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Sunday, February 26, 2017

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.= 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.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.

                                                                  REPORTABLE


                        IN THE SUPREME COURT OF INDIA
                        CIVIL APPELLATE JURISDICTION

                       CIVIL APPEAL NO .3049   OF 2017
                 [Arising out of SLP (C) No. 32285 of 2015]


JAYAKANTHAM & OTHERS                   .....APPELLANTS



                                   Versus

ABAYKUMAR            .....RESPONDENT



                               J U D G M E N T



Dr D Y CHANDRACHUD, J

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.

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-

(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[1] ,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 another[2] :

“…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.”



(iii) Reiterating the position  in  K.  Narendra v. Riviera  Apartments  (P)
Ltd[3],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[4], 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 Vs. Advent Corporation (P) Ltd. and Ors.[5], and held thus :

“…..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.

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.



...….......................................J
                                                      [ARUN MISHRA]




       ..............................................J
                                                      [Dr D Y  CHANDRACHUD]





New Delhi
February 21, 2017


ITEM NO.1A               COURT NO.1               SECTION XII


               S U P R E M E  C O U R T  O F  I N D I A
                       RECORD OF PROCEEDINGS


Civil Appeal No. 3049/2017 @
Petition(s) for Special Leave to Appeal (C) No(s).  32285/2015

(Arising out of impugned final judgment and order dated   11/06/2015  in  SA
No. 436/2009 passed by the High Court Of Madras)

JAYAKANTHAM AND ORS.                                     Petitioner(s)

                                VERSUS

ABAYKUMAR                                                 Respondent(s)

[HEARD BY HON'BLE ARUN MISHRA AND HON'BLE DR. D.Y. CHANDRACHUD, JJ.]

Date : 21/02/2017 This petition was called on for judgment today.


For Petitioner(s)            Mr. K. V. Mohan,Adv.

For Respondent(s)      Mr. A. Lakshminarayanan,AOR


            Hon'ble Dr. Justice D.Y. Chandrachud pronounced the judgment  of
the Bench comprising Hon'ble Mr. Justice Arun Mishra and His Lordship.

            Leave granted.

            For the reasons recorded in the Reportable judgment, the  appeal
is allowed.  There shall be no order as to costs.



  (Renuka Sadana)                            (Parveen Kumar)
Assistant Registrar                                           AR-cum-PS
      [Reportable signed judgment is placed on the file]


-----------------------
[1]

      [2] AIR 1987 SC 2328

[3]

      [4] (1994) 4 SCC 18
[5]

      [6] (1999) 5 SCC 77
[7]

      [8] (2001) 6 SCC 600
[9]

      [10] (2002) 8 SCC 146


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