Kiran Raj

The Kerala High Court has upheld a trial court’s decision enforcing a compromise agreement in a specific performance suit, dismissing the defendants’ plea for rescission of contract. The court found that the defendants had failed to fulfill their primary obligation under the agreement by not delivering the required documents on time. The judgment stated that the plaintiffs’ subsequent delay in depositing the balance sale consideration did not warrant rescission, as the defendants' non-compliance had caused the delay. The court held that there was no manifest error in the trial court’s order warranting interference under Article 227 of the Constitution.

The case originated from a suit for specific performance filed by the plaintiffs against the defendants concerning an immovable property. The matter was referred to the Lok Adalat, where the parties reached a settlement on July 17, 2018. As per the settlement terms, the defendants were required to hand over the prior title documents, tax receipts, and encumbrance certificates within three weeks, and execute the sale deed within a month upon receiving the balance sale consideration. The plaintiffs, in turn, were required to deposit the balance consideration before the execution of the sale deed.

Subsequently, the plaintiffs alleged that the defendants failed to hand over the required documents, causing delays in executing the sale deed. The plaintiffs then filed an application under Section 151 of the Code of Civil Procedure (CPC) seeking permission to deposit the balance sale consideration, asserting that they remained ready and willing to perform their part of the contract. The defendants, on the other hand, filed an application under Section 28(1) of the Specific Relief Act, 1963, seeking rescission of the contract, arguing that the plaintiffs failed to deposit the consideration within the stipulated time.

The trial court dismissed the defendants’ application for rescission and allowed the plaintiffs to deposit the balance sale consideration, holding that the delay was attributable to the defendants’ failure to provide the necessary documents. Aggrieved by this order, the defendants approached the Kerala High Court under Article 227 of the Constitution, seeking to set aside the trial court’s decision.

The High Court examined whether the plaintiffs' delay in depositing the balance sale consideration justified rescission of the contract and whether the trial court's findings suffered from any manifest error. The court referred to the terms of the compromise agreement and noted that the first obligation lay with the defendants to provide the necessary documents before the plaintiffs could be expected to make the payment. The court recorded that "the defendants failed to discharge their responsibility to hand over the necessary documents to the plaintiffs for preparing the sale deed, and eventually, the defendants failed to execute the sale deed as per the terms of the agreement."

The court also took note of the fact that the defendants, in their own pleadings, admitted to handing over the necessary documents only on September 20, 2018—after the prescribed deadline. The court further observed that the defendants failed to produce any substantive evidence to establish that the documents were provided in a timely manner. The defendants had initially sought to summon the plaintiffs' document writer as a witness but later chose not to examine her. The court stated that "the best evidence to prove that the relevant documents were handed over to the plaintiffs could be through the oral evidence of the document writer, who was summoned but later given up by the defendants."

Citing precedents from the Supreme Court, the court distinguished this case from Chanda v. Rattni (2007) 14 SCC 26, which held that an unreasonable delay in paying the balance sale consideration may justify rescission. The High Court noted that "the plaintiffs were expected to seek an extension of time for paying the balance consideration only in a situation where the first obligation was performed by the defendants." Since the defendants had not fulfilled their primary duty under the contract, the delay on the part of the plaintiffs could not be held against them.

The court also addressed the limits of its supervisory jurisdiction under Article 227, stating that it can only be exercised in cases of "grave dereliction of duty or flagrant violation of law" and not to re-evaluate findings of fact. The judgment noted that "the supervisory jurisdiction is not available to correct mere errors of fact or law unless the error is manifest or apparent on the face of the proceeding, such as when it is based on clear ignorance or utter disregard of the provisions of law." Finding no such manifest error in the trial court’s decision, the High Court declined to interfere with the order.

The Kerala High Court dismissed the defendants' petition, affirming the trial court's order permitting the plaintiffs to deposit the balance sale consideration and directing execution of the sale deed in accordance with the compromise agreement. The court concluded that the defendants had failed to establish valid grounds for rescission of the contract and that their own non-compliance had led to the plaintiffs' delay.

Case Title: T.M. Leela & Anr. v. P.K. Vasu & Anr.
Case Number: O.P (C) No. 683 of 2021
Bench: Justice K. Babu

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