Saturday, 10 September 2016

When plaintiff is not entitled to get decree for specific performance of contract?

Section 20 of Specific Relief Act, 1963, provides that 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. However, the discretion of the court is not
arbitrary but sound and reasonable, guided by judicial
principles. Sub-section (2) of Section 20 of the Act provides
the three situations in which the court may exercise discretion
not to decree specific performance. One of such situation is
contained in clause (a) of sub-section (2) of the Section which
provides that where the terms of the contract or the conduct of
the parties at the time of entering into the contract or the
other circumstances under which the contract was entered
into or such that the contract though not voidable, gives the
plaintiff an unfair advantage over the defendant, the decree of
specific performance need not be passed. It is pertinent to
mention here that in the present case, though execution of
agreement dated 21.06.2004 between the parties is proved,
but it is no where pleaded or proved by the plaintiff that he got
redeemed the mortgaged land in favour of defendant No. 2 in
terms of the agreement, nor is it specifically pleaded that he
was ready and willing to get the property redeemed from the
mortgage.
 In the above facts and circumstances of the case and the
judicial principle discussed above, we are of the opinion that it
is a fit case where instead of granting decree of specific
performance, the plaintiff can be compensated by directing the
appellant to pay a reasonable and sufficient amount to him.
Reportable
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURSIDCITION
CIVIL APPEAL NO. 8427 OF 2014
Ramesh Chand (Dead)
through L.Rs. … Appellant
Versus
Asruddin (Dead)
through LRs and another …Respondents


