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SPECIFIC PERFORMANCE SUIT - ESCALATION OF PRICE NO GROUND TO REFUSE - UNLESS PLEADED HARDSHIP AND UNDUE ADVANTAGE 2012 SC

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Justice G.S. Singhvi, and Justice Sudhansu Jyoti Mukhopadhaya of The Supreme Court of India in the case of Narinderjit Singh vs North Star Estate Promoters Ltd. Decided on 8 May, 2012

TRIAL COURT FINDINGS:- In this case, the trial Court declined the relief of specific performance by observing that the price of the land had considerably increased and it would be unfair to compel the appellant to execute the sale deed at the rate agreed to by the parties. For arriving at this conclusion, the trial Court relied upon the judgments of this Court in Sargunam (Dead) by L.R. v. Chidambaram (2005) 1 SCC 162 and Janardhanam Prasad v. Ramdas (2007) 15 SCC 174 and of the Division Bench of the Punjab and Haryana High Court in Mohan Singh v. Kulwinder Singh 2006 (2) P.L.J. 748 and of the Allahabad High Court in Ramawati Devi v. Idris Ahmad 2008 (2) Civil Court Cases 332. The trial Court finally held that the respondent is entitled to refund of the earnest money with interest at the rate of 12% per annum.

LOWER APPELLATE COURT FINDINGS:- The respondent challenged the judgment and decree of the trial Court by filing an appeal. The appellant and his father did not file appeal or cross objection to challenge the findings recorded by the trial Court on the issues of execution of the agreement and readiness and willingness on the respondent’s part to perform its part of the agreement. The lower appellate Court independently analysed the pleadings and evidence of the parties and agreed with the trial Court that the respondent had succeeded in proving execution of the agreement and its readiness and willingness to pay the balance amount and perform its part of the obligation. ..... The lower appellate Court disagreed with the trial Court that the respondent is not entitled to decree of specific performance because cost of the suit property had increased and observed that there was no justification to relieve the appellant of his obligation to execute the sale deed in terms of the agreement.

HIGH COURT SECOND APPELLATE COURT :- The second appeal filed by the appellant was dismissed by the learned Single Judge of the Punjab and Haryana High Court who concurred with the lower appellate Court that the trial Court was not justified in invoking the provisions of Section 20 (2) (c) of the Specific Relief Act, 1963 (for short, ‘the Act’) for the purpose of declining substantive relief to the respondent. The learned Single Judge relied upon the judgments of this Court in K. Narendra v. Riviera Apartments (P) Ltd. (1999) 5 SCC 77, Sargunam (Dead) by LRs. v. Chidambaram (supra) 1 SCC 162 and Gobind Ram v. Gian Chand 2000 (7) SCC 548, and held that inadequacy of consideration or the fact that the contract is onerous to the defendant is not sufficient to deny the relief of specific performance.

Supreme Court held: The question whether the respondent was ready and willing to perform its part of the agreement is required to be decided in the light of the pleadings of the parties, evidence produced by them and their conduct........ The thrust of the case set up by the appellant was that his father had neither executed the agreement nor received the earnest money. According to him, the agreement was an end product of criminal conspiracy hatched by the respondent with the help of Col. Harjit Singh and Vijay Bhardwaj for defrauding him. The appellant also pleaded that the agreement relied upon by the respondent was a fake and fabricated document. In reply to the averments contained in para 5 of the plaint that the respondent was always ready and willing and is still ready and willing to perform its part of the contract, the following statement was made in the written statement: “5. Para no.5 of the plaint is wrong and therefore denied. The question of readiness and willingness on the part of the defendants does not arise at all. Question of receiving of Rs. nine lac also does not arise at all.” ..............

