Specific Relief Act, 1963 — Specific performance — Readiness and willingness — Equitable relief — Forfeiture of earnest money — Restitution
A. Specific performance — Readiness and willingness — Failure to prove financial capacity
Where the plaintiff failed to demonstrate that he had the financial wherewithal to pay the balance sale consideration on the stipulated date and also failed to attend the office of the Sub-Registrar on the due date, the requirement of readiness and willingness was held not to be proved.
(Para 5)
B. Conduct of defendant — Non-fulfilment of contractual obligations
While the plaintiff failed to establish readiness and willingness, it was also noted that the defendants did not fulfil their contractual obligations, particularly in relation to mutation and conversion of the property from leasehold to freehold.
(Para 5)
C. Readiness and willingness — No straitjacket formula — Case-specific determination
The question of readiness and willingness is not governed by a straitjacket formula and has to be determined on the facts and circumstances of each case.
(Para 6)
D. Specific performance — Discretionary and equitable relief — Delay of seventeen years
In view of the passage of more than seventeen years since the execution of the agreement to sell, the grant of specific performance was held to be inequitable, and refusal of such relief was justified.
(Para 6)
E. Equity — Unjust enrichment — Forfeiture of earnest money
Where both parties were at fault, directing forfeiture of earnest money would result in unjust enrichment and an inequitable windfall to the defendants.
(Para 7)
F. Restitution — Adjustment of equities — Lump sum compensation in lieu of specific performance
To do complete justice and adjust equities between the parties, the Court directed payment of a lump sum amount of Rs. 3,00,00,000/- to the plaintiff in substitution of the relief of specific performance, modifying the judgment of the High Court accordingly.
(Para 8)
ANALYSIS
The Supreme Court examined the equitable nature of the relief of specific performance and the statutory requirement of readiness and willingness on the part of the plaintiff.
On facts, the Court affirmed the High Court’s finding that the plaintiff failed to prove readiness and willingness, as he could not establish availability of funds to pay the balance consideration of Rs. 5.21 crores on the due date and did not present himself before the Sub-Registrar (Para 5).
Simultaneously, the Court took note of the defendants’ own defaults, particularly their failure to obtain mutation and conversion of the property from leasehold to freehold, which were part of their contractual obligations (Para 5). The case was thus treated as one where both parties were at fault.
Reiterating settled law, the Court observed that readiness and willingness is a fact-dependent inquiry, with no straitjacket formula applicable (Para 6). Considering the long lapse of seventeen years since execution of the agreement, the Court agreed that specific performance was no longer an equitable remedy (Para 6).
On the issue of forfeiture, the Court held that permitting forfeiture of the earnest money would result in unjust enrichment, which equity does not countenance, especially where the defendants were also in breach (Para 7).
Invoking its power to do complete justice, the Court moulded the relief by directing payment of a lump sum of Rs. 3 crores to the plaintiff, thereby restoring him substantially to his original position and bringing finality to a protracted dispute (Para 8).
RATIO DECIDENDI
Specific performance being a discretionary and equitable relief, where the plaintiff fails to prove readiness and willingness to perform the contract and the defendants are also in breach of their contractual obligations, particularly after a long lapse of time, the Court may refuse specific performance and, to prevent unjust enrichment, mould the relief by directing restitution through lump sum compensation so as to adjust equities and do complete justice between the parties.
