Income Tax does not prove that a party could afford the suit property - SC

Apex court observed in that in deciding whether to grant the remedy of specific performance, specifically in suits relating to sale of immovable property, the courts must be cognizant of the conduct of the parties, the escalation of the price of the suit property, and whether one party will unfairly benefit from the decree. The remedy provided must not cause injustice to a party, specifically when they are not at fault. The plaintiff must establish that he was „ready and willing‟ to perform the contract. In this regard, the conduct of the plaintiff must be consistent.

The appellants are owners of a property measuring about 12.60 acres – by an agreement agreed to sell the suit property for a consideration of Rs. 1,25,000 - respondent paid a sum of Rs. 25,000 as an advance and agreed to pay the balance within six months - On the payment of the balance appellants were executed a sale deed - free from all encumbrances - terms of the agreement - advance amount would be forfeited if appellants failed to complete the sale - if respondent ready and willing to complete but appellants delayed or refused - proceed before the court - suit property mortgage for Rs. 6,000 in favour of Janaki Amma - appellants alleged that respondent aware of the mortgage over the suit property and agreed to discharge the mortgage from the sale consideration -  appellants sent a legal notice - pay the balance consideration and perform his obligations under the agreement to sell and rescinded the contract - the respondent sent a reply -calling upon the appellants to execute the sale free from encumbrance - respondent instituted a suit seeking a permanent injunction restraining the appellants from alienating or creating any encumbrance on the suit property - In meantime, the appellants discharged the mortgage debt - respondent instituted a suit for specific performance - a refund of the advance with interest at 24% per annum .Trail court ordered - sale deed to be executed in favour of the respondent for an amount of Rs. 90,000. The appellants were directed to receive this amount and execute the sale deed within a period of three months – appellant approached the District Judge – Appeal dismissed – High Court also dismissed the appeal – aggrieved appellant filed SLP before Supreme Court.

Appellant argued on the following grounds that

Trial court failed to frame an issue on whether the respondent-plaintiff was ready and willing to perform his part of the agreement to sell;

Trial court failed to consider any evidence or reach any finding as to whether the respondent was ready to perform the contract;

After the legal notice was served on the respondent by the appellant, the respondent filed a suit for permanent injunction and not a suit for specific performance.

Merely because the respondent was paying income tax since 1988 does not indicate his willingness to perform the contract;

Thus, the conduct of the respondent does not indicate that he was ready and willing to perform the contract.

Apex court held that there is a conspicuous absence in judgment of the trial court of any reference to evidence led by the respondent to indicate his willingness to perform the contract…….In evaluating whether the respondent was ready and willing to perform his obligations under the contract, it is not only necessary to view whether he had the financial capacity to pay the balance consideration, but also assess his conduct throughout the transaction.

Apex court observed that respondent has failed to provide any documents or communication which would indicate that he called upon the appellants to perform their obligations or discharge the mortgage within the time period stipulated in the contract….payment of income tax by itself does not show that the respondent had sufficient resources to pay for the suit property.

Appeal Allowed.

D.D- January 20, 2022

Shenbagam & Ors. Versus KK Rathinavel