Suit for Specific Performance is Maintainable Without Challenging Contract Termination When Termination Itself is Invalid: Supreme Court

Supreme Court of India delivered a significant ruling in the domain of specific performance of contracts for sale of immovable property. The Court set aside the Madras High Court’s judgment which had denied specific performance of a registered sale agreement by holding that the plaintiff failed to challenge the termination of the contract and was not ready and willing to perform. Reversing this conclusion, the Court held that "when a vendor accepts additional consideration after the contractual period has lapsed, the contract continues to subsist, and termination thereafter is not legally sustainable."

The Court clarified that declaratory relief against termination is not a precondition for seeking specific performance where the vendor’s conduct demonstrates waiver of termination rights and acknowledgment of the agreement’s continuing validity.

“Acceptance of Additional Consideration After Deadline Waives Right to Terminate Contract” – Supreme Court Restores Decree for Specific Performance

In its judgment dated 29.10.2025, a Division Bench of Justice Manoj Misra and Justice J.B. Pardiwala restored the decree of specific performance granted by the first appellate court in favour of the plaintiff, Annamalai, who had paid almost the entire consideration amount under a registered agreement to purchase immovable property. The Court found that the High Court, while setting aside the specific performance decree, failed to respect the binding nature of findings of fact under Section 100 of the CPC, and wrongly interfered in second appeal.

As observed by the Bench, "once the vendor accepted ₹1,95,000 as additional payment, through a written endorsement over a registered agreement, he unequivocally waived his right to terminate the contract on grounds of delayed payment."

The ruling strengthens the jurisprudence that courts must examine the conduct of parties holistically when considering whether a contract subsisted and whether discretionary relief ought to be granted under the Specific Relief Act, 1963, particularly under pre-amendment provisions.

The dispute arose from a registered agreement for sale dated 08.01.2010, under which Annamalai, the appellant, agreed to purchase two items of property for ₹4,80,000. On the same day, he paid ₹4,70,000 and claimed possession was handed over. Later, the vendors, D-1 and D-2, demanded ₹2,00,000 more. The appellant paid ₹1,95,000 on 09.06.2010, acknowledged via endorsement on the reverse of the agreement. However, on 20.08.2010, the vendors terminated the agreement. They had already sold a portion of the property to D-3 (Vasanthi) on 17.08.2010 — even before termination — prompting the appellant to file a suit for specific performance.

The trial court dismissed the suit, accepting the defendants’ claim that the agreement was only to secure a loan. The first appellate court reversed this, upheld the genuineness of the agreement, and granted a decree for specific performance. The Madras High Court, in second appeal, reversed the decree and directed refund of the advance.

Can a Contract Be Enforced Without Declaratory Relief Against Termination?

The central question before the Supreme Court was whether a suit for specific performance was maintainable without specifically seeking a declaration that the termination of the contract was invalid, especially when the contract had been acted upon after the deadline.

The Court emphatically ruled that it was.

The Court held: "the agreement did not contain an automatic termination clause nor did it confer an explicit unilateral right to terminate. On the contrary, the vendors accepted ₹1,95,000 after the stipulated period, thereby waiving their right to terminate."

Quoting its own reasoning, the Bench noted, "by transferring part of the subject matter of the agreement even before issuing a termination notice, the vendors themselves breached the contract, further proving that the contract was still in force at the time of that transaction."

Accordingly, the Court declared that the termination notice dated 20.08.2010 was a legal nullity, and in such cases, "the plaintiff may sue for enforcement without first seeking a declaration that the termination is void."

The High Court’s Interference Under Section 100 CPC Was Unwarranted

The Supreme Court strongly criticised the High Court for interfering with the first appellate court’s well-reasoned findings of fact, particularly regarding the payment of the additional ₹1,95,000.

Referring to Section 100 of the Code of Civil Procedure, the Court observed:

"A second appellate court can interfere with findings of fact only where there is perversity, misreading, or exclusion of admissible evidence. None of these conditions were satisfied in this case."

The High Court had ignored the admission of signatures on the endorsement, instead choosing to doubt the genuineness of the document based on a claim that it was written on a previously signed blank paper. This, the apex court held, did not justify reversal of findings.

“Once existence of signature(s) on a document acknowledging receipt of money is admitted, a presumption would arise that it was endorsed for good consideration.”

Readiness and Willingness: Plaintiff’s Conduct Satisfied the Legal Standard

The Court also reaffirmed that the test of readiness and willingness is to be applied based on the entirety of facts and conduct, not merely technical defaults.

In this case, Annamalai had paid ₹4,70,000 out of ₹4,80,000 upfront, and even agreed to pay an additional ₹1,95,000 demanded later. The only remaining amount was ₹10,000.

The Court found this conduct sufficient, stating:

"In the instant case, there appears no logical reason to hold that the plaintiff was not ready and willing to perform his part of the contract, particularly when he went beyond the originally agreed consideration."

Rejecting the High Court's contrary view, the Bench clarified that mere delay in payment of a small balance, especially when the vendors themselves extended the contract by accepting more money, cannot defeat a claim for specific performance.

Time Not of the Essence in Real Estate Contracts

The judgment reiterates a core principle of contract law: time is not normally of the essence in contracts involving immovable property.

The vendors had argued that since the balance ₹10,000 was not paid within six months, the contract was voidable. The Supreme Court found that argument legally untenable.

"When vendors accept substantial consideration after the lapse of the deadline, they are deemed to have waived their right to insist on timely performance. Hence, no termination is valid thereafter."

Discretion to Deny Relief – Not Available When Vendors Act in Bad Faith

The High Court had declined specific performance on the ground that the plaintiff allegedly misrepresented possession and fabricated the endorsement. The Supreme Court refuted both charges.

It held: "A claim, if not proved, does not become false. A statement is false only when knowingly incorrect. Here, there was documentary evidence of Tehsildar’s report supporting plaintiff’s possession."

Further, the Court found that D-3 (Vasanthi), who claimed to be a bona fide purchaser, was the daughter of D-1 and fully aware of the prior agreement. Her purchase, made prior to the contract’s termination, was held not to be in good faith.

"This was not a fit case where discretionary relief of specific performance should have been denied."

Setting aside the High Court’s judgment, the Supreme Court restored the first appellate court’s decree and directed Annamalai to deposit the balance ₹10,000 within one month before the execution court, if not already done.

The Court concluded: "The High Court erred in law by interfering with the decree of specific performance passed by the first appellate court. These appeals are therefore allowed. Parties shall bear their own costs."

Date of Decision: 29 October 2025