The law relating to specific performance as engrafted in the Specific Relief Act, 1963 (“the Act”) is an extremely important facet of civil law. The Act inter alia covers most aspects pertaining to performance of contracts as also injunctive reliefs which can be granted and claimed.
This article shall acquaint and take you through the basic principles and important aspects to be borne in mind while seeking specific performance of contracts in relation to immoveable property and related aspects.
In respect of moveable property, the general rule is that specific relief is refused as there is a presumption that the failure to perform can be compensated in terms of money in view of Section 10 of the Act as unamended. Even though Section 10 of the Act now stands amended, it does not mean that specific performance for moveables will be ordinarily granted. The law will still provide and presume that breach of a contract in respect of moveables can be compensated and therefore refuse performance. The exception to this will be amongst others when the moveable property is not an ordinary article of commerce, or is of special value or interest to the plaintiff, or consists of goods which are not easily obtainable in the market.
Nature of Specific Performance
Specific performance is an equitable relief granted by the Court to enforce contractual obligations between the parties. It is a remedy in performance as opposed to a claim sounding in damages for breach of contract where pecuniary compensation is granted as relief for failure to carry out the terms of the contract.
What are the factors a Court considers when decoding to grant or refuse specific performance
Section 10 of the Act as now amended[4] emphasises that specific performance is usually to be granted and denied only in circumstances as set out in Sections 11, 14 and 16 of the Act[5].
Section 10 of the Act as amended by the Specific Relief (Amendment) Act, 2018 seeks to make a departure and is an attempt to reduce the discretion of the Courts relating to enforcement of specific performance of contracts in keeping with the Statement of Objects and Reasons for the amending Act of 2018[6].
Similarly, Section 20 of the Act as it stood earlier provided that the grant of relief was discretionary. It provided as under:
“20. Discretion as to decreeing specific performance.—(1) The jurisdiction to decree specific performance is discretionary, and the court is not bound to grant such relief merely because it is lawful to do so; but the discretion of the court is not arbitrary but sound and reasonable, guided by judicial principles and capable of correction by a court of appeal….”
However with the amendment to Section 20 by the Amendment Act in 2018, it now also seeks to take away the discretion to an extent[7].
Despite the amendments as above, the Courts still consider the following well-settled criteria and principles while granting or denying specific performance.
1. Readiness and Willingness.
Section 16(c)[8] of the Act makes it mandatory for the plaintiff to prove that he has already performed or was always ready and willing to perform the essential terms of the contract which were to be performed by him.
Section 16(c) of the Act as amended by the Specific Relief (Amendment) Act, 2018 no longer requires the plaintiff to plead readiness and willingness as it was earlier mandated by a mantra in the plaint. However, in my view it is still mandatory for the plaintiff to prove that he has already performed or was always ready and willing to perform the essential terms of the contract which were to be performed by him. This cannot be done unless the plaintiff seeking performance also makes necessary averments in the plaint showing and disclosing facts which disclose the readiness and willingness and or performance. It is settled law that evidence cannot be contrary to pleadings and therefore it would still be necessary to have sufficient pleadings which would enable the Court to infer the ingredients of the amended Section 16 i.e. proof of readiness and willingness or performance.
The obligation cast by Section 16(c) of the Act upon the plaintiff to prove that he has already performed or was always ready and willing to perform essential terms of the contract which were to be performed by him have been emphasised by the Supreme Court in the following judgments:
Mehboob-ur-Rehman v. Ahsanul Ghani[9]
“14. Though, with the amendment of the Specific Relief Act, 1963 by Act 18 of 2018, the expression “who fails to aver and prove” is substituted by the expression “who fails to prove” and the expression “must aver” stands substituted by the expression “must prove” but then, the position on all the material aspects remains the same that, specific performance of a contract cannot be enforced in favor to the person who fails to prove that he has already performed or has always been ready and willing to perform the essential terms of the contract which are to be performed by him, other than the terms of which, the performance has been prevented or waived by the other party.”
