This article provides a detailed analysis of a recent judicial pronouncement that offers crucial insights into the principles governing specific performance of contracts, particularly in the context of real estate transactions involving multiple co-owners and purported agent authority. The judgment underscores the mandatory requirement for plaintiffs to prove continuous readiness and willingness, the necessity of clear and subsisting authority for agents, and the equitable considerations guiding the discretionary grant of specific performance.
1. Factual Background and Procedural History
The core of the dispute revolves around a property in Baripada, Odisha, originally owned by Late Surendranath Banerjee, which devolved equally upon his five heirs: two sons (Defendant No. 1 – Binayendra Banerjee, and late Soumendra Nath Banerjee) and three daughters (Defendant Nos. 6 to 8).
On April 14, 1993, an oral agreement was allegedly entered into between all co-owners and the appellants (Defendant Nos. 9 to 11), to sell the property for Rs. 4,20,000.
Subsequently, on June 6, 1993, the plaintiffs (Respondent Nos. 1 & 2), who operated a petrol pump on the suit land, purportedly entered into an agreement to sell with only Defendant No. 1 and late Soumendra for Rs. 5,70,000, paying an earnest money of Rs. 70,000. This agreement stipulated that the sisters (Defendant Nos. 6 to 8) would come to Baripada within three months to execute the sale deed, acknowledging their absence from the agreement. The plaintiffs’ claimed Defendant No. 1 was authorized to act for his sisters via an unregistered General Power of Attorney (GPA) dated December 30, 1982. However, the defendants contended this GPA was limited and effectively revoked by a registered partition deed dated February 17, 1988, which only authorized Defendant No. 1 to collect rent, not to sell.
In fulfillment of the prior oral agreement of April 14, 1993, and with the participation of all five co-owners, a registered sale deed was executed on September 27, 1993, in favour of the appellants (Defendant Nos. 9 to 11) for Rs. 4,20,000.
Despite knowing the necessity of the sisters’ consent, the plaintiffs filed Title Suit No. 103 of 1994 before the Civil Judge (Senior Division), Baripada, seeking specific performance of their alleged agreement of June 6, 1993, or, alternatively, partial specific performance for the shares of Defendant No. 1 and late Soumendra.
The Trial Court dismissed the plaintiffs’ suit for specific performance. It found that the agreement of June 6, 1993, was executed only by Defendant No. 1 and late Soumendra, without explicit consent from the sisters. It held that the GPA did not authorize Defendant No. 1 to sell the property and was impliedly revoked by the subsequent partition deed. The agreement was deemed incomplete and unenforceable against the sisters, and the plaintiffs failed to demonstrate continuous readiness and willingness. The Trial Court also found partial enforcement impractical and inequitable. It held the sale deed of September 27, 1993, in favour of the appellants to be valid and binding, but ordered a refund of Rs. 70,000 (earnest money) with 6% interest to the plaintiffs.
Aggrieved, the plaintiffs filed a first appeal before the High Court of Orissa. The High Court reversed the Trial Court’s judgment, holding that the GPA was valid and conferred authority, rejecting the implied revocation by the partition deed (which it deemed forged). It concluded the agreement of June 6, 1993, was valid and enforceable against all defendants, including the sisters, and that the plaintiffs were always ready and willing. Consequently, the High Court granted specific performance.
Aggrieved by the High Court’s decision, the appellants (Defendant Nos. 9 to 11) approached the Supreme Court.
2. Identification of Legal Issues
The Supreme Court identified three primary legal issues for determination:
- Readiness and Willingness: Whether the plaintiffs proved their continuous readiness and willingness to perform their part of the contract as mandated under Section 16(c) of the Specific Relief Act, 1963.
- Validity and Enforceability of Agreement (Agent Authority): Whether the agreement to sell dated June 6, 1993, was valid and enforceable against Defendant Nos. 6 to 8, given that Defendant No. 1 allegedly lacked the authority to act on their behalf without a valid and subsisting General Power of Attorney.
- Discretionary Relief of Specific Performance: Whether the High Court was right in granting the discretionary relief of specific performance, having been denied by the Trial Court, in the facts and circumstances of the case.
3. Arguments of the Parties
Arguments on Behalf of the Appellants (Janardan Das & Ors. – Defendant Nos. 9 to 11):
The appellants primarily contended that the High Court erred in reversing the Trial Court’s judgment. Their arguments were centered on:
- Lack of Readiness and Willingness: The plaintiffs failed to demonstrate continuous readiness and willingness as required by Section 16(c) of the Specific Relief Act. They did not take concrete steps to secure the consent or presence of Defendant Nos. 6 to 8 within the stipulated three-month period, despite knowing the sisters were not signatories and held a significant share. Their inaction, lack of communication with the sisters, and continued passive operation of their petrol pump indicated a lack of diligence and commitment.
