Specific Performance Cannot Be Granted If Buyer Fails To Prove Financial Capacity; One Co-Owner Cannot Bind Another Without Express Authority: Delhi High Court

"In contracts involving multiple owners of property, it is imperative that all co-owners either personally execute the agreement or duly authorise an agent to act on their behalf through a valid and subsisting power of attorney." Delhi High Court, in a significant ruling dated July 06, 2026, has held that the relief of specific performance cannot be granted to a buyer who fails to prove continuous readiness and willingness, particularly the financial capacity to pay the sale consideration.

A bench of Justice Mini Pushkarna observed that in transactions involving jointly owned properties, an extension of time or modification of terms cannot be valid unless all co-owners consent to it or authorize an agent through a valid Power of Attorney.

The dispute arose from two Agreements to Sell executed in August 2005 for interconnected shop properties in Jawahar Nagar, Delhi. The appellants had paid an advance of Rs. 9 lakhs each against a total consideration of Rs. 84 lakhs per property, with the balance due by December 2005. When the respondents forfeited the earnest money alleging breach of timelines, the appellants filed suits for specific performance, claiming the deadline had been mutually extended to February 2006.

The primary questions before the court were whether the time for performance was validly extended by an endorsement signed by the son of one of the co-owners and whether time was of the essence of the contract. The court was also called upon to determine if the appellants had successfully demonstrated their readiness and willingness to perform their contractual obligations under Section 16(c) of the Specific Relief Act.

Agent Cannot Bind Co-Owner Without Proper Authorization

The Court noted that the purported extension of time was signed by the son of the first respondent, who was neither a co-owner nor a holder of a Power of Attorney. Justice Pushkarna emphasized that for a jointly owned property, consensus ad idem among all co-owners is a mandatory requirement. A hand-written endorsement modifying material terms requires the express consent of every owner to be legally binding.

The bench relied on the Supreme Court's decision in Janardan Das v. Durga Prasad Agarwalla (2024), which clarified that without proper authority, an agent cannot bind principals to a contract of sale. The Court found that the appellants were aware that the mother was the co-owner, yet they failed to obtain her written consent for the extension, rendering the endorsement invalid.

"No third person can personally execute any ancillary/additional/modified agreement, without the express authorization of the original signatory to the instrument/agreement."

Time Can Be Essence In Immovable Property Based On Surrounding Circumstances

While acknowledging the general rule that time is not of the essence in contracts for immovable property, the Court observed that this is not an absolute presumption. By referring to Alagammal v. Ganesan (2024) and K.S. Vidyanadam v. Vairavan (1997), the bench explained that courts must look at the express terms, the nature of the property, and the surrounding objectives of the parties.

In the present case, the respondents had mortgaged their property and were under financial pressure to repay bank loans and settle family disputes. The Court held that these circumstances, coupled with the short timeframe stipulated in the agreement, clearly indicated that time was indeed the essence of the contract. The failure of the appellants to pay the balance by the original December deadline was thus a material breach.

Mandatory Requirement To Prove Continuous Readiness And Willingness Under Section 16(c)

The Court delved deeply into the requirements of Section 16(c) of the Specific Relief Act, noting that the buyer must prove readiness and willingness from the date of the agreement until the final decree. Readiness refers to the financial capacity to pay, while willingness refers to the conduct and intention of the party. The bench reiterated that a mere plea in the plaint is insufficient if not backed by cogent evidence.

Citing C.S. Venkatesh v. A.S.C. Murthy (2020), the Court observed that the amount a plaintiff has to pay must be proved to be available. The bench found that the appellants' conduct was inconsistent with their claims of being ready with funds, as they failed to produce bank statements or witnesses from the bank to showcase their liquidity during the performance window.

"The amount which the plaintiff has to pay the defendant must of necessity be proved to be available. Right from the date of the execution of the contract till the date of decree, he must prove that he is ready and willing to perform his part of the contract."

Financial Capacity Must Be Established Through Cogent Evidence

The bench took a stern view of the fact that the appellants claimed to have prepared Pay Orders for the balance consideration but failed to place copies of these instruments on the trial record. During cross-examination, the appellants admitted they did not even have half the required amount in their bank accounts and relied on vague assertions of "arranging cash."

Justice Pushkarna noted that any prudent person claiming to possess financial instruments for a substantial amount would at least keep a copy. The absence of such evidence led the Court to conclude that the appellants lacked the financial capacity to proceed with the transaction. The bench held that "bald statements" regarding willingness cannot substitute the mandatory requirement of proving financial means.

Maintainability Of Specific Performance Suits Post-Termination

The respondents argued that the suits were not maintainable because the appellants did not seek a declaration to set aside the termination of the agreements. The Court referred to R. Kandasamy v. T.R.K. Sarawathy (2024), noting that while a vendee ought to seek a declaration that a unilateral cancellation is bad, the court need not delve into this "jurisdictional fact" if the suit fails on the merits of readiness and willingness.

The High Court concluded that since the appellants failed to prove their entitlement to specific performance, they were consequently not entitled to any permanent injunction. Finding no merit in the appeals against the Trial Court's dismissal, the bench affirmed that the forfeiture of the advance money was justified under the terms of the agreement due to the buyer's default.

Date of Decision: 06 July 2026