(emphasis supplied)
Umabai v. Nilkanth Dhondiba Chavan[10]
“30. It is now well settled that the conduct of the parties, with a view to arrive at a finding as to whether the plaintiff-respondents were all along and still are ready and willing to perform their part of contract as is mandatorily required under Section 16(c) of the Specific Relief Act must be determined having regard to the entire attending circumstances. A bare averment in the plaint or a statement made in the examination-in-chief would not suffice. The conduct of the plaintiff-respondents must be judged having regard to the entirety of the pleadings as also the evidences brought on records.”
(emphasis supplied)
2. Conduct Unblemished.
It is necessary that a plaintiff’s conduct in performance of the contract or attempting to fulfil the same shows an unwavering intention of wanting to perform. The Supreme Court has in para 12 of its judgment in Aniglase Yohannan v. Ramlatha[11] held that:
“12. The basic principle behind Section 16(c) read with Explanation (ii) is that any person seeking benefit of the specific performance of contract must manifest that his conduct has been blemishless throughout entitling him to the specific relief. The provision imposes a personal bar. The Court is to grant relief on the basis of the conduct of the person seeking relief. If the pleadings manifest that the conduct of the plaintiff entitles him to get the relief on perusal of the plaint he should not be denied the relief.”
(emphasis supplied)
3. Readiness must be shown throughout up to the date of the decree.
A plaintiff in order to succeed must prove facts which would show his readiness and willingness at all times. It is not enough to show the readiness uptil the time of the plaint but the conduct must be such as discloses readiness and willingness at all times from the time of the contract till the suit and up to the decree. This principle was laid down in the following judgements:
Gomathinayagam Pillai v. Palaniswami Nadar[12]
“6. But the respondent has claimed a decree for specific performance and it is for him to establish that he was, since the date of the contract, continuously ready and willing to perform his part of the contract. If he fails to do so, his claim for specific performance must fail. As observed by the Judicial Committee of the Privy Council in Ardeshir Mama v. Flora Sassoon[13]:
“In a suit for specific performance, on the other hand, he treated and was required by the Court to treat the contract as still subsisting. He had in that suit to allege, and if the fact was traversed, he was required to prove a continuous readiness and willingness, from the date of the contract to the time of the hearing, to perform the contract on his part. Failure to make good that averment brought with it the inevitable dismissal of his suit.”
The respondent must in a suit for specific performance of an agreement plead and prove that he was ready and willing to perform his part of the contract continuously between the date of the contract and the date of hearing of the suit.”
(emphasis supplied)
Vijay Kumar v. Om Parkash[14]
“7. In order to obtain a decree for specific performance, the plaintiff has to prove his readiness and willingness to perform his part of the contract and the readiness and willingness has to be shown through out and has to be established by the plaintiff.”
(emphasis supplied)
J.P.Builders v. A. Ramadas Rao[15]
“27. It is settled law that even in the absence of specific plea by the opposite party, it is the mandate of the statute that the plaintiff has to comply with Section 16(c) of the Specific Relief Act and when there is non-compliance with this statutory mandate, the court is not bound to grant specific performance and is left with no other alternative but to dismiss the suit. It is also clear that readiness to perform must be established throughout the relevant points of time. “Readiness and willingness” to perform the part of the contract has to be determined/ascertained from the conduct of the parties.”
(emphasis supplied)
4. It is not necessary that the plaintiff must tender the money due under a contract.
Although one of the factors showing the readiness and willingness may be the ability of a plaintiff to make payment that cannot be a factor by itself to disentitle the plaintiff the grant of relief.
A. Kanthamani v. Nasreen Ahmed [16]
“24. The expression “readiness and willingness” has been the subject-matter of interpretation in many cases even prior to its insertion in Section 16(c) of the Specific Relief Act, 1963. While examining the question as to how and in what manner, the plaintiff is required to prove his financial readiness so as to enable him to claim specific performance of the contract/agreement, the Privy Council in a leading case which arose from the Indian courts (Bombay) in Bank of India Ltd. v. Jamsetji A.H. Chinoy[17] , approved the view taken by Chagla, Actg. C.J., and held inter alia that:
“it is not necessary for the plaintiff to produce the money or vouch a concluded scheme for financing the transaction to prove his readiness and willingness.”
