Suit For Specific Performance Maintainable Without Seeking Declaration Against Unilateral Termination Of Non-Determinable Agreement: Gujarat High Court

"Unilateral termination of contract would not disentitle the plaintiff from filing the suit for specific performance even without asking for declaratory relief that the termination of the ATS is bad in law, more particularly, when no such determinable conditions are enclosed in the ATS," Gujarat High Court, in a significant ruling, held that a suit for specific performance is legally maintainable even if the plaintiff does not specifically seek a declaration that the vendor's unilateral termination of the agreement was invalid.

Justice J. C. Doshi observed that if an agreement to sell is not "determinable" by its very nature or terms, a unilateral termination by one party constitutes a repudiatory breach, allowing the aggrieved party to sue for performance directly. The Court emphasized that forcing a plaintiff to challenge a bad-faith termination would place an unfair burden on the vendee who is otherwise ready and willing to perform the contract.

The case arose from an Agreement to Sell (ATS) executed in October 1985 for a property in Ahmedabad for a consideration of ₹16,000. Despite receiving a portion of the payment and an additional ₹6,000 during the contract period, the vendor (Defendant No. 1) unilaterally cancelled the ATS in July 1986, citing a six-month time limit. While the suit for specific performance was pending and a prohibitory injunction was in force, the vendor sold the property to a third party (Defendant No. 2) in 1993. The Trial Court decreed the suit in favor of the plaintiff, prompting the defendants to appeal.

The primary legal question was whether a suit for specific performance is maintainable in the absence of a prayer to declare the termination of the agreement as bad in law. The Court also examined whether time was the essence of the contract and if the subsequent purchaser could claim the status of a "bona fide purchaser" without notice under Section 19 of the Specific Relief Act (SRA).

Court’s Observations on Determinable Contracts

The High Court engaged in an extensive analysis of what constitutes a "determinable" contract under Section 14 of the Specific Relief Act, 1963. It noted that the phrase contemplates a contract that can be ended at the "sweet will" of a party without assigning reasons or referring to a breach. The Bench clarified that if a contract does not contain a specific clause for unilateral termination, it cannot be considered determinable by nature.

Unilateral Termination Without Right Amounts To Repudiatory Breach

Drawing on the Supreme Court’s recent precedents in K.S. Manjunath v. Moorasavirappa and Annamalai v. Vasanthi, the Court held that where no contractual right to terminate exists, a unilateral termination is merely a breach. In such cases, the non-terminating party is not required to seek a declaration against the termination. The Court reasoned that if such a defense were permitted, every suit for specific performance could be frustrated by a defendant simply issuing a notice of termination.

"The unilateral termination of a non-determinable agreement in question is found to be not for bona fide reasons... it cannot be said that any declaration challenging the alleged termination was required on part of the plaintiff."

Presumption Against Time Being Essence In Immovable Property Sales

Regarding the contention that the contract expired after six months, the Court reiterated the settled principle that time is generally not the essence of a contract for the sale of immovable property. Justice Doshi noted that the mere fixation of a period within which a contract is to be performed does not make it the essence. Since the ATS in this case lacked a penalty clause or a clause for automatic rescission upon expiry, the six-month limit was not rigid.

Court Explains Readiness And Willingness Under Section 16(c) SRA

The Bench found that the plaintiff had proved continuous readiness and willingness by paying amounts beyond the earnest money. The Court specifically pointed to a diary entry in the vendor’s handwriting (Exh. 108) acknowledging an additional ₹6,000 payment. It held that the vendor, who changed his version "like a chameleon" during cross-examination, could not claim the vendee was at fault when the vendor himself was avoiding the execution of the sale deed.

Subsequent Purchasers Must Exercise Due Diligence

The Court dealt strictly with the subsequent purchaser’s claim of being a "bona fide purchaser for value without notice." It observed that Defendant No. 2 failed to issue a public notice in newspapers or obtain a title clearance certificate from an advocate before the purchase. Furthermore, the purchase was made in blatant violation of a court injunction, invoking the doctrine of lis pendens under Section 52 of the Transfer of Property Act.

"A person who acts with wanton or wilful negligence in spite of such knowledge or consciousness cannot be said to act with fairness or uprightness and, therefore, he cannot be said to act with honesty or in good faith."

The High Court dismissed both appeals, confirming the Trial Court's decree for specific performance and the cancellation of the subsequent sale deed. It concluded that the vendor’s conduct was a breach of contract and the subsequent purchaser had failed to take constructive notice of the pending litigation. The Court awarded costs to the plaintiff and stayed the operation of the judgment for two weeks to allow the defendants to approach a higher forum.

Date of Decision: 23 April 2026