Specific Performance is a Discretionary Relief; Delay and Inaction Will Disentitle Relief: Karnataka High Court

Karnataka High Court addressing appeals arising from two civil suits—one seeking specific performance of a 1973 sale agreement and the other seeking a declaration of ownership. Justice C.M. Poonacha denied specific performance of the sale agreement, emphasizing the agreement holder's "failure to demonstrate continuous readiness and willingness to perform contractual obligations."

The judgment set aside the decrees of the lower courts that had granted specific performance. It directed the agreement holder to vacate and hand over possession of the suit property to the owners while ordering the owners to refund the advance amount of ₹5,000 along with 12% interest from the date of filing the suit.

The dispute arose from a 1973 sale agreement executed between the deceased owner, Channappa, and the agreement holder, Balappa. Under the agreement, the total sale consideration for the suit property (4 acres and 31 ½ guntas of land in Ennehosalli village) was ₹8,000, of which ₹2,500 was paid as advance on the date of the agreement. Channappa handed over possession of the property to the agreement holder. Subsequently, additional amounts of ₹2,000 (in 1974) and ₹500 (in 1975) were paid, bringing the total to ₹5,000.

The agreement holder issued a legal notice in 1996—23 years after the agreement—to enforce the sale. When the legal heirs of the deceased owner refused to execute the sale deed, the agreement holder filed a suit for specific performance (OS No. 60/1997). Simultaneously, the heirs filed a suit for declaration of ownership (OS No. 162/1996), contending that the agreement was executed as security for a loan and was not meant to be a sale agreement.

The Trial Court and First Appellate Court decreed in favor of specific performance. However, the heirs challenged these decisions in the Karnataka High Court.

"Readiness and Willingness Are Mandatory for Specific Performance" – Court's Analysis

The High Court extensively analyzed Section 16(c) of the Specific Relief Act, 1963, which mandates that a plaintiff seeking specific performance must plead and prove their readiness and willingness to perform the contract. Justice C.M. Poonacha observed:

"Readiness means the capacity of the agreement holder to perform the contract, including financial capacity to pay the purchase price. Willingness refers to the intention to perform contractual obligations, which must be inferred from the conduct of the agreement holder."

The court emphasized that readiness and willingness are two distinct and essential elements, and failure to demonstrate either disentitles a party from seeking specific performance. Referring to the agreement holder’s conduct, the court stated:

"The plaintiff has not placed any material on record to demonstrate that steps were taken to complete the sale transaction for 23 years after the agreement’s execution. This delay in issuing the legal notice (1996) and filing the suit reflects a lack of readiness and willingness."

The court cited His Holiness Acharya Swami Ganesh Dassji v. Sita Ram Thapar (1996) 4 SCC 526, observing:

"The factum of readiness and willingness is to be adjudged with reference to the conduct of the party and the attending circumstances. The plaintiff’s failure to act diligently demonstrates his lack of readiness and willingness."

"Suit Within Limitation, But Performance Delayed – Limitation Act Does Not Override Readiness Requirement"

While the suit for specific performance was filed within the three-year limitation period from the issuance of the 1996 notice (as per Section 54 of the Limitation Act, 1963), the court emphasized that mere adherence to limitation timelines does not exempt the agreement holder from proving readiness and willingness. Justice Poonacha clarified:

"The issue of limitation is distinct from readiness and willingness. The plaintiff’s unexplained inaction for over 23 years demonstrates a lack of intent to perform his obligations under the contract."

The court further relied on Chand Rani v. Kamal Rani, AIR 1993 SC 1742, which held that in equity, time may not always be of the essence in immovable property contracts, but a reasonable time for performance must be adhered to. The delay in this case was deemed unreasonable.

"Section 53A of the Transfer of Property Act Does Not Protect Agreement Holder’s Possession"

The agreement holder sought protection under Section 53A of the Transfer of Property Act, 1882, which allows a transferee in possession to retain possession in part performance of a contract if they are willing to perform their obligations. The court denied this protection, stating:"One of the essential conditions for invoking Section 53A is continuous willingness to perform the contract. The agreement holder’s conduct over the years shows that this condition was not met."

Citing Tukaram Sadasiv Chamber v. Mallu Babu Chamber, AIR 2012 Kar 123, the court reiterated:

"The agreement holder, having failed to demonstrate readiness and willingness, cannot claim protection under Section 53A to remain in possession of the suit property."

The court directed the agreement holder to vacate the property and hand over possession to the owners.

"Specific Performance is a Discretionary Remedy, Not a Right"

The court reiterated that specific performance is a discretionary remedy under the Specific Relief Act. Justice Poonacha emphasized:

"Specific performance will not be granted where the plaintiff fails to act diligently or demonstrates conduct that disentitles them from equitable relief."

Referring to U.N. Krishnamurthy v. A.M. Krishnamurthy, (2022) SCC OnLine SC 1476, the court observed:

"The plaintiff must plead and prove their financial capacity and intent to complete the transaction in a timely manner. In this case, neither element was adequately established."

The court also noted that the property was the only land belonging to the legal heirs, further supporting its decision to deny specific performance.

The court declared the legal heirs as absolute owners of the suit property and directed the revenue authorities to update the records to reflect their ownership. The agreement holder was ordered to vacate the property and hand over possession to the heirs.

Additionally, the court ordered the heirs to refund the advance amount of ₹5,000 received under the sale agreement, along with 12% interest per annum from the date of filing the suit until payment. Justice Poonacha remarked:

"While the agreement holder is not entitled to specific performance, he is entitled to recover the advance amount with interest to ensure equitable relief."

The Karnataka High Court’s judgment underscores the importance of readiness and willingness in specific performance claims. The decision clarifies that limitation periods do not override the obligation to act diligently and that discretionary relief will not be granted to plaintiffs whose conduct undermines their claims. By directing the agreement holder to vacate the property and granting a refund with interest, the court sought to balance the equities between the parties.

Date of Decision: January 17, 2025