Specific performance may not be granted where the terms of contract give unfair advantage to one party #indianlaws

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, the decree of specific performance need not be passed.

In the instant matter an agreement for sale was executed between the parties after the Appellant had accepted partial consideration. Since the suit land was mortgaged, it was agreed that Appellant would redeem the land before the execution of sale deed.

Upon failure in execution of sale deed by Appellant, a suit for specific performance of contract was initiated wherein Appellant denied the execution of any agreement pertaining to sale of his land as infact he had already executed the agreement in favour of some ‘X’ to sell the land and had also received the earnest money.

Trial Court held that since the suit filed was not a fit case for specific performance of contract, the suit was disposed of with a finding that the agreement executed between the parties was in substance an agreement of security for repayment of loan and directed the Appellant to pay back earnest money with interest.

The appellate court allowed the appeal, and decreed the suit for specific performance of contract with the direction that Appellant should execute the sale deed in terms of the agreement in question. High Court also affirmed the finding of first Appellate Court.

The Court observed that Section 20 of 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. However, the discretion of the court is not arbitrary but sound and reasonable, guided by judicial principles.

Sub-section (2) of Section 20 of the Act provides three situations in which the court may exercise discretion not to decree specific performance. One of such situation is contained in clause (a) of sub-section (2) of the Section which provides that 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, the decree of specific performance need not be passed.

In the present case, though execution of agreement between the parties, stood proved, it was no where pleaded or proved by the Respondent that he got the mortgaged land redeemed in terms of the agreement, nor was it specifically pleaded that he was ready and willing to get the property redeemed from the mortgage.

On this basis it was held as a fit case where instead of granting decree of specific performance, the Respondent could have been compensated by directing the Appellant to pay a reasonable and sufficient amount to him. Accordingly it was directed that the interest amount be increased along with return of earnest money, failing which the decree of specific performance would stand affirmed.

Ramesh Chand (Dead) through LRs. vs. Asruddin (Dead) through LRs and Anr.

SC, 06.10.2015

Civil Appeal No. 8427 of 2014