The Supreme Court held that a plaintiff seeking specific performance of an agreement to sell must establish continuous financial readiness from the date of the agreement, and that Fixed Deposit Receipts created years after filing the suit cannot discharge this burden.
The Supreme Court of India has dismissed a civil appeal, reiterating that a plaintiff seeking specific performance of an agreement to sell must demonstrate continuous readiness and willingness to perform contractual obligations from the date of execution of the agreement to the date of the decree, and that financial documents generated long after the institution of the suit cannot establish such readiness.
A Bench of Justices Prashant Kumar Mishra and N.V. Anjaria decided the matter, setting aside a Trial Court decree of specific performance and affirming the Division Bench of the Karnataka High Court which had reversed it.
Background
On December 20, 1990, the respondent Jayamma agreed to sell a vacant site measuring 100 feet by 78 feet in Mysore to the original plaintiff Mohammed Khaleel for a total consideration of Rs. 3,00,000. The plaintiff paid Rs. 25,000 as earnest money, with the balance of Rs. 2,75,000 payable before the Sub-Registrar at the time of registration. The sale deed was to be executed within four months.
The respondent handed over original title documents to the plaintiff, including a will deed, settlement deed, katha extract, encumbrance certificate, and tax receipts, and put the plaintiff in possession of the suit property.
Disputes arose over the formation of an approach road, the measurement and demarcation of the property, and the obtaining of permission under the Urban Land (Ceiling and Regulation) Act, 1976. A notice issued by the plaintiff on April 15, 1991 was not served on the respondent due to an incorrect house number.
On April 26, 1991, the respondent issued a legal notice rescinding the agreement, citing the plaintiff's failure to obtain ULCRA permission and the expiry of the stipulated period. The plaintiff filed the suit for specific performance on December 20, 1993, nearly two years and nine months after the respondent's rescission notice.
The Trial Court decreed the suit on January 31, 2002, holding that the plaintiff had been ready and willing to perform the contract, that time was not of the essence, that possession had been delivered to the plaintiff, and that the respondent had rescinded the contract without justifiable cause. The Division Bench of the Karnataka High Court reversed this decree on December 9, 2009, finding that the plaintiff had failed to establish readiness and willingness and that the delayed approach to court undermined the claim. The present appeal was filed against the High Court's order.
Arguments
The appellants argued before the Supreme Court that four Fixed Deposit Receipts of Rs. 70,000 each, totalling Rs. 2,80,000, demonstrated financial readiness sufficient to cover the balance consideration of Rs. 2,75,000. They contended that the High Court had incorrectly noted only two FDRs totalling Rs. 1,40,000, overlooking Ex.-29 which reflected all four.
On demarcation, the appellants submitted that insisting on measurement and demarcation was a legitimate step toward completing the transaction and not evidence of unwillingness, since demarcation is necessary for a valid conveyance of immovable property.
On ULCRA permission, the appellants argued that the primary obligation to initiate the process rested with the respondent as transferor, and that the plaintiff had expressly offered to cooperate in his reply dated April 30, 1991. The respondent, they contended, took no steps for nearly eighteen months.
The appellants also challenged the High Court's finding on delay, submitting that no issue on delay was framed before the Trial Court and could not therefore be raised for the first time on appeal. In any event, the suit was filed within the period of limitation.
The respondent countered that from the date of the agreement until the date of the first FDR on October 4, 1999, a period of nine years, no evidence of available funds had been placed on record. The respondent further argued that ULCRA permission was a shared obligation and the plaintiff's passivity in the matter demonstrated unwillingness. The respondent defended the High Court's finding on delay, submitting that filing the suit at the very end of the limitation period reflected a lack of the diligence that an equitable remedy demands.
Analysis
The Bench framed the sole question for consideration as whether the High Court was correct in finding that the plaintiff failed to establish continuous readiness and willingness, and whether the delayed filing of the suit further undermined such readiness and willingness.
The Court held that Section 16(c) of the Specific Relief Act, 1963, as it stood prior to its amendment on October 1, 2018, requires a plaintiff to specifically aver and prove continuous readiness and willingness from the date of the agreement until the date of the decree. It distinguished between 'readiness', which refers to financial capacity, and 'willingness', which reflects the conduct and intention of the party claiming relief.
Relying on N.P. Thirugnanam (Dead) by LRs. v. Dr. R. Jagan Mohan Rao and Others, (1995) 5 SCC 115, and Man Kaur (Dead) by LRs. v. Hartar Singh Sangha, (2010) 10 SCC 512, the Court reiterated that the amount of consideration must be proved to be available right from the date of execution of the agreement. Proof of breach by the defendant does not relieve the plaintiff of this independent obligation.
On the FDRs, the Court found that all four bore dates in 1999 and 2001, several years after the suit was filed in December 1993. Documents created after the institution of the suit cannot establish financial readiness at the relevant period, namely from the date of the agreement to the date of filing. No evidence of available funds existed on record for that period.
On ULCRA permission, the Court noted from the testimony of PW-1, the plaintiff's son and legal representative, that the plaintiff had not furnished the necessary affidavit or requisite forms for obtaining the clearance. Remaining passive and waiting for the respondent to act was itself a failure of continuous readiness and willingness.
On delay, the Court held, relying on K.S. Vidyanadam v. Vairavan, (1997) 3 SCC 1, and Rajesh Kumar v. Anand Kumar and Others, (2024) 13 SCC 80, that courts exercising the discretionary jurisdiction in specific performance suits are entitled to consider whether the plaintiff approached the court promptly, not merely within the limitation period. The delay of two years and nine months between the respondent's refusal and the filing of the suit, at the very end of the limitation period and without adequate explanation, was found to reflect a lack of the promptitude that an equitable remedy demands.
Conclusion
The Supreme Court dismissed the appeal, holding that the appellants had failed to satisfy the twin statutory requirements of readiness and willingness under Section 16(c) of the Specific Relief Act, 1963. The Court found that financial documents created years after the institution of the suit cannot establish readiness at the relevant period, that the appellant's passivity regarding ULCRA permission constituted a further failure of continuous willingness, and that the prolonged delay in approaching the court disentitled the appellants from the equitable relief of specific performance.
Case Title: Mohammed Khaleel (D) Through LRs & Ors. v. Jayamma, Civil Appeal No. 2187 of 2011 (2026 INSC 651)
