1999 JTR(SC) 1306
1999 AIR(SCW) 4818 ; 1999 37 AllLR 789 ; 2000 1 ALT(SC) 3 ; 2000 1 AndhWR(SC) 31 ; 2000 2 BomCR(SC) 15 ; 2000 1 BomLR 490 ; 2000 1 CivCC 199 ; 2001 1 CurLJ 18 ; 2000 DNJ 18 ; 1999 8 JT 608 ; 2000 1 MhLJ(SC) 386 ; 2000 1 MPLJ 222 ; 1999 7 Scale 57 ; 1999 8 SCC 416 ; 1999 Supp4 SCR 356 ; 2000 1 UJ 308 ; 2000 WBLR 106 ; 2000 WLC 80 ; 1999 KHC 1419 ; 1999 9 Supreme 103
1999(9) Supreme 103
SUPREME COURT OF INDIA
(From Bombay High Court)
B.N. Kirpal & N. Santosh Hegde, JJ.
Dadarao & Anr. -Appellants
versus
Ramrao & Ors. -Respondents
Civil Appeal No. 176 of 1982
Decided on 2-11-1999
Counsel for the Parties :
For the Appellants : A.K. Sanghi, Advocate.
For the Respondents : S.V. Deshpande, Advocate.
IMPORTANT POINT
Where sale agreement to sell provided that in the event of any one of parties resiling from agreement sale deed would not be executed and the purchaser would be entitled to get earnest money and fixed damage defendant vendor could not be compelled to complete sale.
Act Referred :SPECIFIC RELIEF ACT : S.20, S.23, S.16, S.14
(A) The relevant statutory provisions under the Specific Relief Act govern the enforcement of contractual obligations for the transfer of immovable property. Sections 14, 16, 20, and 23 of the Specific Relief Act provide the framework for adjudicating suits for specific performance of contracts to sell property. Section 14 addresses the right to sue for specific performance, Section 16 outlines exceptions where relief may be denied, Section 20 deals with cases where the suit is filed after the property has been transferred to a third party, and Section 23 grants the court discretion to refuse specific performance if the property has already been sold or if enforcement would be inequitable. In the present case, these provisions are interpreted in light of the explicit terms of the agreement, which itself limits the obligation to execute a sale deed to situations where both parties consent, and provides for a liquidated sum in the event of non-performance. The court applies these sections to determine the enforceability of the agreement and the appropriate remedy.
(B) The core legal principles are that a contract for the sale of immovable property may be specifically enforced at the court's discretion, and where the contract expressly provides for alternative remedies upon non-performance, those terms govern. The right to specific performance is not absolute and is subject to the court's discretion, particularly where the property has been alienated to a third party or where the enforcement would be inequitable.
Facts of the case:
A written agreement dated 24th April 1969 between the vendor and purchaser stipulated the sale of agricultural land for a fixed price, with the vendor agreeing to execute a sale deed by 15th April 1972. The agreement contained a clause that if either party refused to perform, the purchaser would forfeit the earnest money and an additional sum would be paid, with no sale deed to be executed. The vendor did not execute the sale deed, and the purchaser filed a suit for specific performance. During the pendency of the suit, the land was sold to third parties. The trial court dismissed the suit, the lower appellate court granted specific performance, and the High Court dismissed the appeal.
Findings of Court:
The court found that the agreement was clear and unambiguous, and that the clause therein operated as a binding stipulation that no sale deed was to be executed if either party declined to proceed. The court held that the appellate courts erred in disregarding this contractual provision and in decreeing specific performance against the successors-in-interest of the vendor, as the land had been transferred to third parties and the original vendor was deceased. The court affirmed the trial court's order for refund of the earnest money plus interest and awarded additional damages, while allowing the appeal.
Issues:
Whether the successors-in-interest of the vendor were entitled to a decree of specific performance for the sale of the land in contravention of the explicit terms of the agreement. Whether the trial court's discretion to refuse specific performance was correctly exercised in view of the passage of time and the intervention of third-party rights.
Ratio Decidendi:
The contractual clause expressly providing that no sale deed shall be executed if either party refuses to perform operates as an absolute bar to specific performance. The court's discretion under Section 20 of the Specific Relief Act must be exercised in accordance with the terms of the contract, and where the contract is clear and the property has been transferred to third parties, specific performance is not maintainable.
