A) ABSTRACT / HEADNOTE

The judgment adjudicates a prolonged dispute concerning specific performance of an agreement to sell executed in 1980 and its enforceability in light of the Tamil Nadu Urban Land (Ceiling and Regulation) Act, 1978 and its subsequent repeal in 1999. The litigation trajectory reflects repeated judicial reconsideration across Single Judge, Division Bench, Full Bench, and finally the Supreme Court. The central controversy revolved around whether an agreement to sell, which required statutory permission under the ceiling law, stood rendered void ab initio due to statutory prohibition, or whether such an agreement remained enforceable when the obligation to obtain permission rested upon the vendor.

The Supreme Court clarified that although the Full Bench decision operated inter-parties and attracted res judicata, its ratio did not invalidate agreements containing explicit contractual clauses obligating the vendor to obtain statutory clearance. The Court decisively rejected the High Court Division Bench’s approach that prolonged litigation delay alone could justify denial of specific performance. Emphasis was placed on continuous readiness and willingness of the purchaser and dishonest conduct of the vendors.

The judgment also affirms settled principles that repeal of a prohibitory statute removes legal impediments to enforcement unless vested rights subsist, and that discretion under Section 20 of the Specific Relief Act, 1963 must be exercised judicially, not punitively. The decision restores the decree for specific performance, reinforcing contractual sanctity and equitable accountability.

Keywords: Specific Performance, Urban Land Ceiling, Agreement to Sell, Repeal Statute, Discretionary Relief

B) CASE DETAILS

C) INTRODUCTION AND BACKGROUND OF JUDGEMENT

The dispute emanates from a contractual transaction executed during the operative period of the Tamil Nadu Urban Land (Ceiling and Regulation) Act, 1978, a legislation intended to curb land concentration and speculative profiteering. The appellant company entered into an agreement to purchase immovable property for development purposes, with explicit contractual obligations placed upon the vendors to secure statutory permissions. The inability or unwillingness of the vendors to comply precipitated litigation seeking specific performance.

Judicial adjudication traversed multiple stages over nearly three decades, reflecting interpretative conflict surrounding Section 6 of the 1978 Act and the permissibility of enforcing agreements involving excess land. A Full Bench ruling intervened mid-litigation, declaring that even agreements for sale of excess land were barred. This interpretation profoundly influenced subsequent appellate reasoning.

However, legislative repeal through the Tamil Nadu Urban Land (Ceiling & Regulation) Repeal Act, 1999 altered the statutory landscape, necessitating reconsideration of rights and obligations. The Supreme Court was tasked with reconciling principles of res judicata, repeal effect, contractual clauses, and equitable discretion. The judgment re-anchors judicial reasoning to contractual intent and statutory purpose rather than rigid formalism.

D) FACTS OF THE CASE

The appellant and four vendors executed an agreement to sell dated 12.06.1980 concerning 8 grounds and 2354 sq. ft. of urban land. The agreed consideration was Rs. 5,40,000, with Rs. 1,00,000 paid as advance. Crucially, Clause 4 obligated the vendors to obtain income-tax clearance and permission from the competent authority under the 1978 Act.

The property was encumbered by a mortgage to Syndicate Bank, and the agreement expressly contemplated discharge of the loan from sale proceeds. Despite repeated readiness expressed by the purchaser, statutory permissions were never obtained. Apprehending alienation to third parties, the appellant instituted a suit for specific performance in 1981, asserting continuous readiness and willingness.

Initially, no statutory bar under the ceiling law was pleaded. Only in 1986, through an additional written statement, did the defendants contend that the agreement violated ceiling limits. The Single Judge, after detailed evidence, found the agreement genuine, binding, and enforceable, recording findings of dishonest conduct by the vendors.

Subsequent appellate proceedings resulted in referral to a Full Bench, remand, and eventual reversal by the Division Bench, which substituted specific performance with monetary compensation. This culminated in the present appeal.

E) LEGAL ISSUES RAISED

i. Whether an agreement to sell requiring statutory permission is void ab initio under Section 6 of the 1978 Act
ii. Whether repeal of the ceiling law removes impediments to specific performance
iii. Whether prolonged litigation delay alone can defeat equitable relief
iv. Whether discretionary power under Section 20 of the Specific Relief Act, 1963 was properly exercised

F) PETITIONER / APPELLANT’S ARGUMENTS

The counsels for the appellant submitted that the agreement explicitly placed the burden of obtaining statutory permission on the vendors. Failure to discharge this obligation constituted breach. It was argued that the Full Bench ruling itself recognised enforceability where such clauses exist.

It was further contended that repeal of the ceiling law extinguished any statutory bar, especially in absence of vested rights. The appellant emphasised its continuous readiness and willingness, deposit of balance consideration, and absence of fault. Delay attributable to court process could not operate prejudicially.

G) RESPONDENT’S ARGUMENTS

The counsels for the respondents relied heavily on the inter-parties Full Bench judgment, asserting that the agreement stood void from inception and incapable of revival post-repeal. They argued vested rights accrued upon filing of suit and discretionary relief should be denied given passage of time and escalation of land value. Monetary compensation was urged as equitable substitution.

H) JUDGEMENT

The Supreme Court allowed the appeal, restoring the decree for specific performance. It held that res judicata applied only to the ratio actually decided and not beyond. The Full Bench judgment, properly construed, did not invalidate agreements where statutory compliance was contractually assigned to the vendor.

The Court clarified that the agreement was not void ab initio, and repeal of the ceiling law removed any residual impediment. No vested right accrued to the respondents, as any right under the statute belonged to the State, which chose not to act.

The Division Bench erred in substituting equitable discretion with punitive denial based on litigation delay. The appellant’s readiness and the respondents’ dishonest conduct justified enforcement. The decree of the Single Judge was restored with direction to pay Rs. 1.25 crores as earlier offered.

a) RATIO DECIDENDI

The enforceability of an agreement to sell is preserved where statutory compliance is expressly made a contractual obligation of the vendor, and failure to secure permission constitutes breach rather than illegality. Repeal of a prohibitory statute removes legal barriers unless vested rights subsist. Discretion under Section 20 must be exercised on principled grounds, not on delay alone.

b) OBITER DICTA

The Court observed that courts must resist substituting compensation for performance merely due to market escalation. Judicial delay cannot be weaponised against a diligent litigant. Equity demands reciprocal fairness.

c) GUIDELINES

i. Delay due to court process alone cannot defeat specific performance
ii. Contractual allocation of statutory obligations must be enforced
iii. Repeal statutes operate prospectively unless savings apply
iv. Discretion under Specific Relief Act must be reasoned and reviewable

I) CONCLUSION & COMMENTS

The judgment reinforces contractual sanctity and curtails misuse of statutory prohibitions as post-hoc defences. It realigns discretion with equity and fairness, ensuring that statutory interpretation does not subvert legitimate commercial expectations. The ruling provides doctrinal clarity on repeal effects, res judicata boundaries, and equitable enforcement in property transactions.

J) REFERENCES

a) Important Cases Referred

1. Mathura Prasad Bajoo Jaiswal v. Dossibai N.B. Jeejeebhoy [1970] 3 SCR 830
2. Mademsetty Satyanarayana v. G. Yelloji Rao [1965] 2 SCR 221
3. K.S. Vidyanadam v. Vairavan [1997] 1 SCR 993

b) Important Statutes Referred

1. Specific Relief Act, 1963
2. Tamil Nadu Urban Land (Ceiling & Regulation) Act, 1978
3. Tamil Nadu Urban Land (Ceiling & Regulation) Repeal Act, 1999