agreement, within the stipulated period of four months for performance of the contract, or even at the time of filing of the suit in the year 1993.”
The Court further held:
“The availability of funds must be proved with reference to the relevant point of time and not by relying upon financial documents generated long after the filing of the suit.”
The Bench clarified that while a plaintiff is not required to physically deposit the sale consideration before the Court, reliable and acceptable evidence must be produced to demonstrate the availability of sufficient funds during the relevant period.
The Court also found the plaintiff's conduct significant, noting that although the suit was filed within the prescribed limitation period, there was an unexplained delay of nearly two years and nine months after the agreement had been rescinded.
Observing that promptitude is an important consideration while granting the equitable relief of specific performance, the Court held:
“This conduct of the appellant/plaintiff, in our view, reflects lack of continuous readiness and willingness to perform his part of the contract, which is a sine qua non for the grant of relief of specific performance.”
Concluding that the plaintiffs had failed to satisfy the twin statutory requirements of readiness and willingness and had not approached the Court with due promptness, the Supreme Court dismissed the appeal and upheld the High Court's decision.