Case Note & Summary
The dispute arose from an agreement to sell agricultural land. The petitioner vendor had entered into an agreement dated May 6, 1988 to sell 16 kanal 16 marlas of land for a consideration of Rs.50,000 per killa and received Rs.24,000 as earnest money. The respondent purchaser filed a suit for specific performance in April 1993, contending that he was always ready and willing to perform his part of the contract and pay the balance consideration of Rs.81,000. The trial court accepted the respondent's case and decreed the suit for specific performance. On appeal, the Additional District Judge reversed the decree by judgment dated November 15, 1994, observing that Ramesh and others had come into possession of the land and an agreement was executed in their favour on December 5, 1994 after the appellate judgment; it held that specific performance was not proper and that alternative relief of recovery and compensation was appropriate. In second appeal, the High Court by impugned judgment dated May 15, 1996 in R.S.A. No. 425 of 1995 reversed the first appellate court and restored the trial court decree. The vendor then filed special leave petitions before the Supreme Court. The petitioner's counsel contended that granting specific performance is discretionary, that the court should exercise discretion on sound principles of law, and that because third parties had been inducted into possession and taking possession would involve further litigation, alternative relief should be granted. The Supreme Court found no force in this contention. It noted that it was an admitted fact that respondent Nos. 2 and 3, Ramesh and Shashi Kapoor, had come into possession after the suit was instituted and after the agreement to sell was entered into. The High Court had rightly allowed the appeal, holding them not to be bona fide purchasers and directing specific performance in pursuance of the agreement dated May 6, 1988. The Supreme Court reasoned that if the petitioner's contention were accepted, no contract could be enforced and a party would seek to avoid contract by inducting third parties into possession. The view taken by the first appellate court was clearly illegal. Having regard to the fact that respondent Nos. 2 and 3 were not bona fide purchasers and admittedly came into possession after the suit and the agreement, the High Court rightly rejected their contention. The contention that possession by third parties would be an impediment to specific performance bore no force. The Supreme Court accordingly dismissed the special leave petitions, thereby affirming the High Court's restoration of the trial court's decree for specific performance.
Headnote
A) Specific Performance - Discretion of Court - Third-Party Purchasers Not Bona Fide - Not mentioned - The trial court decreed specific performance of an agreement to sell agricultural land; the first appellate court reversed and granted alternative relief because third parties had come into possession; the High Court restored the trial court decree. The Supreme Court held that transferees who came into possession after the suit and after the agreement to sell were not bona fide purchasers and could not bar specific performance (Paras not mentioned). B) Specific Performance - Enforcement of Contract - Prevention of Avoidance by Inducting Third Parties - Not mentioned - The vendor could not defeat the decree by inducting third parties into possession after institution of the suit; accepting such a contention would mean no contract could be enforced and a party could avoid contract by inducting third parties. The first appellate court's view was illegal; the special leave petitions were dismissed (Paras not mentioned).
Issue of Consideration
Whether the High Court committed an error of law in granting specific performance despite third parties coming into possession after the suit and after the agreement to sell, instead of granting alternative relief of recovery and compensation.
Final Decision
Special leave petitions dismissed; High Court's judgment restoring trial court decree for specific performance upheld; respondent Nos.2 and 3 (Ramesh and Shashi Kapoor) held not bona fide purchasers as they came into possession after suit and after agreement to sell; specific performance directed in pursuance of agreement dated May 6, 1988.
Law Points
- Specific performance is discretionary but must be exercised judiciously
- Third parties inducted after suit are not bona fide purchasers
- Contract enforcement cannot be defeated by inducting third parties
- A party ready and willing to perform is entitled to specific performance
