MANU/SC/0193/2017

Equivalent Citation: 2017 (121) ALR 895, 2017(1)CDR137(SC), 2017(2)CTC647, 2017(2)J.L.J.R.13, (2017)2MLJ460,
2017(I)OLR818, 2017(2)PLJR191, 2017(2)RCR(Civil)104, 2017(3)SCALE61, 2017 (2) SCJ 449, 2017 (1) WLN 175 (SC)

IN THE SUPREME COURT OF INDIA

Civil Appeal No. 3049 of 2017 (Arising out of SLP (C) No. 32285 of 2015)

Decided On: 21.02.2017

Appellants: Jayakantham and Ors.

Vs.
Respondent: Abaykumar

Hon'ble Judges/Coram:
Arun Mishra and Dr. D.Y. Chandrachud, JJ.

Counsels:
For Appellant/Petitioner/Plaintiff: K.V. Mohan, Adv.

For Respondents/Defendant: S. Aravindh and A. Lakshmi Narayanan, Advs.

Case Note:
Contract - Specific performance - Decreeing of suit - Trial Court decreed suit
for specific performance instituted by Respondent against Appellants -
Dismissing second appeal, Single Judge confirmed judgment of District Judge,
by which appeal against judgment of Trial Court was dismissed - Hence,
present appeal - Whether specific performance ought to have been decreed in
present case Facts: The subject matter of the suit for specific performance
was a property upon which a residential house was situated. An agreement to
sell was entered into between the Appellants and the father of the
Respondent. The consideration agreed upon was rupees one lakh sixty
thousand of which an amount of rupees sixty thousand was received as
advance. The balance was to be paid when the sale deed was executed. Time
for completion of the sale transaction was reserved until 2 June 2002. A legal
notice seeking performance of the agreement was issued on 7 May 2002. In
response, the defence that was set up was inter alia that the agreement to
sell was executed only as a security for a loan transaction. The Trial Court by
a judgment and order decreed the suit for specific performance and directed
the Appellants to execute a sale agreement in favour of the Respondent
against receipt of the balance consideration of rupees one lakh. The Trial
Court noted that the agreement to sell had been registered and rejected the
defence that it was merely a document executed by way of security for a loan
transaction. In the view of the Trial Court, there was nothing in the
agreement to indicate that it was executed merely by way of a security. A
finding of fact was arrived at to the effect that the Respondent was ready and
willing to perform the agreement. The suit was decreed. The judgment of the
Trial Court was confirmed in appeal by the District Judge. A second appeal
was initially admitted on a substantial question of law but was eventually
dismissed by the Single Judge of the High Court. Hence, the present appeal.
Held, while allowing the appeal: (i) The court is not bound to grant the relief
of specific performance merely because it is lawful to do so. Section 20(1) of

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the Specific Relief Act, 1963 indicates that the jurisdiction to decree specific
performance is discretionary. Yet, the discretion of the court is not arbitrary
but is "sound and reasonable", to be "guided by judicial principles". The
exercise of discretion is capable of being corrected by a court of appeal in the
hierarchy of appellate courts. Sub-section 2 of Section 20 contains a
stipulation of those cases where the court may exercise its discretion not to
grant specific performance. However, explanation 1 stipulates that the mere
inadequacy of consideration, or the mere fact that the contract is onerous to
the Defendant or improvident in its nature, will not constitute an unfair
advantage within the meaning of Clause (a) or hardship within the meaning of
Clause (b). Moreover, explanation 2 requires that the issue as to whether the
performance of a contract involves hardship on the Defendant has to be
determined with reference to the circumstances existing at the time of the
contract, except where the hardship has been caused from an act of the
Plaintiff subsequent to the contract. [8] (ii) The terms of the contract, the
conduct of parties at the time of entering into the agreement and
circumstances under which the contract was entered into gave the Plaintiff an
unfair advantage over the Defendants. These circumstances made it
inequitable to enforce specific performance. A decree for the payment of
compensation in lieu of specific performance would meet the ends of justice.
The father of the Respondent paid an amount of rupees sixty thousand to the
Appellants in June 1999 of the total agreed consideration of Rs. 1.60 lakhs.
The Appellants voluntarily offered to pay an amount of rupees ten lakhs, as
just compensation in lieu of specific performance. The ends of justice would
be met by directing the Appellants to pay to the Respondent an amount of
rupees fifteen lakhs in lieu of specific performance. The decree for specific
performance shall accordingly stand set aside and shall stand substituted with
a direction to the Appellants to pay a sum of rupees fifteen lakhs to the
Respondent in lieu of specific performance. [11],[12] and[13]

JUDGMENT

Dr. D.Y. Chandrachud, J.

