Acceptance of Post-Deadline Payment Creates Triable Issue on Vendor’s Right to Terminate: Telangana High Court Refuses to Reject Specific Performance Suit

"Once the vendor accepts consideration beyond the deadline, it raises a question whether he has waived his right to cancel" — In a pivotal ruling Telangana High Court refused to interfere with the trial court’s dismissal of an application under Order VII Rule 11 of the Code of Civil Procedure. The Court held that where a vendor has accepted substantial sale consideration after the contractual deadline, it becomes a triable issue whether the termination of contract was valid.

The Court ruled, "When the revision petitioner has received additional sale consideration of ₹1.05 crores subsequent to expiry of time line mentioned in the agreement of sale dated 05.09.2019, a question arises whether the revision petitioner still has right to cancel the agreement."

This judgment reiterates that the power under Order VII Rule 11 CPC cannot be exercised where disputed questions of fact arise from the conduct of parties under a sale agreement.

“Failure to Seek Declaration Against Termination Not Fatal When Termination’s Validity is Inherent to Specific Performance Claim”

"Validity of the termination notice is integral to deciding the relief of specific performance – its absence as a formal prayer is not fatal" — Justice Renuka Yara

Dismissing the petitioner’s contention that the suit was non-maintainable due to the plaintiff’s failure to seek a specific declaratory relief invalidating a termination notice, the High Court observed that such declaration is not always necessary.

The Court stated, "Only when the termination notice is held to be invalid, the relief of specific performance can be granted. Therefore, mere failure to seek cancellation of termination notice as illegal is not fatal such that it forms a ground for rejection of plaint."

The ruling clarifies a significant procedural issue in specific performance suits: if the basis of the claim inherently disputes a termination, the absence of a formal declaration plea does not bar maintainability.

In a detailed order delivered on 23rd October 2025, the Telangana High Court, per Justice Renuka Yara, dismissed a civil revision petition filed under the Civil Revisional Jurisdiction seeking rejection of a plaint in a suit for specific performance. The petitioner had challenged the trial court’s refusal to reject the plaint under Order VII Rule 11 CPC, claiming that the agreement of sale had already been lawfully terminated, and the respondent’s suit lacked a cause of action.

The core legal question was whether the agreement of sale dated 05.09.2019, which had a clause making time the essence, was effectively terminated by the vendor’s legal notice dated 15.01.2021 — and whether failure to challenge that termination directly rendered the specific performance suit incompetent.

The Court, however, emphasized that the vendor’s own conduct in receiving significant post-deadline consideration diluted the “time is of the essence” clause and created disputed factual issues requiring trial.

The respondent (plaintiff in O.S. No. 291 of 2021) filed a suit for specific performance based on a sale agreement dated 05.09.2019 for agricultural land measuring over 3 acres in Ranga Reddy District, Telangana. The total sale consideration was ₹4,00,00,000, with ₹1,00,00,000 paid upfront and the balance ₹3,00,00,000 to be paid on or before 01.10.2019.

The agreement included an explicit clause that failure to pay the balance by the deadline would entitle the vendor to cancel the agreement. The petitioner/vendor, however, accepted further amounts — ₹55,00,000 on 03.10.2019 and ₹50,00,000 on 10.10.2019 — after the expiry of the contractual deadline. A termination notice was later issued on 15.01.2021.

The vendor filed an application under Order VII Rule 11 CPC claiming that since the agreement had been terminated and the plaintiff did not seek a declaration that such termination was illegal, the plaint disclosed no cause of action.

The petitioner cited multiple precedents including R. Kandasamy v. T.R.K. Sarawathy and Dahiben v. Arvindbhai Bhanusali to argue that an agreement which stands terminated cannot be specifically enforced unless the termination is independently challenged. It was also argued that time being the essence of contract was breached, extinguishing the agreement.

But the High Court refused to accept that the agreement had become non-existent solely because of the termination notice.

Justice Renuka Yara held that: "Though termination was pleaded, the petitioner accepted further sale consideration even after the deadline fixed under the agreement, thereby giving rise to triable issues which must be determined at trial."

She further noted: "Having accepted the sale consideration subsequent to 01.10.2019, time ceased to be the essence of the contract."

The Court found that this post-deadline conduct opened up material issues for trial — including whether the vendor waived the right to cancel and whether the suit agreement still subsisted.

On Cause of Action and Specific Performance:

Rejecting the petitioner’s claim of absence of cause of action, the Court clarified the scope of Order VII Rule 11(a):

"The plaint must be read as a whole. It reveals not only the issuance of termination notice but also conduct of the vendor in accepting substantial consideration after the agreed date — this leads to triable issues. Hence, the plaint cannot be rejected at threshold."

The Court further relied on the Supreme Court’s view in Church of Christ Charitable Trust v. Ponniamman Educational Trust, (2012) 8 SCC 706, that cause of action is a bundle of facts that must be assessed holistically and not selectively.

Vendor’s Conduct Created Mixed Questions of Law and Fact:

The High Court stressed that the issue was not one of simple interpretation of contract or bare application of law. The facts of payment timelines, pendency of prior title litigation, and the parties’ conduct created a complex set of factual questions.

"The validity of the termination notice, the subsequent conduct of the petitioner receiving additional sale consideration... and entitlement of the respondent to seek specific performance are all triable issues, which can be decided only after full-fledged trial."

Justice Yara thus concluded that the Civil Revision Petition was without merit and upheld the trial court’s order refusing rejection of the plaint.

The Telangana High Court’s ruling offers an important clarification on the maintainability of suits for specific performance, especially in situations where the agreement has been terminated but the vendor has accepted payments post-deadline.

By holding that such conduct creates a triable issue and that failure to seek a declaratory relief is not fatal, the Court has prioritized substantive justice over procedural technicalities.

The ruling affirms the principle that: "Litigation which involves disputed questions of fact must proceed to trial; it cannot be strangled at the preliminary stage through mechanical application of procedural tools."

Date of Decision: 23 October 2025