Plaintiff Need Not Always Seek Declaration Against Contract Termination | Supreme Court Restores Decree For Specific Performance Of Sale Agreement
Kiran Raj
The Supreme Court Division Bench of Justices J.B. Pardiwala and Manoj Misra on Wednesday (October 29) clarified when a plaintiff seeking specific performance of a contract must also seek a declaration that the other party’s termination of the contract was invalid. Distinguishing between lawful termination and wrongful repudiation, the Court held that such a declaration is required only when the contract’s subsistence is in doubt. Setting aside the Madras High Court’s decision and restoring the first appellate court’s decree, the Bench upheld the purchaser’s readiness to perform the agreement and directed deposit of the remaining sale consideration for execution of the sale deed.
The dispute arose from two civil suits concerning specific performance of a property sale agreement dated 8 January 2010 between the appellant and the defendants. The appellant claimed that the original owners had executed powers of attorney in favour of him and one of the defendants, under which a sale deed was executed for part of the property. Subsequently, the defendants agreed to sell both items of the property to the appellant for a consideration of Rs. 4,80,000, of which Rs. 4,70,000 was paid in advance. The appellant alleged that the balance of Rs. 10,000 was payable at execution, and that possession had been handed over. He further claimed that the defendants later demanded an additional Rs. 2,00,000, of which Rs. 1,95,000 was paid and endorsed on the back of the agreement.
The defendants denied execution of a genuine sale agreement, contending it was executed only as security for a loan and denying delivery of possession. They later issued a notice cancelling the agreement and sold part of the property to another respondent, who sought declaration of ownership and injunction against the appellant.
The trial court consolidated both suits, dismissed the appellant’s claim for specific performance, and decreed the purchaser’s suit for declaration and injunction. The first appellate court reversed this decision, holding the agreement genuine and the buyer ready to perform. The High Court, in second appeal, set aside the decree for specific performance and ordered refund of advance consideration with interest.
Evidence included the registered sale agreement, the endorsement of additional payment, and notices exchanged between the parties. The matter involved interpretation of Section 55 of the Contract Act, 1872, and the Court’s power under Section 100 of the Code of Civil Procedure, 1908, in reviewing findings of fact.
The Court observed that the first appellate court was the final fact-finding authority and that the High Court had exceeded its jurisdiction under Section 100 CPC by interfering with factual determinations. It “committed a mistake in discarding the endorsement (Exb. A-2)” as “existence of signatures on a document acknowledging receipt of money gives rise to a presumption that it was endorsed for good consideration.”
The Bench recorded that “once the finding regarding payment of additional sum of Rs. 1,95,000 is sustained, there appears no logical reason to hold that the plaintiff was not ready and willing to perform its part under the contract.” It stated that readiness and willingness must be assessed “on the entirety of proven facts and circumstances of a case including conduct of the parties.”
Referring to the essence of time, the Court observed that “time is presumed not to be the essence of the contract relating to immovable property,” and that acceptance of additional payment beyond the stipulated period “signified that the agreement was treated as subsisting.”
Addressing the issue of declaratory relief, the Court recorded that a declaration is required only when a doubt exists over subsistence of the contract: “A declaratory relief would be required where a doubt or a cloud is there on the right of the plaintiff and grant of relief is dependent on removal of that doubt.” It explained that where the vendor has waived the right to terminate, “termination may be taken as a breach by repudiation, and the party aggrieved may, by treating the contract as subsisting, sue for specific performance without seeking declaratory relief.”
Regarding the discretionary nature of specific performance, the Court noted that the High Court’s reasons for denial were not sustainable, stating that “acceptance of additional money not only signified waiver of the right to forfeit advance consideration but also acknowledged subsistence of the agreement.” It further stated that a failed claim of possession “does not make it false,” and “a statement is false when its maker knows the same is incorrect.”
The Bench recorded that “this was not a fit case where discretionary relief of specific performance should have been denied,” as the buyer had paid more than 90% of the consideration and the transferee was not a bona fide purchaser.
The Court stated: “For the aforesaid reasons, we are of the considered view that the High Court erred in law by interfering with the decree of specific performance passed by the first appellate court. These appeals are therefore allowed.” It further directed that “the judgment and decree(s) of the High Court is/are set aside and that of the first appellate court is/are restored.”
“As it is not clear from the record before us as to whether the plaintiff has deposited the balance amount of Rs.10,000 for execution of the sale deed, in terms of Order XX Rule 12A of CPC, we deem it appropriate to direct that the plaintiff-appellant shall deposit the balance amount, if not deposited already, in the execution court, within a period of one month from today.”
“Parties to bear their own costs,” and “Pending applications, if any, shall stand disposed of.”
Advocates Representing the Parties
For the Petitioners: Mr. S. Parthasarathi, Adv. Mr. M.p. Parthiban, AOR
For the Respondents: Mr. Naveen Nagarjuna, Adv. Mr. Ashish Yadav, Adv. Ms. Priya Aristotle, AOR
Case Title: Annamalai v. Vasanthi and Others
Neutral Citation: 2025 INSC 1267
Case Number: Civil Appeal @ SLP (C) Nos. 26848-26849 of 2018
Bench: Justice J.B. Pardiwala and Justice Manoj Misra