Result:
The appeal is allowed. The decrees of the lower appellate court and the High Court are set aside. The vendor's successors-in-interest are not entitled to specific performance. The trial court's order for refund of Rs. 1,000/- with interest, plus Rs. 500/- as damages, is affirmed with a modification that the damages also bear interest at 6% per annum from the date of the trial court's decree.
(A) The relevant statutory provisions under the Specific Relief Act govern the enforcement of contractual obligations for the transfer of immovable property. Sections 14, 16, 20, and 23 of the Specific Relief Act provide the framework for adjudicating suits for specific performance of contracts to sell property. Section 14 addresses the right to sue for specific performance, Section 16 outlines exceptions where relief may be denied, Section 20 deals with cases where the suit is filed after the property has been transferred to a third party, and Section 23 grants the court discretion to refuse specific performance if the property has already been sold or if enforcement would be inequitable. In the present case, these provisions are interpreted in light of the explicit terms of the agreement, which itself limits the obligation to execute a sale deed to situations where both parties consent, and provides for a liquidated sum in the event of non-performance. The court applies these sections to determine the enforceability of the agreement and the appropriate remedy.
(B) The core legal principles are that a contract for the sale of immovable property may be specifically enforced at the court's discretion, and where the contract expressly provides for alternative remedies upon non-performance, those terms govern. The right to specific performance is not absolute and is subject to the court's discretion, particularly where the property has been alienated to a third party or where the enforcement would be inequitable.
Facts of the case:
A written agreement dated 24th April 1969 between the vendor and purchaser stipulated the sale of agricultural land for a fixed price, with the vendor agreeing to execute a sale deed by 15th April 1972. The agreement contained a clause that if either party refused to perform, the purchaser would forfeit the earnest money and an additional sum would be paid, with no sale deed to be executed. The vendor did not execute the sale deed, and the purchaser filed a suit for specific performance. During the pendency of the suit, the land was sold to third parties. The trial court dismissed the suit, the lower appellate court granted specific performance, and the High Court dismissed the appeal.
Findings of Court:
The court found that the agreement was clear and unambiguous, and that the clause therein operated as a binding stipulation that no sale deed was to be executed if either party declined to proceed. The court held that the appellate courts erred in disregarding this contractual provision and in decreeing specific performance against the successors-in-interest of the vendor, as the land had been transferred to third parties and the original vendor was deceased. The court affirmed the trial court's order for refund of the earnest money plus interest and awarded additional damages, while allowing the appeal.
Issues:
Whether the successors-in-interest of the vendor were entitled to a decree of specific performance for the sale of the land in contravention of the explicit terms of the agreement. Whether the trial court's discretion to refuse specific performance was correctly exercised in view of the passage of time and the intervention of third-party rights.
Ratio Decidendi:
The contractual clause expressly providing that no sale deed shall be executed if either party refuses to perform operates as an absolute bar to specific performance. The court's discretion under Section 20 of the Specific Relief Act must be exercised in accordance with the terms of the contract, and where the contract is clear and the property has been transferred to third parties, specific performance is not maintainable.
Result:
The appeal is allowed. The decrees of the lower appellate court and the High Court are set aside. The vendor's successors-in-interest are not entitled to specific performance. The trial court's order for refund of Rs. 1,000/- with interest, plus Rs. 500/- as damages, is affirmed with a modification that the damages also bear interest at 6% per annum from the date of the trial court's decree.
ORDER
One Balwantrao Ganpatrao Pande owned three acres of agricultural land and had entered into an agreement dated 24th April, 1969 with one Tukaram Devsarkar. Appellant No. 1 herein is one of the heirs of Balwantrao Ganpatrao Pande while the respondents herein are the successors-in-interest of Tukaram Devsarkar.
2. The said agreement, with which we are concerned in the present case, was in the following terms :
"Tukaram Devsarkar aged about 65, Agriculturist R/o Devsar, Purchaser, (Ghenar) - Balwantrao Ganpatrao Pande aged 76 years r/o Dijadi Post Devsar, Vendor (Denar), who hereby give in writing that a paddy field situated at Dighadi Mouja, Survey No. 7/2 admeasuring 3 acres belonging to me hereby agree to sell to you for Rs. 2,000/- and agree to receive Rs. 1,000/- from you in presence of V.D.N. Sane. A sale deed shall be made by me at my cost by 15-4.1972. In case the sale deed is not made to you or if you refuse to accept, in addition of earnest money an amount of Rs. 500/- shall be given or taken and no sale deed will be executed. The possession of the property has been agreed to be delivered at the time of purchase. This agreement is binding on the legal heirs and successors and assigns."