- Lack of Authority of Defendant No. 1: Defendant No. 1 lacked the valid and subsisting authority to bind Defendant Nos. 6 to 8. The unregistered GPA of 1982 was limited in scope, and any broader power was impliedly revoked by the registered partition deed of 1988, which restricted his authority to rent collection. The agreement of June 6, 1993, did not reference the GPA, and Defendant No. 1 signed in his personal capacity, without representing to the plaintiffs that he was acting on his sisters’ behalf. The plaintiffs were aware of the necessity of the sisters’ consent.
- Discretionary Nature of Relief: Specific performance is a discretionary relief, and the Trial Court rightly exercised its discretion to deny it. Granting specific performance would be inequitable and unfairly prejudice the appellants, who were bona fide purchasers for value under a registered sale deed from all five co-owners. The agreement with the plaintiffs was incomplete and unenforceable against the majority shareholders. Monetary compensation (refund of earnest money) would be adequate for the plaintiffs.
Arguments on Behalf of the Respondents (Durga Prasad Agarwalla & Ors. – Plaintiffs):
The respondents argued in favour of the High Court’s decision to grant specific performance, asserting:
- Continuous Readiness and Willingness: They were always ready and willing to perform their part of the contract, including paying the balance consideration. They relied on Defendant No. 1 and late Soumendra to procure the sisters’ presence and believed Defendant No. 1 was authorized by the GPA.
- Validity of GPA and Authority: The General Power of Attorney dated December 30, 1982, was valid and conferred authority upon Defendant No. 1 to act on behalf of his sisters for the sale. They contended that the partition deed did not impliedly revoke this authority, and the High Court correctly found the alleged revocation (through the partition deed) to be forged and not genuine.
- Enforceability of Agreement: The agreement dated June 6, 1993, was valid and enforceable against all defendants, including the sisters.
- Appellants as Not Bona Fide Purchasers: The subsequent sale deed to the appellants was invalid and not binding because they executed it with full knowledge of the prior agreement with the plaintiffs.
4. Court’s Analysis and Reasoning
The Supreme Court systematically analyzed each issue, aligning its reasoning with the Trial Court’s findings and discrediting the High Court’s reversal.
- Readiness and Willingness (Issue I): The Court reiterated that Section 16(c) of the Specific Relief Act, 1963, makes it mandatory for a plaintiff seeking specific performance to aver and prove continuous readiness and willingness to perform their contractual obligations. This requirement is a condition precedent, and the plaintiff’s conduct throughout the proceedings is crucial. The Court referred to U.N. Krishnamurthy v. A.M. Krishnamurthy, emphasizing that mere averments are insufficient; evidence of financial capacity or arrangements for funds is necessary. The Court concurred with the Trial Court’s finding that the plaintiffs failed to demonstrate such continuous readiness and willingness. The agreement explicitly required the plaintiffs to ensure the sisters (Defendant Nos. 6 to 8) would come to execute the sale deed within three months. The plaintiffs took no concrete steps to secure their consent or presence, relying passively on Defendant No. 1 and late Soumendra. Their inaction, absence of notices or direct communication with the sisters, and failure to provide evidence of arranged funds indicated a lack of diligence and earnestness. The Court found the High Court’s cursory assessment on this point to be erroneous.
- General Power of Attorney and Validity of Agreement (Issue II): The Court stressed that in multi-owner property transactions, all co-owners must either personally execute the agreement or duly authorize an agent through a valid and subsisting power of attorney, with clear and unambiguous authority. The Court upheld the Trial Court’s finding that the unregistered GPA of 1982 did not explicitly authorize Defendant No. 1 to sell the property. More importantly, the subsequent registered partition deed of 1988 implicitly revoked any such prior authority by specifically limiting Defendant No. 1’s authority to collecting rent and allocating specific shares to each co-owner. The agreement of June 6, 1993, did not mention the GPA, and Defendant No. 1 signed only in his personal capacity, not as an agent for his sisters. The plaintiffs were aware that the sisters were not parties to their agreement and that their consent was essential for a valid sale. Their reliance on assurances from Defendant No. 1 and late Soumendra could not substitute for explicit consent or valid agency. Therefore, the Court held that Defendant No. 1 lacked the authority to bind Defendant Nos. 6 to 8. The agreement of June 6, 1993, was incomplete and unenforceable against the sisters, who held a significant 3/5th share, rendering it unenforceable against them.
- Discretionary Nature of Granting Specific Performance (Issue III): The Court reiterated that specific performance, under Section 20 of the Specific Relief Act, 1963 (prior to its 2018 amendment), is discretionary. A court is not bound to grant it merely because it is lawful to do so; discretion must be exercised judiciously and equitably. The Court identified several factors weighing against granting specific performance in this case:
- The agreement was incomplete and unenforceable against the majority shareholders (Defendant Nos. 6 to 8), making partial enforcement inequitable.
- The plaintiffs failed to prove readiness and willingness and did not take necessary steps to secure all co-owners’ consent.
- Granting specific performance would unfairly prejudice Defendant Nos. 6 to 8, who never consented to the sale to the plaintiffs.
- The appellants (Defendant Nos. 9 to 11) were bona fide purchasers for valuable consideration under a registered sale deed from all five co-owners way back on September 27, 1993. The plaintiffs’ agreement was not signed by all co-owners and had no basis to disturb the appellants’ rights acquired through a valid transaction.
- The Court found that monetary compensation (refund of earnest money with interest) would adequately compensate the plaintiffs, as there was no evidence suggesting it would be insufficient. The plaintiffs’ delay in asserting their rights and taking proactive steps further suggested a lack of genuine intent to purchase the property for themselves, rather than merely securing their commercial interests related to the petrol pump.
5. Final Conclusion and Holding
The Supreme Court allowed the appeal, setting aside the judgment and decree of the High Court dated October 25, 2013. It restored the judgment of the Trial Court dated May 17, 1997, which had dismissed the suit for specific performance.
The Court held that the plaintiffs failed to demonstrate their continuous readiness and willingness to perform their contractual obligations. It further concluded that Defendant No. 1 lacked the authority to bind Defendant Nos. 6 to 8 in the agreement dated June 6, 1993, rendering the agreement incomplete and unenforceable against them. Given the incomplete and unenforceable nature of the agreement, the Court found it neither just nor equitable to grant specific performance.
In balancing the equities, the Court directed the appellants (Defendant Nos. 9 to 11) to refund the sum of ₹10,00,000 (Rupees Ten Lakhs) to the plaintiffs (Respondent Nos. 1 & 2) within two months. This amount included the earnest money paid by the plaintiffs and accounted for any interest and expenses incurred. There was no order as to costs.
The legal principles reinforced by this judgment are:
- Mandatory Nature of Readiness and Willingness: Strict proof of continuous readiness and willingness, encompassing both financial capacity and proactive steps to fulfill obligations, is a mandatory prerequisite for specific performance.
- Clarity of Agency Authority: For contracts involving multiple owners, the agent’s authority must be explicit, valid, and subsisting. Any implied revocation or limitations on power must be carefully considered.
- Equitable Discretion: Specific performance is a discretionary remedy, and courts will exercise this discretion judiciously, considering the completeness and enforceability of the contract, the conduct of both parties, the presence of bona fide third-party interests, and whether monetary compensation is an adequate alternative.
- Protection of Bona Fide Purchasers: The rights of bona fide purchasers for value under valid, registered sale deeds will be protected, especially when the plaintiff’s prior agreement is incomplete or unenforceable against all necessary parties.
FAQs:
1. What does “readiness and willingness” mean for specific performance lawsuits?
“Readiness and willingness” in a specific performance lawsuit requires the plaintiff to prove they had the financial means and actively took steps to fulfill their contractual obligations throughout the agreement’s term, not just vague claims.
2. Can an agent sell property without a clear Power of Attorney?
An agent’s authority to sell property must be explicit and valid. If the power of attorney is limited or impliedly revoked by other legal documents, the agent cannot bind the principal to a sale agreement.
3. Is specific performance an automatic right if a contract is breached?
No, specific performance is a discretionary remedy, not an automatic right. Courts evaluate several factors, including fairness, the plaintiff’s conduct, and potential prejudice to others, before granting it.
4. How do courts decide if a prior agreement is enforceable against all property owners?
Courts determine if a prior agreement is enforceable against all property owners by checking if all owners were signatories or if the signatory agent had valid, subsisting authority to bind all co-owners.
5. When is monetary compensation preferred over specific performance in property disputes?
Monetary compensation may be preferred over specific performance when granting specific performance would be unjust or inequitable, particularly if the contract is incomplete, the plaintiff failed in their obligations, or if a third-party bona fide purchaser’s rights would be unfairly disturbed.
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