Case Name: Sangita Sinha v. Bhawana Bhardwaj & Ors.
Court: Supreme Court of India (Civil Appellate Jurisdiction)
Citation: 2025 LiveLaw (SC) 378
Bench: Justice Dipankar Datta and Justice Manmohan
Appellant: Sangita Sinha
Respondents: Bhawana Bhardwaj & Ors.
Date of Judgment: 4 April 2025
Introduction
This appeal before the Supreme Court of India raises a foundational question in the law of specific performance: whether a suit for the enforcement of a sale agreement is maintainable where the seller has validly cancelled the agreement before the suit was instituted, and whether a plaintiff who has accepted a refund of the advance paid under a cancelled agreement can thereafter be said to possess the continuous readiness and willingness to perform the contract that Section 16(c) of the Specific Relief Act, 1963 prescribes as a sine qua non for the grant of specific performance. The case also examines whether a plaintiff who fails to seek relief against the cancellation of the agreement under Section 34 of the Specific Relief Act, 1963 can successfully maintain a suit for specific performance. The facts involve the encashment of demand drafts refunding the advance under a cancelled agreement, followed by the filing of a suit for specific performance, and present the Court with the question of whether such conduct is consistent with the continuous readiness and willingness that the law demands throughout the period from the execution of the agreement to the passing of the decree.
Summary of Facts
An unregistered agreement to sell was executed on 25 January 2008 between the late Kusum Kumari as seller and the respondent, Bhawana Bhardwaj, as buyer, in respect of a property allotted by the People’s Co-operative House Construction Society, Patna. The agreed sale price was Rs. 25,00,000. The buyer paid Rs. 2,51,000 in cash and issued three post-dated cheques totalling Rs. 7,50,000.
On 6 February 2008, the seller filed a complaint alleging that her signature on the agreement had been obtained fraudulently. On 7 February 2008, she sent a letter to the buyer cancelling the agreement and enclosed five demand drafts amounting to Rs. 2,11,000 to refund the cash payment, along with two of the post-dated cheques. The buyer encashed the demand drafts in July 2008. Notwithstanding the cancellation and the receipt of the refund, the buyer filed a suit for specific performance, being Title Suit No. 176 of 2008, on 5 May 2008. The seller passed away during the pendency of proceedings and the appellant, Sangita Sinha, who was named as the beneficiary under the seller’s Will, was impleaded in her place. The Trial Court decreed the suit in favour of the buyer in 2018, holding that the entirety of the advance had not been refunded. The Patna High Court upheld the Trial Court’s decree in 2024. The appellant then brought the matter before the Supreme Court.
Issues Before the Court
1. Whether a suit for specific performance is maintainable where the seller has validly cancelled the sale agreement prior to the institution of the suit.
2. Whether the buyer’s acceptance and encashment of the demand drafts refunding the advance paid under the cancelled agreement demonstrates the absence of continuous readiness and willingness to perform the contract, as required by Section 16(c) of the Specific Relief Act, 1963.
3. Whether the buyer’s failure to seek a declaration setting aside the cancellation of the agreement under Section 34 of the Specific Relief Act, 1963 is fatal to the suit for specific performance.
Arguments Given by Both Parties
Arguments on Behalf of the Appellant
The appellant submitted that the seller had validly and unambiguously cancelled the sale agreement on 7 February 2008, prior to the institution of the suit for specific performance, and that the buyer had accepted this cancellation by encashing the demand drafts forwarded with the cancellation notice. The acceptance of the refund, it was argued, was incompatible with the buyer’s claim to enforce the agreement, as it demonstrated that the buyer had acquiesced in the termination of the contractual relationship. The appellant further contended that the buyer had failed to seek a declaration setting aside the cancellation before or simultaneously with filing the suit for specific performance, as required by Section 34 of the Specific Relief Act, 1963, and that this omission was fatal to the suit.
Arguments on Behalf of the Respondents
The respondent submitted that the seller’s cancellation was not valid because the entire advance paid by the buyer had not been refunded, and that the partial refund did not constitute an effective rescission of the agreement. It was argued that the buyer’s readiness and willingness to perform the contract had been consistently demonstrated throughout the proceedings and that the encashment of the demand drafts was necessitated by financial circumstances and did not amount to an acceptance of the cancellation. The respondent relied upon the Trial Court’s finding that the totality of the advance had not been repaid as the basis for maintaining the suit.
Reasonings and Findings
The Supreme Court allowed the appeal and set aside the concurrent findings of the Trial Court and the High Court. The Court commenced its analysis by examining the requirement of continuous readiness and willingness under Section 16(c) of the Specific Relief Act, 1963. The Court observed that readiness refers to the financial capacity of the plaintiff to perform the contract, while willingness refers to the bona fide intention of the plaintiff to perform his or her obligations. Both elements must be present continuously from the date of the agreement to the date of the decree, and the absence of either at any point in that period is fatal to the suit.
The Court held that the buyer’s encashment of the demand drafts forwarded by the seller as part of the cancellation of the agreement constituted conduct fundamentally inconsistent with a subsisting readiness and willingness to perform the sale agreement. A party who accepts a refund of the advance paid under a cancelled agreement signals, by that acceptance, that the contractual relationship has come to an end and that the party no longer treats the agreement as subsisting. This conduct is irreconcilable with the assertion that the party was throughout ready and willing to perform. The Court found that the buyer’s encashment of the demand drafts in July 2008 demonstrated the absence of the continuous readiness and willingness required by Section 16(c).
The Court also held that the buyer’s failure to challenge the cancellation of the agreement by seeking a declaration under Section 34 of the Specific Relief Act, 1963 was a significant omission. A plaintiff who seeks specific performance of a cancelled agreement must, as a prerequisite, obtain a judicial declaration that the cancellation was invalid or that it should be set aside. In the absence of such a declaration, the cancellation stands as a fact that negates the subsistence of the agreement upon which the claim for specific performance is founded.
Judgment and Conclusion
The Supreme Court of India allowed the appeal and set aside both the decree of the Trial Court and the judgment of the Patna High Court. The suit for specific performance filed by the respondent was dismissed. The Court held that the buyer’s acceptance and encashment of the demand drafts forwarded by the seller pursuant to the cancellation of the agreement demonstrated the absence of continuous readiness and willingness to perform the contract as required by Section 16(c) of the Specific Relief Act, 1963, and that the failure to seek a declaration against the cancellation further undermined the suit.
The judgment reaffirms the strict and uncompromising nature of the readiness and willingness requirement in suits for specific performance. A plaintiff who accepts a refund following the cancellation of an agreement cannot, without more, resile from that position and claim specific performance of the selfsame agreement. The decision serves as an important reminder that specific performance is a discretionary equitable remedy that demands of the plaintiff a consistent and unambiguous demonstration of the will and ability to perform throughout the life of the proceedings.
Frequently Asked Questions (F&Q)
Q1: What does Section 16(c) of the Specific Relief Act, 1963 require of a plaintiff in a specific performance suit?
Section 16(c) of the Specific Relief Act, 1963 requires a plaintiff seeking specific performance of a contract to aver and prove that he or she has performed or has always been ready and willing to perform the essential terms of the contract which are to be performed by him or her. The readiness and willingness must be continuous, that is, it must have existed without interruption from the date of the contract to the date of the decree. The plaintiff must specifically aver readiness and willingness in the plaint, and failure to establish this element is fatal to the suit for specific performance.
Q2: Does the acceptance of a refund under a cancelled agreement amount to acquiescence in the cancellation?
The Supreme Court held in this case that the acceptance and encashment of demand drafts forwarded by the seller as part of the cancellation of a sale agreement constitutes conduct that is fundamentally inconsistent with a continuing readiness and willingness to perform the contract. A party who accepts a refund of the advance paid under a cancelled agreement signals, by that act, that the contractual relationship has come to an end. Such conduct is irreconcilable with the assertion of a continuing right to enforce the agreement by way of specific performance, and the Court accordingly held that the encashment of the refund demonstrated the absence of the requisite readiness and willingness.
Q3: What is the significance of Section 34 of the Specific Relief Act, 1963 in the context of specific performance suits?
Section 34 of the Specific Relief Act, 1963 empowers a court to make a declaration as to any legal character or right. In the context of specific performance, where a sale agreement has been cancelled by the seller, the buyer must obtain a declaration setting aside the cancellation before or simultaneously with seeking specific performance, since the subsistence of the agreement is a prerequisite to any claim for its enforcement. A plaintiff who omits to seek such a declaration leaves the cancellation standing as an unchallenged fact that negates the foundation of the specific performance claim.
Q4: Can specific performance be granted if only part of the advance has been refunded at the time of cancellation?
The Trial Court in this case held that the partial nature of the refund was a ground for granting specific performance, on the basis that the cancellation was ineffective because the entire advance had not been returned. The Supreme Court disagreed, holding that the buyer’s conduct in encashing even the partial refund was inconsistent with the continuous readiness and willingness required by Section 16(c) of the Specific Relief Act, 1963. The Court did not directly address whether a complete refund is a precondition for a valid cancellation, but made clear that the act of accepting even a partial refund had the consequence of demonstrating an absence of the necessary intent to perform.
Q5: Is specific performance a matter of right in Indian law?
Specific performance is not a matter of right in Indian law; it is a discretionary remedy which the court may grant or refuse having regard to the totality of circumstances. The Specific Relief Act, 1963, as amended by the Specific Relief (Amendment) Act, 2018, has significantly restricted the scope of that discretion and requires courts generally to grant specific performance unless the case falls within one of the specified exceptions. However, the pre-conditions for the grant of relief, including the continuous readiness and willingness under Section 16(c), remain mandatory, and a failure to satisfy them disentitles the plaintiff to the remedy regardless of any other consideration.
