The Supreme Court, in Ferrodous Estate v P Gopirathnam, revisited the law on the specific performance of a contract. It reiterated that mere delay by itself cannot be the sole factor to deny specific performance.
Brief facts of the Case
The Appellant, Ferrodous Estate in 1980, had agreed to the sale of a property that belonged to the Respondent, a Hindu Undivided Family. The Respondents failed to fulfil the obligations as per the Tamil Nadu Urban Land Ceiling Act.
The Appellant approached the High Court for the specific performance of the contract.
The High Court held that the Appellant was entitled to buy the property and get the decree for specific performance. However, this was later set aside by the Division Bench of the same Court.
Arguments by the Appellant
Representing the Appellant, the Counsel argued that factual findings found even the dishonesty of the Defendants, had not been reversed by the Division Bench in appeal. Also, the bar contained in Section 6 of the Tamil Nadu Urban Land Ceiling Act was applied against the appellant. This was due to wrong application of judgment.
This resulted in the agreement being held void ab initio.
It was argued that this is incorrect since, in this agreement, it was the Defendants who were to get permission from the competent authority under the Act.
Since a first appeal is in the nature of rehearing a suit, on the date that the Division Bench passed its decree, the Tamil Nadu Urban Land Ceiling Act stood repealed. Hence, none of its provisions could be used to hit the agreement in the present case.
Further, he stated the Division Bench’s construction of Section 5(3)’s proviso renders the main part of the provision redundant.
Additionally, the Appellant was always ready and willing to perform their part, and the Defendants were found to be in breach. The findings have been set aside by the Division Bench.
Hence concluding that since the agreement is void ab initio, specific performance cannot be decreed. The Counsel argued that this was wholly incorrect in the facts of the present case.
The Tamil Nadu Urban Land Ceiling Act having been repealed by the time the Division Bench passed its judgment, did not impede decreeing of specific performance of the suit property.
Also, the fact that litigation took 27 years by the time the Division Bench passed its judgment could not be put against the Appellant, as has been held by a series of judgments of this Court.
Arguments by the Respondent
Representing the Respondents, the Counsel argued that the Full Bench judgment was inter-parties in nature. Thus, it bound the parties. Further, due to res judicata, the same cannot be reopened.
If the Full Bench judgment is to be seen, the Division Bench was correct in its conclusion that the agreement being void ab initio. Since it was stillborn, it could not be resuscitated at any future moment, given the repeal of the Tamil Nadu Urban Land Ceiling Act.
Relying on judgments, the Counsel contended that where a vested right accrued on the date of the filing of the suit, it cannot be taken away later. Also, the suit must be decided as on the date the plaint is filed and not on the date of the state of the law when the appellate decree is passed.
Further, the Appellant has already been awarded Rs.2 crores with interest.
He also added that the Division Bench was correct in stating that after so many years, a grant of specific performance, being discretionary, was refused.
Court’s Observation
The Bench noted that the jurisdiction to decree specific performance is discretionary, it has to be exercised soundly and reasonably. This has to be guided by judicial principles, and capable of correction by a court of appeal.
Further, in a suit for specific performance filed within limitation, the same cannot be dismissed on the sole ground of delay or laches.
The exception to this rule is where the immovable property is to be sold within a certain period. Time being of the essence, the Bench found that owing to some default on the part of the plaintiff, the sale could not take place within the stipulated time.
Once a suit for specific performance has been filed, any delay as a result of the court process cannot be put against the Plaintiff. But, the Court has the discretion to decide if there is a need to pay an extra amount to the Plaintiff after a specific performance decree being passed.
Court’s Order
Applying the observations to the facts of the present case, the bench comprising Justice R. F. Nariman and Justice Navin Shah allowed the appeal.Further, the Appellant was ordered to pay a sum of Rs.1.25 crores to the Respondents, with eight weeks of passing of the Order.
Click here to read the judgment
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