25. The following observations of the Privy Council are apposite: (Jamsetji case[18] , SCC OnLine PC)
“… Their Lordships agree with this conclusion and the grounds on which it was based. It is true that Plaintiff 1 stated that he was buying for himself, that he had not sufficient ready money to meet the price and that no definite arrangements had been made for finding it at the time of repudiation. But in order to prove himself ready and willing a purchaser has not necessarily to produce the money or to vouch a concluded scheme for financing the transaction. … Their Lordships would only add in this connection that they fully concur with Chagla, Actg. C.J. when he says:
‘In my opinion, on the evidence already on record it was sufficient for the court to come to the conclusion that Plaintiff 1 was ready and willing to perform his part of the contract. It was not necessary for him to work out actual figures and satisfy the court what specific amount a bank would have advanced ……’.”
(emphasis supplied)
Boramma v. Krishna Gowda[19]
“10. Ms. Agarwal has read to us the statement of PW 2. In the cross- examination, PW2 stated that he had not offered at any time to Boramma the amount and that he had not deposited any amount in court. Explanation to clause (c) of Section 16 makes it clear that where a contract involves the payment of money, it is not essential for the plaintiff to actually tender to the defendant or to deposit in court any money, except when so directed by the court.”
(emphasis supplied)
Azhar Sultana v. B. Rajamani[20]
“31. We are, however, in agreement with Mr. Lalit that for the aforementioned purpose, it was not necessary that the entire amount of consideration should be kept ready and the plaintiff must file proof in respect thereof. ”
(emphasis supplied)
Apart from the aforesaid the following must also be borne in mind while conducting a suit for performance.
5. The plaintiff must seek appropriate relief.
It often happens that a contract is terminated and that fact gives rise to a cause of action to file a suit for performance. In such cases the failure to apply to have the termination set aside would be fatal to performance as without an appropriate relief to set aside the termination it would be deemed the plaintiff has accepted the same and then cannot sue for performance of a contract treated as at an end by his conduct.
In I.S. Sikandar v. K. Subramani[21],the Supreme Court held that on failure to pray for and seek to declare that a termination was wrongful the further relief to perform the terminated agreement could not be granted:
“37. As could be seen from the prayer sought for in the original suit, the plaintiff has not sought for declaratory relief to declare the termination of agreement of sale as bad in law. In the absence of such prayer by the plaintiff the original suit filed by him before the trial court for grant of decree for specific performance in respect of the suit scheduled property on the basis of agreement of sale and consequential relief of decree for permanent injunction is not maintainable in law.”
(emphasis supplied)
The provisions of Section 22[22] must also be considered when seeking relief in cases where the plaintiff is not in possession of the land or property in dispute.
Adcon Electronics (P) Ltd. v. Daulat[23]
“16. In a suit for specific performance of contract for sale of immovable property containing a stipulation that on execution of the sale deed the possession of the immovable property will be handed over to the purchaser, it is implied that delivery of possession of the immovable property is part of the decree of specific performance of contract. But in this connection it is necessary to refer to Section 22 of the Specific Relief Act, 1963. ……….
17. It may be seen that sub-section (1) is an enabling provision. A plaintiff in a suit of specific performance may ask for further reliefs mentioned in clauses (a) and (b) thereof. Clause (a) contains reliefs of possession and partition and separate possession of the property, in addition to specific performance. The mandate of sub-section (2) of Section 22 is that no relief under clauses (a) and (b) of sub-section (1) shall be granted by the court unless it has been specifically claimed. Thus it follows that no court can grant the relief of possession of land or other immovable property, subject-matter of the agreement for sale in regard to which specific performance is claimed, unless the possession of the immovable property is specifically prayed for.”
6. Who are the necessary parties to a suit for specific performance.
It is not unusual that during the pendency of an action or even before in case a party to the contract creates third party rights then such persons claiming title from one of the contracting parties becomes a necessary party. Who would be appropriate parties to a suit for performance would depend on the facts of a case, Order I Rule 10 of the Civil Procedure Code, 1908 and Section 19[24] of the Act which provides an indication. The Supreme Court in Kasturi case[25] has succinctly laid down the principles to consider i.e. who should be a necessary party in a suit for performance.