1. Leave granted.

2. This appeal arises from a judgment rendered by a learned Single Judge of the
Madras High Court on 11 June 2015 in a second appeal Under Section 100 of the Code
of Civil Procedure, 1908. Dismissing the second appeal, the learned Single Judge
confirmed the judgment of the Principal District Judge, Villupuram by which an appeal
against the judgment of the sub-Judge, Kallakurichi was dismissed. The trial court
decreed the suit for specific performance instituted by the Respondent against the
Appellants.

3. The subject matter of the suit for specific performance is a property bearing survey
No. 314/1A at Kallakurichi village admeasuring 735 square feet upon which a
residential house is situated. An agreement to sell was entered into between the
Appellants and the father of the Respondent on 2 June 1999. The consideration agreed
upon was rupees one lakh sixty thousand of which an amount of rupees sixty thousand
was received as advance. The balance was to be paid when the sale deed was
executed. Time for completion of the sale transaction was reserved until 2 June 2002.
A legal notice seeking performance of the agreement was issued on 7 May 2002. In
response, the defence that was set up was inter alia that the agreement to sell was
executed only as a security for a loan transaction.

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4. In support of the plea for specific performance, the father of the Respondent was
examined as PW1. Evidence on behalf of the Appellants was adduced by DW1 and
DW2. The trial court by a judgment and order dated 5 January 2007 decreed the suit
for specific performance and directed the Appellants to execute a sale agreement in
favour of the Respondent against receipt of the balance consideration of rupees one
lakh. The trial court noted that the agreement to sell had been registered and rejected
the defence that it is merely a document executed by way of security for a loan
transaction. In the view of the trial court, there was nothing in the agreement to
indicate that it was executed merely by way of a security. A finding of fact was arrived
at to the effect that the Respondent was ready and willing to perform the agreement.
The suit was decreed. The judgment of the trial court was confirmed in appeal on 26
August 2008 by the Principal District Judge, Villupuram.

5. A second appeal was initially admitted on a substantial question of law but was
eventually dismissed by a learned Single Judge of the Madras High Court on 11 June
2015.

6. When the Special Leave Petition came up on 29 January 2016, this Court observed
that there was no error in the finding of facts recorded by three courts concurrently
and hence those findings could not be reversed on merits. However, the alternative
submission which was urged on behalf of the Appellants was that the suit property is
the only property held by them and has an extremely high value. The Appellants stated
that they are ready to pay a sum of rupees ten lakhs or even more to retain it. Notice
was issued to the Respondent limited to the above contention.

7. On behalf of the Appellants, it has been submitted that this is a fit and proper case
where specific performance ought not to be ordered and a decree for compensation in
lieu thereof would meet the ends of justice. It was urged that specific performance of
an agreement need not necessarily be ordered merely because it is lawful to do so and
the matter lies in the judicious exercise of discretion of the court. In support of this
plea, reliance was placed on several circumstances; primary among them being the
fact that it is not in dispute that the father of the Respondent who entered into the
transaction and deposed as PW1(the Respondent being about sixteen years of age at
the time of execution of the agreement) carried on money lending business. Opposing
this submission, it was urged on behalf of the Respondent that while it is true that his
father is a money lender, this by itself would not disable the Respondent from seeking
specific performance. Moreover, it was urged that the mere fact that there has been an
escalation of land prices would not be a justification to refuse specific performance.

8. While evaluating whether specific performance ought to have been decreed in the
present case, it would be necessary to bear in mind the fundamental principles of law.
The court is not bound to grant the relief of specific performance merely because it is
lawful to do so. Section 20(1) of the Specific Relief Act, 1963 indicates that the
jurisdiction to decree specific performance is discretionary. Yet, the discretion of the
court is not arbitrary but is "sound and reasonable", to be "guided by judicial
principles". The exercise of discretion is capable of being corrected by a court of appeal
in the hierarchy of appellate courts. Sub-section 2 of Section 20 contains a stipulation
of those cases where the court may exercise its discretion not to grant specific
performance. Sub-section 2 of Section 20 is in the following terms:

Section 20(2). The following are cases in which the court may properly
exercise discretion not to decree specific performance-

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 (a) where the terms of the contract or the conduct of the parties
at the time of entering into the contract or the other
circumstances under which the contract was entered into are
such that the contract, though not voidable, gives the Plaintiff an
unfair advantage over the Defendant; or

(b) where the performance of the contract would involve some

hardship on the Defendant which he did not foresee, whereas its
non-performance would involve no such hardship on the Plaintiff;

(c) where the Defendant entered into the contract under

circumstances which though not rendering the contract voidable,
makes it inequitable to enforce specific performance.

