2025 (4) TMI 310 - SC - Indian Laws

Buyer's encashment of demand drafts during suit shows unwillingness to perform agreement, specific performance denied

SANGITA SINHA Versus BHAWANA BHARDWAJ AND ORS.

SC held that buyer's encashment of demand drafts worth Rs. 2,11,000/- during pendency of specific performance suit demonstrated unwillingness to perform ... Decree of suit for specific performance of an Agreement to Sell, if the buyer had accepted the refund of majority of the earnest money deposit/advance consideration, during the pendency of the civil suit - HELD THAT:- After examination of the pleadings and evidence in the present suit as well as the conduct of the Respondent No.1-buyer, this Court is unable to agree with Respondent No.1-buyer that she was willing to perform the Agreement to Sell dated 25th January, 2008 and go ahead with the purchase of the property. This Court says so because admittedly, as noted above, the five demand drafts dated 7th February 2008 for Rs. 2,11,000/- were encashed by the Respondent No.1-buyer in July, 2008. The conduct of the Respondent No.1-buyer in encashing the demand drafts establishes beyond doubt that the Respondent No.1-buyer was not willing to perform her part of the Agreement to Sell and proceed with execution of the sale deed; for the Respondent No.1-buyer would not have encashed the demand drafts if she was indeed willing to perform the contract and have a sale deed executed. Consequently, once it is established that the Respondent No. 1-buyer is not willing to perform the contract, the fact that the entire advance consideration/earnest money had not been returned to Respondent No.1-buyer is irrelevant and immaterial. Since in the present case, the seller had issued a letter dated 07th February, 2008 cancelling the agreement to sell prior to the institution of the suit, the same constitutes a jurisdictional fact as till the said cancellation is set aside, the respondent is not entitled to the relief of specific performance - Consequently, this Court is of the opinion that absent a prayer for declaratory relief that termination/cancellation of the agreement is bad in law, a suit for specific performance is not maintainable. Locus standi to file appeal - HELD THAT:- The appellant was impleaded as defendant no. 3 in the subject suit as she is a beneficiary under the Will dated 23rd September 2002 executed by the original owner/seller, whereby the subject property has been bequeathed in her favour. Consequently, the appellant, being a necessary and interested party to the lis, has the locus to file the present appeal. Further, the onus to establish readiness and willingness is on the Respondent No.1-buyer and the failure to establish the same disentitles the Respondent No.1-buyer from the equitable and discretionary relief of specific performance. Conclusion - The buyer's encashment of the refund constituted acceptance of the agreement's cancellation. The Agreement to Sell cannot be specifically enforced. Appeal allowed. ISSUES PRESENTED and CONSIDEREDThe primary issue considered was whether a suit for specific performance of an Agreement to Sell is liable to be decreed if the buyer accepted a refund of the majority of the earnest money deposit/advance consideration during the pendency of the civil suit. The Court also examined whether the buyer was ready and willing to perform the Agreement to Sell and whether the agreement was validly cancelled. Additionally, the Court considered the maintainability of the suit in the absence of a declaratory relief challenging the cancellation of the agreement and the locus standi of the appellant to file the appeal.ISSUE-WISE DETAILED ANALYSISRelevant legal framework and precedents:The legal framework centered on the Specific Relief Act, 1963, particularly the discretionary nature of specific performance as a remedy. The Court referenced several precedents, including Kamal Kumar vs. Premlata Joshi, outlining the requirements for granting specific performance, such as the existence of a valid contract and the plaintiff's readiness and willingness to perform the contract.Court's interpretation and reasoning:The Court emphasized that specific performance is an equitable and discretionary relief, requiring continuous readiness and willingness from the buyer. It found that the buyer's acceptance of the refund and encashment of the demand drafts indicated a lack of willingness to perform the contract. The Court also determined that the unilateral cancellation of the agreement by the seller, followed by the buyer's acceptance of the refund, effectively terminated the agreement.Key evidence and findings:The Court noted that the buyer had encashed demand drafts totaling Rs. 2,11,000 after receiving a cancellation letter from the seller. This action was viewed as acceptance of the cancellation. Furthermore, the buyer did not seek a declaratory relief to challenge the cancellation, which the Court found necessary for maintaining a suit for specific performance.Application of law to facts:The Court applied the principles from precedents to determine that the buyer's actions demonstrated a lack of continuous readiness and willingness to perform the contract. It concluded that the suit for specific performance was not maintainable due to the absence of a declaratory relief challenging the cancellation.Treatment of competing arguments:The appellant argued that the buyer was not ready and willing to perform the contract, as evidenced by the encashment of the refund. The buyer contended that the agreement could not be unilaterally cancelled and that the refund was not complete. The Court sided with the appellant, finding that the buyer's acceptance of the refund and lack of a challenge to the cancellation were decisive.Conclusions:The Court concluded that the buyer was not entitled to specific performance due to the lack of continuous readiness and willingness and the absence of a declaratory relief challenging the cancellation. The agreement was deemed cancelled, and the suit was not maintainable.SIGNIFICANT HOLDINGSThe Court held that the buyer's encashment of the refund constituted acceptance of the agreement's cancellation. It emphasized the necessity of continuous readiness and willingness for specific performance and the requirement for a declaratory relief to challenge a cancellation. The Court stated, 'The conduct of the Respondent No.1-buyer in encashing the demand drafts establishes beyond doubt that the Respondent No.1-buyer was not willing to perform her part of the Agreement to Sell.'The Court also clarified that the absence of a declaratory relief challenging the cancellation constituted a jurisdictional fact, rendering the suit for specific performance not maintainable. It stated, 'Absent a prayer for declaratory relief that termination/cancellation of the agreement is bad in law, a suit for specific performance is not maintainable.'Finally, the Court addressed the issue of locus standi, affirming the appellant's right to appeal as a beneficiary under the seller's will, and highlighted the buyer's suppression of material facts as a factor disqualifying her from obtaining equitable relief.The appeal was allowed, and the judgments and decrees favoring the buyer were set aside, declaring the sale deed executed in favor of the buyer null and void.