Kasturi v. Iyyamperumal [26]
“7. In our view, a bare reading of this provision, namely, second part of Order 1 Rule 10 sub-rule (2) CPC would clearly show that the necessary parties in a suit for specific performance of a contract for sale are the parties to the contract or if they are dead, their legal representatives as also a person who had purchased the contracted property from the vendor. In equity as well as in law, the contract constitutes rights and also regulates the liabilities of the parties. A purchaser is a necessary party as he would be affected if he had purchased with or without notice of the contract, but a person who claims adversely to the claim of a vendor is, however, not a necessary party. From the above, it is now clear that two tests are to be satisfied for determining the question who is a necessary party. Tests are — (1) there must be a right to some relief against such party in respect of the controversies involved in the proceedings; (2) no effective decree can be passed in the absence of such party.
* * *
10. That apart, from a plain reading of Section 19 of the Act we are also of the view that this section is exhaustive on the question as to who are the parties against whom a contract for specific performance may be enforced.
* * *
15…Therefore, in our view, a third party or a stranger to the contract cannot be added so as to convert a suit of one character into a suit of different character.”
(emphasis supplied)
7. The proper form of decree.
In cases where there is a transfer of the suit property by the contracting party and then the party in default suffers a decree for performance the proper form of a decree is as laid down in Durga Prasad v. Deep Chand[27] where it was held that the defendant and the transferee must join in the performance.
The principle was again applied recently in Vijay A. Mittal v. Kulwant Rai.[28]
“38. The question arose before this Court in Durga Prasad v. Deep Chand as to what form of decree should be passed in the case of specific performance of contract where the suit property is sold by the defendant i.e. the owner of the suit property to another person and later he suffers a decree for specific performance of contract directing him to transfer the suit property to the plaintiff in term of contract.
39. The learned Judge, Vivian Bose, J. examined this issue and speaking for the Bench in his inimitable style of writing, held as under: (Durga Prasad case[30] )
“Where there is a sale of the same property in favour of a prior and subsequent transferee and the subsequent transferee has, under the conveyance outstanding in his favour, paid the purchase-money to the vendor, then in a suit for specific performance brought by the prior transferee, in case he succeeds, the question arises as to the proper form of decree in such a case. The practice of the courts in India has not been uniform and three distinct lines of thought emerge. According to one point of view, the proper form of decree is to declare the subsequent purchase void as against the prior transferee and direct conveyance by the vendor alone. A second considers that both vendor and vendee should join, while a third would limit execution of the conveyance to the subsequent purchaser alone. According to the Supreme Court, the proper form of decree is to direct specific performance of the contract between the vendor and the prior transferee and direct the subsequent transferee to join in the conveyance so as to pass on the title which resides in him to the prior transferee. He does not join in any special covenants made between the prior transferee and his vendor; all he does is to pass on his title to the prior transferee.”
8. Limitation for an action.
The prescribed period of limitation for a suit of specific performance is three years from the date fixed for performance or if no such date is fixed, when the plaintiff has notice that performance is refused[31].
Rathnavathi v. Kavita Ganashamdas[32]
“42. A mere reading of Article 54 of the Limitation Act would show that if the date is fixed for performance of the agreement, then non-compliance with the agreement on the date would give a cause of action to file suit for specific performance within three years from the date so fixed. However, when no such date is fixed, limitation of three years to file a suit for specific performance would begin when the plaintiff has noticed that the defendant has refused the performance of the agreement.
43. The case at hand admittedly does not fall in the first category of Article 54 of the Limitation Act because as observed supra, no date was fixed in the agreement for its performance. The case would thus be governed by the second category viz. when the plaintiff has a notice that performance is refused.
44. As mentioned above, it was the case of the plaintiff that she came to know on 2-1-2000 and 9-1-2000 that the owner of the suit house along with the so-called intending purchaser are trying to dispossess her from the suit house on the strength of their ownership over the suit house. This event was, therefore, rightly taken as starting point of refusal to perform the agreement by Defendant 2, resulting in giving notice to Defendant 2 by the plaintiff on 6-3-2000 and then filing of suit on 31-3-2000.”
9. Court Passing the decree retains control over the decree even after the decree is passed.
This principle enables the Court to provide assistance to the successful Plaintiff even after the decree to effectuate complete satisfaction of the relief claimed and prevent it from being rendered useless.
