Specific Performance Cannot Be Granted For Contingent Contracts Dependent On Third-Party Conveyance: Madras High Court

"The recital in the agreement that 'after obtaining sale deed from TNSCB for the non-residential portion within three months we will execute the sale deed' is a contingent clause. Since the said event has not occurred, the contract is unenforceable," Madras High Court, in a significant ruling dated April 21, 2026, held that a sale agreement remains a "contingent contract" and cannot be specifically enforced if the transfer of title is dependent on an uncertain future event, such as a statutory body conveying the property to the vendor.

A bench of Dr. Justice A.D. Maria Clete observed that under Section 32 of the Indian Contract Act, such contracts become void if the event becomes impossible or fails to occur within the stipulated timeframe.

The dispute arose from a 2005 sale agreement between an elderly widow (vendor) and a builder (purchaser) regarding two items of property in Chennai. While the vendor had clear title to the residential portion (Item I), the non-residential portion (Item II) was yet to be allotted and conveyed by the Tamil Nadu Slum Clearance Board (TNSCB). When the TNSCB deferred the allotment, the purchaser sought specific performance, which the trial court granted for both portions, prompting the vendors to appeal.

The primary question before the court was whether a sale agreement is enforceable when the vendor's title is dependent on a future conveyance by a statutory authority. The court was also called upon to determine if a tenant's possession can be treated as "part performance" under Section 53A of the Transfer of Property Act in the absence of a registered agreement.

Court Explains Nature Of Contingent Contracts Under Section 32

The Court noted that the sale of Item II was expressly dependent on the plaintiffs obtaining a sale deed from the TNSCB. Invoking Section 32 of the Indian Contract Act, the bench explained that a contingent contract to do or not to do anything if an uncertain future event happens cannot be enforced by law unless and until that event has happened.

Since the TNSCB had not conveyed the non-residential portion and its allotment remained deferred, the "event" that would trigger the contract had not occurred. The Court emphasized that because the event became uncertain and potentially impossible given the TNSCB's statutory mandate, the agreement in respect of that specific portion remained unenforceable.

Specific Performance Barred Where Continuous Supervision Required

"In view of the bar contained in Section 14 of the Specific Relief Act, 1963, the mandatory injunction granted in respect of the non-residential property is unsustainable in law."

The bench further held that the trial court erred in granting a mandatory injunction directing the vendors to "obtain" a sale deed from the TNSCB. Under Section 14(d) of the Specific Relief Act, specific performance is barred where the execution of the decree would require continuous supervision by the Court.

The Court observed that the TNSCB, as a statutory body, is not bound to accede to a private request for conveyance of commercial plots. Directing a private party to ensure a statutory body performs an act is legally untenable and beyond the scope of specific performance suits.

Tenant Cannot Unilaterally Claim Part Performance Under Unregistered Agreement

"A tenant cannot unilaterally alter his status into that of a purchaser in possession."

Regarding the purchaser's claim that he held possession of the shop as part performance of the contract, the Court pointed out that Section 53A of the Transfer of Property Act requires a registered instrument following the 2001 amendment. In this case, the agreement was unregistered and contained no recital regarding the delivery of possession.

The bench clarified that since the purchaser was already a tenant, his continued occupation was referable only to his tenancy. The Court held that mere execution of a sale agreement does not relieve a tenant of the liability to pay rent, nor does it transform the nature of possession into part performance of a contract.

Court Invokes Order XLI Rule 33 To Do Complete Justice

Recognizing that the purchaser had already obtained a court-executed sale deed and possession of the residential portion (Item I) during the pendency of the appeal, the Court decided not to disturb that completed transaction. The bench noted that the entire sale consideration had been appropriated towards Item I.

To bring the long-standing controversy to a quietus, the Court invoked Order XLI Rule 33 of the CPC. It adjusted the excess sale consideration paid by the purchaser against the twenty years of rent arrears he owed for the commercial portion (Item II). The Court declared that the purchaser would continue only as a tenant for Item II, with the landlady having the right to seek enhanced rent or eviction.

The High Court partially allowed the appeal, confirming specific performance for the residential plot but setting aside the decree for the commercial plot due to its contingent nature. The ruling underscores that courts cannot compel performance of contracts dependent on third-party statutory actions and reaffirms the mandatory requirement of registration for claiming protection under the doctrine of part performance.

Date of Decision: 21 April 2026