Case Note & Summary
This matter arose from a civil dispute concerning the specific performance of an agreement to sell agricultural land. The petitioner before the Supreme Court was the vendor, while the respondent was the purchaser who sought enforcement of the sale agreement. The litigation reached the Supreme Court by way of a special leave petition against the judgment and order of the Punjab and Haryana High Court in Second Appeal No.333 of 1996, which had confirmed the decree for specific performance granted by the lower courts. The admitted facts were that on June 14, 1986, the petitioner entered into an agreement to sell land admeasuring 6 Kanals 13 marlas at a consideration of Rs.85,000 per killa. The petitioner received Rs.6,000 as earnest money, and the balance amount was agreed to be paid at the time of registration. The sale deed was to be executed by July 15, 1987. When the respondent presented a bank draft for the balance consideration of Rs.64,000 at the time of registration, the petitioner refused to receive it. Consequently, the petitioner failed to execute the sale deed, and the respondent filed a suit for specific performance. All the courts below concurrently found as a fact that the respondent had presented the bank draft and the petitioner had refused to accept it. The core legal issue was whether tendering a bank draft satisfied the contractual requirement of paying the balance consideration at registration, or whether only cash payment would suffice. The petitioner contended that payment by bank draft was not payment by cash, and therefore the respondent had committed breach by not paying cash. He argued that the courts below had committed a manifest error of law in decreeing specific performance. The respondent maintained that a bank draft was as good as cash and that the petitioner's refusal to accept it constituted a breach of the agreement. The Supreme Court rejected the petitioner's contention. It observed that payment by bank draft is as good a payment as cash-in-hand. The Court noted that instead of bringing cash, the respondent had brought a bank draft, which would be honoured by the bank on behalf of the respondent. The Court characterized the respondent's action as having rightly presented the bank draft at the time of negotiation, which was legal tender of cash payment to the vendor. The Court held that the petitioner's refusal to receive the bank draft at the time of registration was a breach of the covenant in terms of the agreement. Accordingly, the courts below had not committed any manifest error of law warranting interference. In the result, the Supreme Court dismissed the special leave petition and upheld the decree for specific performance of the contract. The decision reaffirmed that a bank draft is equivalent to cash for the purpose of payment of sale consideration, and a vendor cannot avoid contractual obligations by refusing to accept a bank draft when it is duly presented. The judgment favored the respondent-purchaser, who was entitled to the enforcement of the agreement.
Headnote
A) Contract Law - Specific Performance - Bank Draft Constitutes Valid Tender of Balance Sale Consideration and Vendor's Refusal Amounts to Breach - No specific statute cited - The petitioner agreed to sell land measuring 6 Kanals 13 marlas for Rs.85,000 per killa, received Rs.6,000 earnest money, and the balance was payable at registration by July 15, 1987. The respondent presented a bank draft for the balance Rs.64,000 at registration, but the petitioner refused to accept it. The Supreme Court held that a bank draft is as good as cash and that the petitioner's refusal to accept the bank draft constituted breach of the covenant in the agreement. The decree for specific performance granted by the courts below was upheld and the special leave petition was dismissed. Held that no manifest error of law was committed by the courts below. (Para 1)
Issue of Consideration
Whether tendering a bank draft for the balance sale consideration constitutes valid payment as cash under the agreement to sell; whether the petitioner-vendor's refusal to accept the bank draft amounts to breach of contract justifying a decree for specific performance.
Final Decision
The Supreme Court dismissed the special leave petition, holding that payment by bank draft is as good as cash, and the petitioner's refusal to accept the bank draft at the time of registration was a breach of the covenant in the agreement. The decree for specific performance granted by the courts below was upheld.
Law Points
- Payment by bank draft is as good as cash
- tender of bank draft for balance sale consideration is valid
- refusal to accept bank draft constitutes breach of contract
- specific performance decree upheld