The trial Court comprehensively analysed the pleadings and evidence of the parties and held that the respondent has succeeded in proving execution of the agreement by the appellant’s father and receipt of Rs.1,00,000/- by him. The trial Court then considered the question whether the respondent was ready and willing to pay the balance price and observed: ........... The defendants are also estopped from taking the plea that plaintiff was not ready and willing to perform his part of the contract and that the plaintiff did not have the capacity to make the payment when the defendants have denied the very execution of the agreement in question. .......... After Finger Prints and Handwriting Expert, who has specifically stated on oath before the Court .......... So, the agreement in question ...............duly stands proved in accordance with provisions of law. It stands sufficiently proved on record that defendants ................. had executed an agreement to sell in favour of the plaintiff after receiving earnest amount of Rs.one lacs from the plaintiff in the presence of marginal witnesses.”.......... The appellant did not question the aforesaid findings of the trial Court by filing an appeal. Not only this, he did not file cross-objection in the appeal filed by the respondent. Therefore, the lower appellate Court was not required to consider whether execution of the agreement for sale has been proved and whether respondent was ready and willing to perform its part of the agreement, but it considered both the questions ..............

On the other hand, the defendants/respondents have denied the agreement in question and it is not their plea that appellant/plaintiff was not ready and willing to perform its contract. Under these circumstances, the evidence produced by the appellant/plaintiff to prove their readiness and willingness to perform their part of contract can be accepted without any hesitation and in this regard I find support from the judgment of Hon'ble Punjab and Haryana High Court in Santa Singh Vs. Binder Singh and Ors 2006(4) Civil Court Cases-608 wherein it was held as under:- "Since the case of the defendant is that of one of denial, therefore, the statement of the plaintiff that he was ready and willing to perform his part of the contract is sufficient to infer that plaintiffs were ready and willing to perform their part of contract. It was a meager amount of Rs.2000/- alone which was required to be paid at the time of registration of the sale deed. The substantial amount was paid at the time of execution of the agreement. More than Rs.12000/- was kept for payment to the mortgagee. Therefore, the argument raised by the learned counsel for the appellant that the plaintiffs have led evidence to prove his ready and willingness to perform the contract is not tenable.”

In R.C. Chandiok v. Chuni Lal Sabharwal (1970) 3 SCC 140, this Court observed that “readiness and willingness cannot be treated as a straitjacket formula and the issue has to be decided keeping in view the facts and circumstances relevant to the intention and conduct of the party concerned”. The same view was reiterated in D'Souza v. Shondrilo Naidu, (2004) 6 SCC 649. In N.P. Thirugnanam v. R. Jagan Mohan Rao (Dr) (1995) 5 SCC 115, the Court found that the appellant was dabbling in real estate transaction without means to purchase the property and observed: “Section 16(c) of the Act envisages that plaintiff must plead and prove that he had performed or has always been ready and willing to perform the essential terms of the contract which are to be performed by him, other than those terms the performance of which has been prevented or waived by the defendant. The continuous readiness and willingness on the part of the plaintiff is a condition precedent to grant the relief of specific performance. This circumstance is material and relevant and is required to be considered by the court while granting or refusing to grant the relief. If the plaintiff fails to either aver or prove the same, he must fail. To adjudge whether the plaintiff is ready and willing to perform his part of the contract, the court must take into consideration the conduct of the plaintiff prior and subsequent to the filing of the suit along with other attending circumstances. The amount of consideration which he has to pay to the defendant must of necessity be proved to be available. Right from the date of the execution till date of the decree he must prove that he is ready and has always been willing to perform his part of the contract. As stated, the factum of his readiness and willingness to perform his part of the contract is to be adjudged with reference to the conduct of the party and the attending circumstances. The court may infer from the facts and circumstances whether the plaintiff was ready and was always ready and willing to perform his part of the contract.”

We are also inclined to agree with the lower appellate Court that escalation in the price of the land cannot, by itself, be a ground for denying relief of specific performance. In K. Narendra v. Riviera Apartments (P) Ltd. ((1999) 5 SCC 77), this Court interpreted Section 20 of the Act and laid down the following propositions: “Section 20 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; 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. 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.”

In the present case, the appellant had neither pleaded hardship nor produced any evidence to show that it will be inequitable to order specific performance of the agreement.

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