A Long Stop Date is Not a Mere Formality—It Terminates Rights Automatically: Bombay High Court Rejects Specific Performance

"Once the Long Stop Date Lapses Without Compliance, the Contract Dies Its Natural Death—No Room for Revival or Enforcement Thereafter", Bombay High Court, in a crucial ruling concerning commercial contract enforceability, held that a Term Sheet for joint development of land between M/s. Everhome Properties Pvt. Ltd. and M/s. Aditya Developers was not a concluded contract and stood terminated due to the failure of the plaintiff to fulfill conditions precedent before the Long Stop Date of 11.04.2024. In Appeal from Order No. 541 of 2025, Justice Milind N. Jadhav ruled that no injunction could be granted to enforce the Term Sheet, and the plaintiff was entitled only to a refund of ₹11 crores, which was already deposited in court.

"Clause 12 Governs the Contract—Not Clause 11": Long Stop Date Held to Override Enforceability Clause

The Court decisively rejected the plaintiff's argument that Clause 11 of the Term Sheet—which stated it was "enforceable"—could override Clause 12, which explicitly included a non-obstante clause and stipulated that failure to complete due diligence, accept or reject title, or execute transaction documents by 11.04.2024 would terminate the agreement.

Holding that the contract stood automatically terminated on the expiry of the Long Stop Date, the Court observed,
"The Validity Clause 12 is a non-obstante clause... and makes the Validity clause stand-alone, self-operative and independent of all other terms of the Term Sheet."

It further ruled that the enforceability clause in Clause 11 could not be interpreted to override the clear conditionality and deadline set in Clause 12, especially in the absence of any mutual extension or waiver of compliance.

"Long Stop Date Is a Sunset Clause—Once Missed, the Contract Is Extinguished"

Justice Jadhav offered a detailed legal exposition on the commercial function and legal significance of a Long Stop Date, terming it a sunset clause, a concept well-rooted in contract law across jurisdictions. He observed,
"A Long Stop Date... is not like a date scheduled for completion. It is rather a well-recognized concept in commercial law... After the Long Stop Date, if the conditions are not fulfilled, there is no agreement at all."

The Court held that this concept is designed to ensure certainty, stating,
"Long Stop Date provides ultimate certainty... it protects parties from being indefinitely bound... and provides a clear exit strategy if obligations are not met."

The Court also drew upon international jurisprudence, citing Ruven Cohen v. Teseo Properties Ltd. ([2015] EWHC 1001) to hold that the purpose of such a clause is to conclusively end contractual obligations unless extended explicitly.

"This Was a Contingent Contract—And It Became Void on Non-Performance": Sections 31 and 35 of Indian Contract Act Applied

Relying on Sections 31 and 35 of the Indian Contract Act, 1872, the Court held that the Term Sheet was a contingent contract, dependent on specific events (like completion of due diligence and execution of transaction documents) within a fixed time. Since these preconditions were not fulfilled before 11.04.2024, the contract became void by operation of law.

"Contingent contracts to do something if a specific event happens within a fixed time become void if the event does not occur. That is exactly the case here," the Court ruled.

Refusing the plaintiff’s plea that the contract was revived by later conduct or emails, the Court stated:
"Silence of the parties cannot amount to affirmation or extension of the Long Stop Date."

"No Specific Performance of a Determinable Contract—Monetary Refund Is Adequate Relief"

Addressing the plaintiff’s prayer for specific performance and injunction to prevent third-party rights, the Court applied Section 14(1)(a) and (c) and Section 41(e) of the Specific Relief Act, 1963, and concluded that the Term Sheet was not specifically enforceable, observing:
"This Term Sheet is determinable in nature... and compensation in money is an adequate relief. No injunction can be granted to prevent breach of such a contract."

The Court also took note that the plaintiff had pleaded an alternative prayer for refund of ₹11 crores, which was already deposited by the defendant, and hence no equity favored the grant of any interim protection.

"Once the amount of ₹11 crores has been secured and deposited in Court... the balance of convenience is clearly in favor of Defendants," the judgment noted.

"Parties Cannot Cherry-Pick Contractual Terms—Clause 12 Must Be Given Full Effect"

The Court rejected the plaintiff's attempt to rely selectively on Clause 11, without complying with the mandatory obligations under Clause 12. Justice Jadhav firmly held:
"Validity Clause 12 supersedes all other clauses... Once the conditions precedent are not complied with, the Term Sheet automatically comes to an end on the Long Stop Date and becomes unenforceable."

He further observed that it would be impermissible to interpret the contract in a way that allows one party to rely on selective clauses while ignoring their own obligations under others.

"No Vagueness or Open-Ended Commitment—Commercial Deadlines Must Be Respected"

The Court also emphasized the importance of respecting commercially negotiated deadlines, especially in real estate transactions involving high stakes. Here, the land in question was valued at over ₹1000 crores, while the plaintiff had paid only ₹11 crores as a refundable deposit.

Rejecting any theory of implied extension, the Court observed:
"The Term Sheet cannot be construed as open-ended unless specifically agreed upon by both parties mutually for further extension."

"No Identified Property, No Executed Agreement—Essential Terms Were Missing"

The Court also dealt with the issue of uncertainty in the scope of the Term Sheet, noting that the phases of development, identification of parcels, and Joint Development Agreement were all yet to be formalized. Citing Pawan Kumar Dutt v. Shakuntala Devi, the Court reiterated that a decree for specific performance cannot be granted when the property to be developed is not clearly identified.

"The courts are not expected to pass a decree which is not capable of enforcement in law," the Court ruled.

Appeal Dismissed, Interim Relief Continued for Four Weeks

Concluding that the Term Sheet had automatically terminated, the Court dismissed the Appeal from Order, affirming the Trial Court’s decision to reject the injunction and allow deposit of ₹11 crores.

"Plaintiff has failed to establish any prima facie case... The impugned order... is a well-reasoned and balanced order and does not suffer from any infirmity," the Court held.

However, considering the plaintiff’s intention to approach the Supreme Court, the Court continued interim protection for four weeks from the date of the judgment.

Date of Decision: 17 November 2025