However, explanation 1 stipulates that the mere inadequacy of consideration, or the

mere fact that the contract is onerous to the Defendant or improvident in its nature,
will not constitute an unfair advantage within the meaning of Clause (a) or hardship
within the meaning of Clause (b). Moreover, explanation 2 requires that the issue as to
whether the performance of a contract involves hardship on the Defendant has to be
determined with reference to the circumstances existing at the time of the contract,
except where the hardship has been caused from an act of the Plaintiff subsequent to
the contract.

9. The precedent on the subject is elucidated below:

(i) In Parakunnan Veetill Joseph's Son Mathew v. Nedumbara

Kuruvila's Son and Ors. MANU/SC/0173/1987 : AIR 1987 SC 2328, this
Court held that:

...14. Section 20 of the Specific Relief Act, 1963 preserves

judicial discretion of Courts as to decreeing specific performance.
The Court should meticulously consider all facts and
circumstances of the case. The Court is not bound to grant
specific performance merely because it is lawful to do so. The
motive behind the litigation should also enter into the judicial
verdict. The Court should take care to see that it is not used as
an instrument of oppression to have an unfair advantage to the
Plaintiff....

(ii) A similar view was adopted by this Court in Sardar Singh v. Smt.
Krishna Devi and Anr. MANU/SC/0102/1995 : (1994) 4 SCC 18:

...14. Section 20(1) of the Specific Relief Act, 1963 provides that
the jurisdiction to decree specific performance is discretionary,
and the court is not bound to grant such relief, merely because it
is lawful to do so; but the discretion of the court is not arbitrary
but sound and reasonable, guided by judicial principles and
capable of correction by a court of appeal. The grant of relief of
specific performance is discretionary. The circumstances specified
in Section 20 are only illustrative and not exhaustive. The court
would take into consideration the circumstances in each case, the
conduct of the parties and the respective interest under the
contract.

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 (iii) Reiterating the position in K. Narendra v. Riviera Apartments (P)
Ltd. MANU/SC/0392/1999 : (1999) 5 SCC 77, this Court held thus:

...29. Performance of the contract involving some hardship on the

Defendant which he did not foresee while non-performance
involving no such hardship on the Plaintiff, is one of the
circumstances in which the court may properly exercise discretion
not to decree specific performance. The doctrine of comparative
hardship has been thus statutorily recognized in India. However,
mere inadequacy of consideration or the mere fact that the
contract is onerous to the Defendant or improvident in its nature,
shall not constitute an unfair advantage to the Plaintiff over the
Defendant or unforeseeable hardship on the Defendant. The
principle underlying Section 20 has been summed up by this
Court in Lourdu Mari David v. Louis Chinnaya Arogiaswamy by
stating that the decree for specific performance is in the
discretion of the Court but the discretion should not be used
arbitrarily; the discretion should be exercised on sound principles
of law capable of correction by an appellate court.

(iv) These principles were followed by this Court in A.C. Arulappan v. Smt.
Ahalya Naik MANU/SC/0438/2001 : (2001) 6 SCC 600, with the following
observations:

...7. The jurisdiction to decree specific relief is discretionary and

the court can consider various circumstances to decide whether
such relief is to be granted. Merely because it is lawful to grant
specific relief, the court need not grant the order for specific
relief; but this discretion shall not be exercised in an arbitrary or
unreasonable manner. Certain circumstances have been
mentioned in Section 20(2) of the Specific Relief Act, 1963 as to
under what circumstances the court shall exercise such
discretion. If under the terms of the contract the Plaintiff gets an
unfair advantage over the Defendant, the court may not exercise
its discretion in favour of the Plaintiff. So also, specific relief may
not be granted if the Defendant would be put to undue hardship
which he did not foresee at the time of agreement. If it is
inequitable to grant specific relief, then also the court would
desist from granting a decree to the Plaintiff.

....

