Specific Performance Can Be Denied If Buyer’s Misuse Of Property Prevents Seller From Fulfilling Statutory Obligations: Delhi High Court

"By continuing to misuse the property for running the business of steel fabrication, the appellants themselves wilfully acted at variance with, and in subversion of the relation intended to be established by the set of documents of the year 1995 and the Compromise, for the sale of the suit property." Delhi High Court, in a significant ruling dated July 15, 2026, held that a buyer cannot seek the equitable relief of specific performance if their own conduct—specifically the unauthorized misuse of the property—obstructs the seller from performing their part of the contract.

A bench of Justice Mini Pushkarna observed that such conduct constitutes a willful act at variance with the contract, thereby invoking the personal bars to relief under Section 16(b) of the Specific Relief Act, 1963.

The court noted that when a buyer’s actions lead to the cancellation or non-restoration of a property's lease, they cannot later complain about the seller's failure to perfect the title. The bench emphasized that the remedy of specific performance is discretionary and requires the party seeking it to come with "blemishless conduct" and a "clean slate."

The dispute involved an industrial plot in Wazirpur, originally allotted by the DDA to the respondent. The appellants, who were already in possession of portions as tenants, entered into Agreements to Sell (ATS) in 1995 and a subsequent Compromise in 2004 to purchase the property. However, the DDA cancelled the lease due to misuse, and a court order required the stoppage of such misuse for restoration. While the seller was obligated to restore the lease, the buyers continued using the premises for steel fabrication in violation of the Master Plan, leading the DDA to refuse restoration.

The primary question before the court was whether property misuse by a buyer, which prevents the restoration of a leasehold title, acts as a bar to specific performance under Section 16 of the SRA. The court also examined whether the appellants had successfully proved their "readiness and willingness" in the absence of documented financial capacity.

Equity Requires Blemishless Conduct From The Purchaser

The Court observed that specific performance is an equitable and discretionary remedy that cannot be claimed as a matter of right. Relying on Supreme Court precedents, the bench noted that the conduct of the plaintiff, both prior and subsequent to the filing of the suit, is a material circumstance that must be scrutinized.

Justice Pushkarna held that the appellants’ conduct did not inspire confidence as they continued to misuse the industrial plot for steel fabrication. This misuse directly prevented the respondent from complying with the DDA's conditions for lease restoration, which was a prerequisite for the sale.

"The basic principle behind Section 16(c)... is that any person seeking benefit of the specific performance of contract must manifest that his conduct has been blemishless throughout entitling him to the specific relief."

Misuse Of Property Acts As A Personal Bar Under Section 16(b)

The High Court analyzed Section 16(b) of the unamended SRA, which applies to transactions prior to 2018. The provision stipulates that specific performance cannot be enforced in favour of a person who violates an essential term of the contract or acts in subversion of the relation intended to be established.

The bench found that by carrying on a steel-rolling business in violation of the original Master Plan, the appellants willfully acted at variance with the contract. The Court noted that as long as the misuse continued, the perpetual lease could not be restored by the DDA, rendering the terms of the Compromise impossible to implement due to the buyers' own defaults.

Appellants Failed To Prove Continuous Readiness And Willingness

Regarding the requirement of "readiness" (financial capacity) and "willingness" (conduct), the Court found the appellants' evidence severely lacking. Although the appellants claimed they had prepared pay orders for the balance consideration, they admitted to cancelling them within months without depositing the money in court.

The Court held that mere statements of financial capacity, without supporting documents like bank statements or income tax returns, are insufficient. It reiterated that readiness and willingness must be proved in continuum from the date of the contract till the final decree.

"A continuous financial capacity has to be shown from the date of execution of the contract, till the final date of disposal of the suit... Mere statements citing financial capacity without proof are not sufficient."

Admission Of Signatures Is Not Proof Of Document Contents

The bench also corrected a procedural error by the Trial Court regarding "Mutual Agreements" produced by the respondent during cross-examination. The Court clarified that while the appellants admitted their signatures on these documents, they did not admit the contents or the execution.

Justice Pushkarna ruled that the mere marking of an exhibit does not dispense with the need to prove the document's contents. However, the Court concluded that this error did not displace the ultimate finding, as the appellants’ primary breaches regarding property misuse and financial readiness were sufficient to dismiss the appeals.

The High Court concluded that the appellants were not entitled to specific performance or a permanent injunction due to their failure to stop the misuse of the property and their inability to prove financial readiness. The appeals were dismissed, affirming the Trial Court's decision that the buyers' conduct barred them from equitable relief.

Date of Decision: July 15, 2026