2. It seems that no sale deed, as contemplated by the aforesaid agreement, was executed by Balwantrao Ganpatrao Pande. Thereupon Tukaram Devsarkar filed a suit for specific performance on 18th July, 1974. During the pendency of the suit, by sale deeds executed in September 1974 and March 1975 appellant No. 2 herein became the owner of the land in question. In the plaint which was filed, it was specifically stated that the agreement dated 24th April, 1969 contemplated that in the event of Balwantrao not executing the sale deed the sum of Rs. 1,000/- was to be returned along with an amount of Rs. 5,00/-. Nevertheless, the prayer in the plaint was for a decree of specific performance requiring Balwantrao to execute the sale deed and in the alternative a decree for return of Rs. 1,000/- plus a sum of Rs. 500/-.
3. The trial Court by its judgment dated 8th July, 1977 came to the conclusion that though the plaintiff was entitled to a decree for specific performance of the contract for sale but as the jurisdiction to decree was a discretionary one the interest of justice demanded that no decree for specific performance should be passed. In coming to this conclusion, the trial Court noticed that Balwantrao had died and the denfendants to the suit were his nephews and whatever property had been left by Balwantrao had been sold by the nephews during the pendency of the suit. In fact it was only appellant No. 1 who continued to contest the suit.
4. An appeal was thereafter filed by the plaintiff and the lower appellate court allowed the same and passed a decree for specific performance and required the defendants to execute the sale deed on the plaintiff depositing Rs. 1,000/- being the balance amount of the sale consideration. The appellants thereafter filed an appeal before the High Court but the same was dismissed in limini. Hence the present appeal by special leave.
5. The relationship between the parties has to be regulated by the terms of the agreement between them. Whereas the defendants in the suit had taken up the stand that the agreement dated 24th April, 1969 was really in the nature of a loan transaction, it is the plaintiff who contended that it was an agreement to sell. As we read the agreement, it contemplates that on or before 15th April, 1972 the sale deed would be executed. But what is important is that the agreement itself provides as to what is to happen if either the sellor refuses to sell or the purchaser refuses to buy. In that event the agreement provides that in addition to the earnest money of Rs. 1,000/- a sum of Rs. 500/- was to be given back to Tukaram Devsarkar and that "no sale deed will be executed". The agreement is very categorical in envisaging that a sale deed is to be executed only if both the parties agree to do so and in the event of anyone of them resiling from the same there was to be no question of the other party being compelled to go ahead with the execution of the sale deed. In the event of the sale deed not being executed, Rs. 500/-, in addition to the return of Rs. 1,000/-, was the only sum payable. This sum of Rs. 500/- perhaps represented the amount of quantified damages or, as the defendants would have it, interest payable on Rs. 1,000/-.
6. If the agreement had not stipulated as to what is to happen in the event of the sale not going through, then perhaps the plaintiff could have asked the court for a decree of specific performance but here the parties to the agreement had agreed that even if the sellor did not want to execute the sale deed he would only be required to refund the amount of Rs. 1,000/- plus pay Rs. 500/- in addition thereto. There was thus no obligation on Balwantrao to complete the sale transaction.
7. Interpreted in such a way as we have indicated hereinabove, it appears to us that the lower appellate court and the High Court erred in coming to the conclusion that the successors-in-interest of Tukaram Devsarkar were in any way entitled to a decree of specific performance requiring the sale of three acress of land pursuant to the agreement dated 24th April, 1969. The order of the High Court and the lower appellate Court, therefore, has to be set aside.
8. While disposing of the suit, the trial Court had directed the defendants to pay back Rs. 1,000/- plus interest at the rate of 6 per cent per annum from the date of the suit till realisation. In addition thereto, the Civil Judge had required the defendants to pay Rs. 500/- as damages to the plaintiff. Keeping this in view, while allowing this appeal, we affirm the decree of the trial Court with this modification that the sum of Rs. 500/- will also carry an interest of 6 per cent per annum with effect from 8th July, 1977, being the date of the decree by the trial Court. This will be in addition to a decree for Rs. 1,000/- plus interest at the rate of 6 per cent thereon from the date of the filing of the suit till the date of realisation.
9. Parties to bear their own costs.
(C.R.) Appeal allowed.
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Parallel Citations of other Journals :
Dadarao & Anr. v. Ramrao & Ors., 1999(9) Supreme 103 : 1999(4) CCC 317 : 1999(8) JT 608
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