...15. Granting of specific performance is an equitable relief,

though the same is now governed by the statutory provisions of
the Specific Relief Act, 1963. These equitable principles are nicely
incorporated in Section 20 of the Act. While granting a decree for
specific performance, these salutary guidelines shall be in the
forefront of the mind of the court...

(v) A Bench of three Judges of this Court considered the position in Nirmala
Anand v. Advent Corporation (P) Ltd. and Ors. MANU/SC/0845/2002 :
(2002) 8 SCC 146, and held thus:

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 ...6. It is true that grant of decree of specific performance lies in
the discretion of the court and it is also well settled that it is not
always necessary to grant specific performance simply for the
reason that it is legal to do so. It is further well settled that the
court in its discretion can impose any reasonable condition
including payment of an additional amount by one party to the
other while granting or refusing decree of specific performance.
Whether the purchaser shall be directed to pay an additional
amount to the seller or converse would depend upon the facts
and circumstances of a case. Ordinarily, the Plaintiff is not to be
denied the relief of specific performance only on account of the
phenomenal increase of price during the pendency of litigation.
That may be, in a given case, one of the considerations besides
many others to be taken into consideration for refusing the
decree of specific performance. As a general rule, it cannot be
held that ordinarily the Plaintiff cannot be allowed to have, for
her alone, the entire benefit of phenomenal increase of the value
of the property during the pendency of the litigation. While
balancing the equities, one of the considerations to be kept in
view is as to who is the defaulting party. It is also to be borne in
mind whether a party is trying to take undue advantage over the
other as also the hardship that may be caused to the Defendant
by directing specific performance. There may be other
circumstances on which parties may not have any control. The
totality of the circumstances is required to be seen.

10. In the present case, the material on the record contains several aspects which will
have to weigh in the balance. There is no dispute about the fact that the father of the
Respondent who entered into an agreement on his behalf (and deposed in evidence)
carried on moneylending business. The consistent case of the Appellants in reply to the
legal notice, in the written statement as well as in the course of evidence was that
there was a transaction of a loan with the father of the Respondent. The evidence of
DW2 was to the following effect:

The Defendant was having a relationship with Plaintiff's father, Babu

Dhanaraj in respect of loan transaction. Already the Defendant No. 2 has
taken loan from Babu Dhanapathy Raj and bought a lorry and was driving it.
In this case, in order to return the loan of Rs. 1,00,000/- as per the
instruction of Babu Dhanapathy Raj only on the basis of trust, the Exhibit P1
agreement to sell was executed. In the said document, I have put my
signature as a witness.

During the course of the evidence, the Appellants produced material (Exhibit D3)
indicating that the value of the property was six lakhs thirty thousand on 20 November
2006. The agreed consideration between the parties was rupees one lakh sixty
thousand of which an amount of rupees sixty thousand was paid at the time of the
execution of the agreement. The sale transaction was to be completed within three
years against the payment of the balance of rupees one lakh. The Appellants also
relied upon Exhibit D2 which indicated that the value of the property as on 1 April
1999. These aspects were adverted to in the judgment of the trial court and the first
appellate court while setting out the evidence, but have evidently not been borne in
mind in determining as to whether a decree for specific performance could judiciously
have been passed.

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11. In our view the material which has been placed on record indicates that the terms
of the contract, the conduct of parties at the time of entering into the agreement and
circumstances under which the contract was entered into gave the Plaintiff an unfair
advantage over the Defendants. These circumstances make it inequitable to enforce
specific performance.

12. For the above reasons a decree for the payment of compensation in lieu of specific
performance would meet the ends of justice. As we have noted earlier the father of the
Respondent paid an amount of rupees sixty thousand to the Appellants in June 1999 of
the total agreed consideration of Rs. 1.60 lakhs. The Appellants have voluntarily
offered to pay an amount of rupees ten lakhs, as just compensation in lieu of specific
performance. In our view, the ends of justice would be met by directing the Appellants
to pay to the Respondent an amount of rupees fifteen lakhs in lieu of specific
performance.

13. The decree for specific performance shall accordingly stand set aside and shall
stand substituted with a direction to the Appellants to pay a sum of rupees fifteen
lakhs to the Respondent in lieu of specific performance. The amount shall be paid
within two months from the date of receipt of a copy of this judgment. Upon the expiry
of the period of two months, the amount shall carry interest at the rate of 9 per cent
per annum, till payment or realization.

14. The appeal shall stand allowed in these terms. There shall be no order as to costs.

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