This appeal is directed against judgment and order dated
22.01.2014, passed by the High Court of Punjab and Haryana
in Regular Second Appeal No. 1344 of 2011 (O&M) whereby
said court has dismissed the appeal, and affirmed the decree
passed by the first appellate court regarding specific
performance of contract, in a suit filed by the
plaintiff/respondent No.1.
2. We have heard learned counsel for the parties and
perused the papers on record.
3. Brief facts of the case are that plaintiff/respondent No.1
Asaruddin entered into an agreement with defendant No. 1/
appellant Ramesh Chand on 21.06.2004, whereby the
appellant agreed to sell his land measuring 12 kanals, 16
marlas, situated in Village Mohammed Nagar, Tehsil Ferozpur
Jhirka, District Gurgaon, to the respondent No. 1 for an
amount of rupees six lacs. An agreement for sale was
executed between the parties after the appellant accepted
rupees four lacs as a part of consideration. It was further
agreed between the parties that the land in suit, mortgaged
with defendant No. 2/respondent No. 2 Gurgaon Gramin
Bank, Nagina, would be redeemed by the appellant before
execution of the sale deed. It is pleaded by the
plaintiff/respondent No. 1 that he was and is always ready
and willing to perform his part of contract. The
plaintiff/respondent No. 1 gave notice to the appellant to
execute the sale deed on 30.11.2004, and remained present
with the balance amount of consideration in the Office of Sub
Registrar, Nagina, and got his presence marked. But the
appellant failed to turn up to execute the sale deed, as agreed
between him and the respondent No. 1. Hence the suit for
specific performance of contract.
4. The appellant-defendant No.1 contested the suit and filed
the written statement before the trial court. He denied the
execution of the agreement dated 21.06.2004 to sell his land.
It is pleaded by the appellant before the trial court that he had
already executed agreement dated 07.05.2004 to sell the land
in favour of one Pravin Kumar, resident of Tauru for an
amount of Rs.7,62,200/- after receiving Rs.1,20,000/- as
earnest money. In the circumstances, there was no occasion to
enter into agreement with the respondent No.1 to sell the same
land. It is further pleaded that since the answering defendant
was in the need of money, he had taken loan of Rs.1,50,000/-
from the plaintiff on 21.06.2004, on interest at the rate of
1.5% per month. The appellant specifically denied having
received rupees four lacs, as alleged by the plaintiff. It is
further pleaded that when respondent No. 1 made demand for
repayment of Rs.1,50,000/- with interest, and created
pressure, the answering defendant asked Pravin Kumar to
make payment of Rs.1,80,000/- to the plaintiff. It is further
alleged that after said payment was made to the plaintiff on
10.11.2005 by Pravin Kumar, the alleged agreement dated
21.06.2004, which was a kind of security, stood cancelled.
And respondent No. 1 should have returned the document to
the plaintiff.
5. On the basis of the pleadings of the parties, the Civil
Judge (Jr. Division), Ferozpur Jhirka, framed as many as ten
issues on 06.09.2005. After recording oral testimony of
witnesses of the parties, and considering the documentary
evidence on record, the trial court came to the conclusion that
it is not a fit case for specific performance of contract, and
disposed of the suit with a finding that the agreement
executed between the plaintiff and defendant No. 1 was in
substance an agreement of security for repayment of loan and
directed the defendant No. 1 to pay back earnest money of
rupees four lacs with 8% interest per annum from 21.06.2004
till payment is made to the plaintiff.
6. Aggrieved by the decree passed by the trial court, plaintiff
filed Civil Appeal No. 51 of 2010 before the first appellate
court. After hearing the parties, the appellate court
(Additional District Judge, Nuh) vide judgment and order
dated 14.02.2011, allowed the appeal, and decreed the suit for
specific performance of contract, directing the defendant No. 1
to execute the sale deed in terms of the agreement dated
21.06.2004, after accepting balance rupees two lacs from the
plaintiff. This made defendant No. 1 Ramesh Chand to file
Regular Second Appeal No. 1344 of 2011 before the High
Court. During the Second Appeal, defendant No. 1 appears to
have died, and his legal heirs prosecuted the appeal. After
hearing the parties, the High Court dismissed the appeal
upholding the order passed by the first appellate court. Hence
this appeal before us through special leave. During this appeal
the plaintiff/respondent No.1 also expired, and his legal heirs
got substituted.
7. Learned counsel for the appellant argued before us that
the first appellate court and the High Court have erred in law
in not considering the fact that the appellant had already
executed an agreement of sale on 07.05.2004 in favour of one
Pravin Kumar, and the decree of specific performance of
contract in the subsequent agreement, if any, in favour of
respondent No.1 was not at all desirable. On the other hand,
on behalf of respondent No.1 it is contended that he cannot be
denied the fruits of decree of specific performance after the
findings recorded by the first appellant court which stood
affirmed by the High Court.
8. Section 20 of Specific Relief Act, 1963, provides that 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. However, the discretion of the court is not
arbitrary but sound and reasonable, guided by judicial
principles. Sub-section (2) of Section 20 of the Act provides
the three situations in which the court may exercise discretion
not to decree specific performance. One of such situation is
contained in clause (a) of sub-section (2) of the Section which
provides that where the terms of the contract or the conduct of
the parties at the time of entering into the contract or the
other circumstances under which the contract was entered
into or such that the contract though not voidable, gives the
plaintiff an unfair advantage over the defendant, the decree of
specific performance need not be passed. It is pertinent to
mention here that in the present case, though execution of
agreement dated 21.06.2004 between the parties is proved,
but it is no where pleaded or proved by the plaintiff that he got
redeemed the mortgaged land in favour of defendant No. 2 in
terms of the agreement, nor is it specifically pleaded that he
was ready and willing to get the property redeemed from the
mortgage.
9. In the above facts and circumstances of the case and the
judicial principle discussed above, we are of the opinion that it
is a fit case where instead of granting decree of specific
performance, the plaintiff can be compensated by directing the
appellant to pay a reasonable and sufficient amount to him.
We are of the view that mere refund of rupees four lacs with
interest at the rate of 8% per annum, as directed by the trial
court, would be highly insufficient. In our considered opinion,
it would be just and appropriate to direct the appellants (Legal
Representatives of original defendant No.1, since died) to repay
rupees four lacs along with interest at the rate of 18% per
annum from 21.06.2004 till date within a period of three
months from today to the L.Rs. of respondent No. 1
(mentioned in I.A. No. ___ of 2015 dated 07.09.2015). If they
do so, the decree of specific performance shall stand set aside.
We clarify that if the amount is not paid or deposited before
the trial court in favour of the L.Rs. of respondent No.1 within
a period of three months, as directed above, the decree of
specific performance shall stand affirmed. We order
accordingly
10. The appeal stands disposed of. Pending I.A(s) also stand
disposed of. No order as to costs.
..…………………..…………J.
[Dipak Misra]
 …………………..……………J.
[Prafulla C. Pant]
New Delhi;
October 06, 2015.
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