Case Note & Summary
The original plaintiff filed a suit for specific performance of an agreement to sell dated 20.02.2008 in respect of a suit property admeasuring 70,000 sq. feet for a total consideration of Rs.21,52,50,000/-. An earnest amount of Rs.50,00,000/- was paid. The plaintiff alleged that despite his readiness and willingness, the defendants failed to execute the sale deed. The defendants denied the claim, contending that the plaintiff was not ready and willing and that time was of the essence. The trial court dismissed the suit, holding that the plaintiff was not ready and willing to perform his part of the contract and that the defendants had not committed breach. The plaintiff appealed. The High Court upheld the finding that the plaintiff was not ready and willing, as he failed to prove financial capacity and steps to arrange the balance consideration. However, the Court held that the defendants could not forfeit the earnest money without proving actual loss, and therefore ordered refund of the earnest money of Rs.50,00,000/- with interest at 9% per annum from the date of suit till realization. The appeal was partly allowed.
Headnote
A) Specific Relief Act, 1963 - Section 16(c) - Readiness and Willingness - Plaintiff must plead and prove continuous readiness and willingness to perform his part of the contract from the date of agreement till the decree - The plaintiff failed to prove financial capacity and steps taken to arrange balance consideration within the stipulated period - Held that the plaintiff was not ready and willing to perform his part of contract (Paras 11-20).
B) Contract Act, 1872 - Earnest Money - Forfeiture - Earnest money cannot be forfeited unless the defendant proves actual loss suffered due to breach by the plaintiff - In the absence of such proof, the plaintiff is entitled to refund of earnest money with interest - Held that the defendants are liable to refund the earnest money of Rs.50,00,000/- with interest at 9% per annum from the date of suit till realization (Paras 21-25).
C) Code of Civil Procedure, 1908 - Section 96 - First Appeal - Appellate court can re-appreciate evidence and interfere with findings of fact if they are perverse or based on no evidence - The trial court's finding on readiness and willingness was upheld, but the refusal to refund earnest money was set aside (Paras 11-25).
Issue of Consideration
Whether the plaintiff was ready and willing to perform his part of the contract for specific performance, and whether the plaintiff is entitled to refund of earnest money with interest.
Final Decision
The First Appeal is partly allowed. The impugned judgment and order dismissing the suit is modified. The plaintiff is held entitled to refund of earnest money of Rs.50,00,000/- with interest at 9% per annum from the date of suit till realization. The defendants are jointly and severally liable to pay the same. The decree for specific performance and compensation is denied. The appeal is disposed of accordingly. Pending civil applications also disposed of.
Law Points
- Specific Performance of Contract
- Readiness and Willingness
- Earnest Money Forfeiture
- Time Essence of Contract
- Decree on Admission
- Section 96 CPC
- Section 16(c) Specific Relief Act
- 1963
Case Details
2024 LawText (BOM) (8) 270
First Appeal No.1180 of 2014
R. G. Avachat, Neeraj P. Dhote
Mr. A. D. Soman (for Appellants), Mr. P. R. Katneshwarkar (for Respondent No.1), Mr. Rajendra S. Deshmukh, Senior Advocate a/w. Mr. Shriram Deshmukh (for Respondent No.2), Mr. S. V. Adwant (for Respondent No.3)
Gulam Ali S/o Ismail Khan (since deceased, through LRs Saida Gulam Ali, Mansoor Ali Gulam Ali Khan, Samir Ali Gulam Ali Khan, Jamir Ali Gulam Ali Khan, Jayada Firoj Pathan, Tarannum Rafique Ahmed Shaikh)
Shaikh Kalimulla S/o Sk. Barkatulla, Shaikh Kalilulla S/o Sk. Barkatulla, Shaikh Majidulla S/o Sk. Barkatulla
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Nature of Litigation
First Appeal against dismissal of suit for specific performance of contract.
Remedy Sought
Appellants (legal representatives of original plaintiff) sought specific performance of agreement to sell, or in the alternative, refund of earnest money with interest and compensation.
Filing Reason
The original plaintiff alleged that the defendants failed to execute the sale deed despite his readiness and willingness, and that the defendants committed breach of contract.
Previous Decisions
The trial court (2nd Joint Civil Judge, Senior Division, Aurangabad) dismissed the suit on 21.11.2013, holding that the plaintiff was not ready and willing to perform his part of contract and that time was of the essence.
Issues
Whether the plaintiff was ready and willing to perform his part of the contract?
Whether the plaintiff is entitled to refund of earnest money with interest?
Whether the plaintiff is entitled to decree on admission by defendant No.3 to the extent of 1/3rd undivided share?
Submissions/Arguments
Appellants argued that the plaintiff was ready and willing to perform the contract, as evidenced by communications and legal notices, and that the defendants committed breach.
Respondent No.1 argued that the plaintiff failed to complete the sale within the stipulated period and was not ready and willing, and that the earnest money was forfeited.
Respondent No.2 argued that the plaintiff was a fictitious person and never contacted him, and that the agreement was cancelled.
Respondent No.3 supported the plaintiff's case.
Ratio Decidendi
For a decree of specific performance, the plaintiff must plead and prove continuous readiness and willingness to perform his part of the contract from the date of agreement till the decree. The plaintiff failed to prove financial capacity and steps to arrange the balance consideration. However, earnest money cannot be forfeited unless the defendant proves actual loss suffered due to breach. In the absence of such proof, the plaintiff is entitled to refund of earnest money with interest.
Judgment Excerpts
The Plaintiff failed to prove his readiness and willingness to perform his part of contract.
The Defendants cannot forfeit the earnest money without proving actual loss.
The Plaintiff is entitled to refund of earnest money with interest.
Procedural History
The original plaintiff filed Spl. Civil Suit No.390/2011 for specific performance of contract. The trial court dismissed the suit on 21.11.2013. The plaintiff filed First Appeal No.1180/2014. During the pendency of the appeal, the original plaintiff died and his legal representatives were brought on record. The appeal was heard and reserved on 18.07.2024 and judgment pronounced on 26.08.2024.
Acts & Sections
- Code of Civil Procedure, 1908: Section 96
- Specific Relief Act, 1963: Section 16(c)
- Indian Contract Act, 1872:
