A) ABSTRACT / HEADNOTE

The appeal concerns whether a suit for specific performance of an Agreement to Sell can be sustained where, before the suit, the vendor sent a cancellation letter together with partial refunds (demand drafts and returned cheques), and the purchaser later encashed the demand drafts during the pendency of the suit.

The Supreme Court analysed:

(i) existence of a valid and subsisting contract,

(ii) the dual elements of readiness and willingness required for specific performance under the Specific Relief Act, 1963,

(iii) the consequences of acceptance of a vendor’s repudiation by the buyer.

The Court held that readiness (capacity to perform) and willingness (intention to perform) are separate; continuous readiness and willingness from contract formation until decree is a condition precedent to relief. Encashment of the demand drafts was treated as acceptance of the seller’s repudiation, demonstrating absence of willingness and effectively cancelling the Agreement. Because the buyer neither sought a declaratory decree setting aside the cancellation nor disclosed the cancellation in the plaint, the suit for specific performance was not maintainable. The Court set aside prior decrees in favour of the buyer, declared the sale deed null and void, and directed refund of amounts as determined.

Keywords: Specific performance, Agreement to Sell, readiness and willingness, acceptance of repudiation, cancellation of agreement, suppression of material fact.

B) CASE DETAILS

C) INTRODUCTION AND BACKGROUND OF JUDGEMENT

The dispute arose from an unregistered Agreement to Sell dated 25 January 2008 between the vendor (original owner) and the buyer (Respondent No.1). At execution the buyer paid ₹2,51,000 in cash and issued three post-dated cheques totalling ₹7,50,000. The vendor later alleged forgery and, on 7 February 2008, wrote a letter cancelling the Agreement and enclosed five demand drafts totaling ₹2,11,000 (in lieu of the cash) and returned two of the three post-dated cheques. The buyer filed a suit for specific performance on 5 May 2008. The trial court decreed specific performance and a sale deed was executed following deposit of the balance consideration; the High Court affirmed. The vendor died; her step-grandson and the appellant (legatee under a Will dated 23 September 2002) were parties in the litigation. The appellant challenged the decree in the Supreme Court, contending that the seller had validly repudiated the agreement before suit and that encashment by the buyer of the demand drafts evidenced acceptance of repudiation and absence of willingness to perform. The Court was tasked to determine whether encashment and absence of declaratory challenge to cancellation precluded a decree for specific performance.

D) FACTS OF THE CASE

The owner (late Kushum Kumari) held the subject allotment by registered sub-lease (2 April 1968). An Agreement to Sell (25 January 2008) for ₹25,00,000 was alleged, with upfront cash ₹2,51,000 and three post-dated cheques (₹2,50,000 each). On discovering the document, the vendor lodged a police complaint (6 February 2008) alleging fraud and, by letter dated 7 February 2008, cancelled the Agreement, enclosing five demand drafts totalling ₹2,11,000 and returning two post-dated cheques. The buyer received those instruments before filing the suit but filed suit on 5 May 2008 for specific performance without seeking a declaratory decree impugning the cancellation. The buyer encashed the demand drafts in July 2008, after suit commencement. The vendor did not lead oral testimony before dying. Subsequent proceedings produced a trial decree and sale deed made in the buyer’s favour after court-ordered deposit of balance consideration; the High Court dismissed the vendor’s heirs’ appeal. The Supreme Court proceeded to examine conduct, jurisdictional fact of cancellation, and equitable doctrines.

E) LEGAL ISSUES RAISED

1. Whether a suit for specific performance is maintainable where the vendor cancelled the Agreement to Sell prior to institution of the suit by returning earnest money and cheques.

2. Whether the buyer’s encashment of refund instruments during the pendency of the suit constitutes acceptance of repudiation and defeat of the buyer’s willingness to perform.

3. Whether absence of a declaratory prayer challenging the cancellation is fatal to a suit for specific performance.

4. Whether suppression in the plaint of the vendor’s cancellation letter and refund instruments disentitles the buyer to equitable relief.

5. Whether the appellant (legatee under a Will) has locus standi to challenge the decree.

F) PETITIONER / APPELLANT’S ARGUMENTS

The appellant advanced that the vendor’s signatures were fraudulently procured and that upon discovery the vendor repudiated the Agreement by a 7 February 2008 cancellation letter, returning part consideration via demand drafts and cheques. The buyer later encashed the drafts (July 2008) after suit, thereby accepting repudiation and demonstrably lacking willingness to perform. The appellant relied on the principle that a non-existent or validly terminated agreement cannot be enforced (citing R. Kandasamy decision and other precedents) and emphasised that continuous readiness and willingness are mandatory conditions for specific performance. The appellant asserted locus as beneficiary under the Will dated 23 September 2002.

G) RESPONDENT’S ARGUMENTS

The respondent-buyer argued the trial and High Court correctly appreciated evidence and deposition, and that the buyer ultimately deposited ₹24,61,000 before the trial court leading to a sale deed. It contended the vendor did not prove her defence before death and the written statement was unproved; unilateral cancellation by returning earnest money was not effective to defeat a bilateral contract; further, the vendor had not returned the entire consideration and hence cancellation could not be effective. The buyer denied suppression and maintained readiness and willingness to perform.

