Shah claimed that they provided necessary documents and repeatedly urged Vilasben to complete the sale, but she consistently avoided finalizing the transaction. Shah sent a letter expressing their readiness to pay and demanding vacant and peaceful possession of the flat and all original documents and Society’s No Objection Certificate. Despite agreeing to an extended timeline, Vilasben continued to evade completing the transaction. Shah instituted legal proceedings seeking specific performance of the MoU and compensation at a rate of Rs. 2,000 per day.

During the proceedings, Vilasben passed away, and her legal representatives (referred to as Dhruva) were made parties to the suit. Dhruva disputed Shah’s readiness and willingness to fulfil the MoU obligations, arguing that Shah failed to demonstrate readiness to pay the balance consideration within the agreed timeframe, because of which the MoU was terminated. Dhruva claimed Vilasben needed to sell the flat urgently for providing alternative accommodation to her three sons and their families due to space constraint. They alleged that Shah assured Vilasben of prompt payment but failed to obtain the Reserve Bank of India permission and provide necessary documents and payment within the extended timeline.

In the Trial Court, specific issues were framed, and testimony was provided by both parties. The Trial Court dismissed Dhruva’s arguments regarding improper stamping and additional amounts. The Trial Court learnt Shah had sufficient funds and readiness, and Vilasben failed to fulfil her obligations. The Trial Court declared termination of the MoU invalid, awarded reasonable damages, and directed Dhruva to execute the sale deed.

Dhruva appealed, challenging reliance on the attorney’s evidence, and claiming that time was of essence of the contract. Dhruva questioned Shah’s readiness and willingness and raised issues about the attorney’s competency. Dhruva contested the evidence, including the loan sanction letter, and argued against granting specific performance without proof of readiness and willingness.

Shah’s counsel argued that the constituted attorney was qualified to testify due to personal knowledge of the transaction. He stated that the MoU did not specify time being of the essence. Shah had sufficient funds and a home loan sanction, demonstrating financial capability. He accentuated Shah’s readiness and willingness to complete the transaction and mentioned Vilasben’s failure to fulfil obligations as undermining Dhruva’s claims about time being of the essence and Shah’s readiness and willingness.

The Court examined key issues, including whether (i) the constituted attorney was competent to testify; (ii) time was of the essence; (iii) Shah demonstrated readiness and willingness; and (iv) the trial court’s decision was justified. The Court acknowledged exceptions to the general rule that a power of attorney holder cannot testify for the principal. In the present case, the Court observed that the constituted attorney had personal knowledge and acted on behalf of Shah throughout the transaction, making the constituted attorney competent to testify.

The Court also discussed the concept of time being of the essence in contracts, particularly in the sale of immovable property. The Court observed that explicit terms, nature of the property, and immediate circumstances are examined to determine if the contract should be performed within a reasonable timeframe, as there is no presumption that time is of the essence in such cases.

The Court emphasised the principle of equitable relief in specific performance cases. It states that the grant of specific performance is a discretionary remedy that depends on numerous circumstances, including equitable principles of the Specific Relief Act. The Court has the authority to consider factors such as hardship, fairness, and the conduct of the parties in deciding whether to grant specific performance. The order stresses the importance of balancing the interests of both parties and applying equitable principles in determining the appropriateness of specific performance as a remedy.

The order highlights the need to update laws to adapt to changing economic circumstances and criticizes the application of outdated legal principles. Granting specific performance relief to a purchaser who fails to complete the sale within the agreed time is seen as unfair, considering the increase in property prices. Delay in settling specific performance cases is viewed as contributing to injustice. Courts emphasize that not every suit for specific performance should be automatically granted, and prompt filing of suits is expected after a breach or refusal, despite the three-year limitation period. The three-year period is to assist purchasers in exceptional cases where a significant portion of the consideration has been paid and possession has been partially transferred.

The Court recognizes the urgent need of the defendant to sell the flat and purchase an alternative property for her sons. The MoU and the circumstances of the case indicate that time was considered of essence of the contract, overriding the general presumption.

The Court emphasizes the importance of demonstrating readiness and willingness as a condition for seeking specific performance. Readiness refers to the plaintiff’s ability to fulfil the contract, including having the financial means, while willingness pertains to their intention to fulfil the contract. Both factors are evaluated based on the plaintiff’s conduct and the circumstances, as stated in Section 16(c) of the Specific Relief Act.

Even if the Trial Court failed to frame the issue regarding the plaintiffs’ readiness and willingness, the records indicate that both parties presented evidence and arguments on this specific issue. Therefore, the absence of issue framing does not negatively impact the case.

After hearing both parties counsel and examining the evidence, the Court observed that Shah failed to provide sufficient evidence of their financial capacity to pay the balance consideration, and their communication regarding readiness and willingness to fulfil their obligations was inadequate. Shah lacked supporting evidence and did not take steps to complete the sale transaction. Due to these failings, Shah cannot be granted a decree of specific performance. Considering the circumstances, including the small amount of earnest money paid, delay in payment, and the significant rise in property prices, enforcing specific performance would be unfair and impose considerable hardship on Vilasben’s family members surpassing the hardship faced by Shah.

The Court set aside the order of the Trial Court, resulting in dismissal of the suit. Court directed Dhruva to refund the earnest money with interest @6% p.a. from the date of the suit till final payment. The Court permitted Shah to withdraw the deposited amount with accrued interest. All pending applications were disposed of.

The Order demonstrates the Court’s commitment to equity, as it balanced the issues of hardship, fairness, conduct and law reform, and set aside the Trial Court’s specific performance order by also considering the economic shift.

This article was originally published in Financial Express on 20 July 2023 Written by: Ashoo Gupta, Partner. Click here for original article

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