2004 (7) TMI 684 - SC - Indian Laws

Suit for specific performance of contract for enforcing an agreement for sale - Time limitation - Readiness and willingness - Liquidated damages - Escalation in property prices and its effect on granting specific performance - HELD THAT - It is not a case where the defendant did not foresee the hardship. It is furthermore not a case that non-performance of the agreement would not cause any hardship to the plaintiff. The defendant was a landlord of the plaintiff. He had accepted part payments from the plaintiff from time to time without any demur whatsoever. He redeemed the mortgage only upon receipt of requisite payment from the plaintiff. Even in August, 1981, i.e. just two months prior to the institution of suit, he had accepted ₹ 20,000 from the Plaintiff. It is, therefore, too late for the Appellant now to suggest that having regard to the escalation in price, the Respondent should be denied the benefit of the decree passed in his favour. Explanation l appended to Section 20 clearly stipulates that merely inadequacy of consideration or the mere fact that the contract is onerous to the defendant or improvident in its nature would not constitute an unfair advantage within the meaning of sub-section (2) of Section 20. The Court for arriving at the said finding gave opportunities to the parties to settle the matter and the respondents No. l and 2 were prepared to pay upto ₹ 60 lakhs as against the demand of the appellant to the fine of rupees one and a half crores which was subsequently reduced upto ₹ 120 lakhs. In view of the respective stand taken by the parties, the Court inter alia directed the respondents No. l and 2 to pay a sum of ₹ 40 lakhs in addition to the sum already paid by them. Conclusion The Supreme Court dismissed the appeal, upholding the High Court's decree for specific performance. The court found that the plaintiff had been ready and willing to perform her part of the contract, the suit was within time, and the discretionary jurisdiction was correctly exercised. The existence of a liquidated damages clause did not preclude specific performance, and escalation in property prices was not a sufficient ground to deny the relief.

Summary

Issues Involved:
1. Readiness and willingness to perform the contract.
2. Time limitation for the suit.
3. Discretionary jurisdiction under Section 20 of the Specific Relief Act.
4. Liquidated damages clause and its impact on specific performance.
5. Escalation in property prices and its effect on granting specific performance.

Summary:

1. Readiness and Willingness to Perform the Contract:
The defendant contended that the plaintiff was not ready and willing to perform her part of the contract by the stipulated date of 5.12.1978. The Trial Court agreed, dismissing the suit. However, the High Court found that the plaintiff had been ready and willing to perform her part of the contract, noting that the plaintiff had made several payments and had shown readiness by keeping money available in a demand draft. The Supreme Court upheld the High Court's finding, stating that the defendant's actions, including accepting payments and seeking extensions, indicated that the contract was revived beyond the original date.

2. Time Limitation for the Suit:
The Trial Court dismissed the suit on the grounds of readiness and willingness but did not specifically address the issue of time limitation. The High Court, by implication, found the suit to be within time as it ruled in favor of the plaintiff. The Supreme Court did not find any fault with this implicit finding.

3. Discretionary Jurisdiction under Section 20 of the Specific Relief Act:
The defendant argued that the court should not exercise its discretionary jurisdiction u/s 20 of the Specific Relief Act due to the hardship it would cause him. The High Court rejected this contention, and the Supreme Court agreed, noting that the defendant had accepted payments and had not raised the issue of hardship earlier. The court emphasized that mere escalation in property prices does not constitute an unfair advantage to the plaintiff.

4. Liquidated Damages Clause and Its Impact on Specific Performance:
The defendant argued that the existence of a liquidated damages clause in the agreement precluded a decree for specific performance. The Supreme Court rejected this argument, citing Section 23 of the Specific Relief Act, which allows for specific performance even if a sum is named in the contract for breach. The court noted that the clause was intended to secure performance, not to provide an option to pay damages in lieu of performance.

5. Escalation in Property Prices and Its Effect on Granting Specific Performance:
The defendant contended that the court should refuse specific performance due to the significant increase in property prices. The Supreme Court dismissed this argument, stating that escalation in prices alone does not justify denying specific performance. The court referred to previous judgments, emphasizing that specific performance is a rule in contracts for the sale of immovable property, and refusal is an exception based on valid grounds.

Conclusion:
The Supreme Court dismissed the appeal, upholding the High Court's decree for specific performance. The court found that the plaintiff had been ready and willing to perform her part of the contract, the suit was within time, and the discretionary jurisdiction was correctly exercised. The existence of a liquidated damages clause did not preclude specific performance, and escalation in property prices was not a sufficient ground to deny the relief.