H) JUDGEMENT 

The Court emphasised established inquiries necessary for specific performance: existence of valid contract; continuous readiness and willingness; extent of plaintiff’s performance; equities and possible alternative remedies (following Kamal Kumar and related authorities). The Court analysed readiness (capacity/financial ability) as distinct from willingness (intention to perform inferred from conduct). Citing a line of precedents Gomathinayagam Pillai, J.P. Builders, Umabai, Mehboob-Ur-Rehman, C.S. Venkatesh the Court reiterated that continuous demonstration of both elements from contract to decree is essential. The Court found material admissions: the buyer received the cancellation letter and demand drafts before suit and encashed the drafts in July 2008. The encashment, absent evidence of protest, signalled acceptance of the seller’s repudiation and negated willingness.

The fact that full earnest money had not been returned did not neutralise this inference. The Court held that the cancellation letter existed pre-suit and thereby constituted a jurisdictional fact; absent a claim declaring that cancellation void, the suit for specific performance could not be maintained (drawing on I.S. Sikandar, A. Kanthamani and the reconciliation in R. Kandasamy). The Court further held that suppression of the cancellation in the plaint was a material concealment disentitling equity relief (relying on Citadel Fine Pharmaceuticals principle of “clean hands”). On locus, the appellant as beneficiary under a Will was a necessary party and had standing. Resultantly, the Court set aside the trial and High Court decrees, declared the sale deed null and void, and directed refund of ₹24,61,000 to the appellant.

a. RATIO DECIDENDI

The operative ratio is that continuous readiness and willingness from contract formation to decree is a precondition for specific performance; acceptance by buyer of vendor’s repudiatory conduct (here, encashment of refund instruments received with a cancellation letter before suit) constitutes acceptance of cancellation and negates willingness. If cancellation/repudiation took place before suit, the buyer must seek a declaratory remedy challenging its validity; failure to do so (and suppression of the cancellation) bars the equitable remedy of specific performance. The Court integrated precedent law on jurisdictional facts and equitable forfeiture of relief for suppression.

b. OBITER DICTA

The Court observed (obiter) that an appellate court can examine jurisdictional facts and the existence of a valid agreement even if the trial court omitted framing an issue on maintainability, drawing from R. Kandasamy and Shrisht Dhawan discussion on jurisdictional fact. The Court clarified the separate conceptual contours of readiness and willingness and reiterated that mere willingness pleaded in plaint without corroborative conduct and proof is insufficient. The Court also noted that unilateral physical return of earnest money may amount to repudiation and, if accepted by the buyer, bring the agreement to an end.

c. GUIDELINES

1. Readiness and willingness must be pleaded and proved as distinct elements; evidence must show continuity till decree.

2. If a vendor issues a clear cancellation/repudiation before suit, the purchaser must seek a declaratory decree challenging that cancellation to keep alive a claim for specific performance.

3. Acceptance by the purchaser of refund instruments accompanying a cancellation, without protest, is evidence of acceptance of repudiation and kills willingness.

4. Suppression of material facts (e.g., non-disclosure in the plaint of cancellation and refund) disentitles the claimant to discretionary equitable relief.

5. Appellate courts may examine whether the jurisdictional fact necessary for grant of specific performance exists despite omission at trial; this preserves the public law function to avoid wrongful conferment of equitable relief.

I) CONCLUSION & COMMENTS

The decision reinforces equity’s insistence on candid disclosure and continuous performance capability and intent as prerequisites for specific performance. Practically, the judgment warns purchasers to challenge vendor repudiation by seeking declaratory relief if they intend to preserve claims for specific performance. Encashment of returned payment instruments will be scrutinised as conduct inconsistent with willingness. The judgment balances contractual sanctity against equitable doctrine by ensuring that courts do not enforce non-existent or validly terminated agreements. For practitioners, the case is a salutary reminder to plead and prove readiness and willingness through contemporaneous conduct and to avoid suppression of jurisdictional facts in pleadings. The ruling also clarifies appellate powers to test jurisdictional facts where vital to the exercise of equitable jurisdiction.

J) REFERENCES

a. Important Cases Referred

1. R. Kandasamy (Since Dead) & Ors. v. T.R.K. Sarawathy & Anr., Civil Appeal No. 3015 of 2013 (decided 21 Nov. 2024).
2. Mehboob-Ur-Rehman (Dead) through LRs. v. Ahsanul Ghani, [2019] 2 SCR 169 : (2019) 19 SCC 415.
3. C.S. Venkatesh v. A.S.C. Murthy (Dead) by LRs. and Ors., [2020] 2 SCR 676 : (2020) 3 SCC 280.
4. Kamal Kumar v. Premlata Joshi and Ors., [2019] 1 SCR 54 : (2019) 3 SCC 704.
5. P. Daivasigamani v. S. Sambandan, [2022] 18 SCR 199 : (2022) 14 SCC 793.
6. Gomathinayagam Pillai and Ors. v. Palaniswami Nadar, [1967] 1 SCR 227.
7. Vijay Kumar and Others v. Om Parkash, 2018 SCC OnLine SC 1913.
8. J.P. Builders & Anr. v. A. Ramadas Rao & Anr., [2011] 15 SCR 538 : (2011) 1 SCC 429.
9. Umabai & Anr. v. Nilkanth Dhondiba Chavan (Dead) by LRs. & Anr., [2005] 3 SCR 521 : (2005) 6 SCC 243.
10. I.S. Sikandar (Dead) by LRs. v. K. Subramani & Ors., (2013) 15 SCC 27.
11. A. Kanthamani v. Nasreen Ahmed, [2017] 2 SCR 610 : (2017) 4 SCC 654.
12. Citadel Fine Pharmaceuticals v. Ramaniyam Real Estates Pvt. Ltd. & Anr., [2011] 13 SCR 605 : (2011) 9 SCC 147.

b. Important Statutes Referred

1. Specific Relief Act, 1963 (provisions on specific performance; Sections and statutory principles as considered by the Court).