The Supreme Court has in Hungerford Investment Trust Ltd. v. Haridas Mundhra[33] explained the power of the Court in the following terms:
“22. It is settled by a long course of decisions of the Indian High Courts that the Court which passes a decree for specific performance retains control over the decree even after the decree has been passed. In Mahommadalli Sahib v. Abdul Khadir Saheb[34],it was held that the Court which passes a decree for specific performance has the power to extend the time fixed in the decree for the reason that Court retains control over the decree, that the contract between the parties is not extinguished by the passing of a decree for specific performance and that the contract subsists notwithstanding the passing of the decree. In Pearisundari Dassee v. Hari Charan Mozumdar Chowdhry[35],the Calcutta High Court said that the Court retains control over the proceedings even after a decree for specific performance has been passed, that the decree passed in a suit for specific performance is not a final decree and that the suit must be deemed to be pending even after the decree…….Fry in his book[36]on specific performance stated the law in England as follows:
“It may and not unfrequently does happen that after judgment has been given for the specific performance of a contract, some further relief becomes necessary, in consequence of one or other of the parties making default in the performance of something which ought under the judgment to be performed by him or on his part; as for instance, where a vendor refuses or is unable to execute a proper conveyance of the property or a purchaser to pay the purchase money . . . .
There are two kinds of relief after judgment for specific performance of which either party to the contract may, in a proper case, avail himself —
(i) He may obtain (on motion in the action) an order appointing a definite time and place for the completion of the contract by payment of the un-paid purchase-money and delivery over of the executed conveyance and title deeds, or a period within which the judgment is to be obeyed, and if the other party fails to obey the order, may thereupon at once issue a writ of sequestration against the defaulting party’s estate and effects. . . . . . .
(ii) He may apply to the Court (by motion in the action) for an order rescinding the contract. On an application of this kind, if it appears that the party moved against has positively refused to complete the contract, its immediate rescission may be ordered; otherwise, the order will be for rescission in default of completion within a limited time . . . . . .”
All the aforesaid principles would apply with equal force to a party seeking specific performance in an arbitration.
* Advocate, High Court, Bombay. Assisted by Arjun Prabhu, Mayur Agarwal and Sheetal Parkash. Author can be reached at karlshroff@gmail.com.
[2] Section 10 (prior to its amendment). Cases in which specific performance of contract enforceable.—Except as otherwise provided in this Chapter, the specific performance of any contract may, in the discretion of the court, be enforced……
Explanation.—Unless and until the contrary is proved, the court shall presume—
(i) that the breach of a contract to transfer immovable property cannot be adequately relieved by compensation in money; and
(ii) that the breach of a contract to transfer moveable property can be so relieved except in the following cases—
(a) where the property is not an ordinary article of commerce, or is of special value or interest to the plaintiff, or consists of goods which are not easily obtainable in the market;
(b) where the property is held by the defendant as the agent or trustee of the plaintiff.
[3] As amended by the Specific Relief (Amendment) Act, 2018
[4] As amended by the Specific Relief (Amendment) Act, 2018
[5] Section10. Specific performance in respect of contracts. — The specific performance of a contract shall be enforced by the court subject to the provisions contained in sub-section (2) of Section 11, Section 14 and Section 16
[6] Statement of Objects and Reasons of Amending Act 18 of 2018.—The Specific Relief Act, 1963 was enacted to define and amend the law relating to certain kinds of specific relief. It contains provisions, inter alia, specific performance of contracts, contracts not specifically enforceable, parties who may obtain and against whom specific performance may be obtained, etc. It also confers wide discretionary powers upon the courts to decree specific performance and to refuse injunction, etc. As a result of wide discretionary powers, the courts in majority of cases award damages as a general rule and grant specific performance as an exception.
(2) The tremendous economic development since the enactment of the Act have brought in enormous commercial activities in India including foreign direct investments, public private partnerships, public utilities infrastructure developments, etc.; which have prompted extensive reforms in the related laws to facilitate enforcement of contracts, settlement of disputes in speedy manner. It has been felt that the Act is not in tune with the rapid economic growth happening in our country and the expansion of infrastructure activities that are needed for the overall development of the country.
