Case Note & Summary
The dispute arose from a suit for specific performance of an Agreement to Sell dated 25th January 2008, executed between the buyer (Respondent No.1) and the seller (late Kushum Kumari) for a property in Patna. The buyer paid Rs.2,51,000 in cash and issued three post-dated cheques of Rs.2,50,000 each as earnest money. The seller alleged her signatures were fraudulently obtained and, upon discovery on 5th February 2008, filed a criminal complaint and sent a cancellation letter dated 7th February 2008, refunding Rs.2,11,000 via demand drafts and returning two cheques. The buyer encashed the demand drafts in July 2008 after filing the suit on 5th May 2008. The Trial Court decreed the suit in favour of the buyer on 27th April 2018, which was upheld by the Patna High Court on 9th May 2024. The appellant, a beneficiary under the seller's will, appealed to the Supreme Court. The core legal issue was whether the suit for specific performance could be decreed given the buyer's acceptance of the refund during the suit's pendency. The appellant argued that the agreement stood cancelled, the buyer was not ready and willing, and the suit was not maintainable, citing precedents like R. Kandasamy v. T.R.K. Sarawathy. The buyer contended that the refund was partial, the agreement could not be unilaterally cancelled, and the courts below had rightly appreciated the evidence. The Supreme Court analyzed the buyer's conduct, noting her admission of receiving and encashing the refund. It held that acceptance of the refund indicated a lack of readiness and willingness to perform the contract, essential under the Specific Relief Act, 1963. The court reasoned that the agreement was effectively revoked, making the suit based on a non-existent agreement not maintainable. Consequently, the appeal was allowed, setting aside the judgments of the lower courts and dismissing the suit.
Headnote
A) Contract Law - Specific Performance - Agreement to Sell - Specific Relief Act, 1963 - Buyer accepted refund of earnest money during suit pendency - Court held that acceptance of refund indicates lack of readiness and willingness to perform the contract, making the suit for specific performance not maintainable as the agreement stood cancelled (Paras 15-22). B) Contract Law - Specific Performance - Readiness and Willingness - Specific Relief Act, 1963 - Buyer's conduct in encashing demand drafts after suit filing - Court held that buyer's conduct, including encashment of refunded amount, demonstrated she was not ready and willing to perform the contract, which is essential for granting specific performance (Paras 15-22). C) Contract Law - Specific Performance - Validity of Agreement - Specific Relief Act, 1963 - Existence of valid agreement sine qua non - Court held that a non-existent agreement cannot be enforced, and acceptance of refund amounted to revocation of the agreement, making the suit based on a cancelled agreement not maintainable (Paras 15-22).
Issue of Consideration
Whether a suit for specific performance of an Agreement to Sell is liable to be decreed if the buyer had accepted the refund of majority of the earnest money deposit/advance consideration, during the pendency of the civil suit?
Final Decision
The Supreme Court allowed the appeal, set aside the judgments of the Trial Court and High Court, and dismissed the suit for specific performance
Law Points
- Specific performance of an agreement to sell requires a valid and subsisting agreement
- readiness and willingness of the buyer to perform the contract
- and acceptance of refund of earnest money during suit pendency can indicate lack of readiness and willingness
- making the suit not maintainable