(3) In view of the above, it is proposed to do away with the wider discretion of courts to grant specific performance and to make specific performance of contract a general rule than exception subject to certain limited grounds.
[7] Section 20. Substituted performance of contract.— (1) Without prejudice to the generality of the provisions contained in the Indian Contract Act, 1872 (9 of 1872), and, except as otherwise agreed upon by the parties, where the contract is broken due to non-performance of promise by any party, the party who suffers by such breach shall have the option of substituted performance through a third party or by his own agency, and, recover the expenses and other costs actually incurred, spent or suffered by him, from the party committing such breach.
(2) No substituted performance of contract under sub-section (1) shall be undertaken unless the party who suffers such breach has given a notice in writing, of not less than thirty days, to the party in breach calling upon him to perform the contract within such time as specified in the notice, and on his refusal or failure to do so, he may get the same performed by a third party or by his own agency:
Provided that the party who suffers such breach shall not be entitled to recover the expenses and costs under sub-section (1) unless he has got the contract performed through a third party or by his own agency.
(3) Where the party suffering breach of contract has got the contract performed through a third party or by his own agency after giving notice under sub-section (1), he shall not be entitled to claim relief of specific performance against the party in breach.
(4) Nothing in this section shall prevent the party who has suffered breach of contract from claiming compensation from the party in breach.
[8] 16. Personal bars to relief – Specific performance of a contract cannot be enforced in favor of a person –
(a) – (b) * * *
(c) who fails to prove that he has performed or has always been ready and willing to perform the essential terms of the contract which are to be performed by him, other than terms the performance of which has been prevented or waived by the defendant.
Explanation. – For the purposes of clause (c) –
(i) where a contract involves the payment of money, it is not essential for the plaintiff to actually tender to the defendant or to deposit in court any money except when so directed by the Court.
(ii) the plaintiff must prove performance of, or readiness and willingness to perform, the contract according to its true construction.
[10] (2005) 6 SCC 243
[11] (2005) 7 SCC 534
[12] (1967) 1 SCR 227
[15] (2011) 1 SCC 429
[16] (2017) 4 SCC 654
[18]. Bank of India Ltd. v. Jamsetji A.H. Chinoy, 1949 SCC OnLine PC 81
[19] (2000) 9 SCC 214
[20] (2009) 17 SCC 27
[21] (2013) 15 SCC 27 at page 38
[22] Section 22. Power to grant relief for possession, partition, refund of earnest money, etc.— (1) Notwithstanding anything to the contrary contained in the Code of Civil Procedure, 1908, any person suing for the specific performance of a contract for the transfer of immovable property may, in an appropriate case, ask for—
(a) possession, or partition and separate possession, of the property, in addition to such performance; or
(b) any other relief to which he may be entitled, including the refund of any earnest money or deposit paid or made by him, in case his claim for specific performance is refused.
(2) No relief under clause (a) or clause (b) of sub-section (1) shall be granted by the court unless it has been specifically claimed:
Provided that where the plaintiff has not claimed any such relief in the plaint, the court shall, at any stage of the proceeding, allow him to amend the plaint on such terms as may be just for including a claim for such relief.”
[23] (2001) 7 SCC 698
[24] Section 19. Except as otherwise provided by this Chapter, specific performance of a contract may be enforced against.—
(a) either party thereto;
(b) any other person claiming under him by a title arising subsequently to the contract, except a transferee for value who has paid his money in good faith and without notice of the original contract;
(c) any person claiming under a title which, though prior to the contract and known to the plaintiff, might have been displaced by the defendant.
[25] Kasturi v. Iyyamperumal, (2005) 6 SCC 733
[26] Ibid
[27] 1954 SCR 360
[28] (2019) 3 SCC 520
[29] 1954 SCR 360
[30] Ibid
[31] Article 54 of the Limitation Act, 1963
For specific performance of a contract. Three years The date fixed for the performance, or, if no such date is fixed, when the plaintiff has notice that performance is refused.
[32] (2015) 5 SCC 223
[33] (1972) 3 SCC 684
[35] ILR (1888) 15 Cal 211
[36] Fry on Specific Performance, 6th Edn., p. 546