No Specific Relief if There Is a Provision For Compensation: SC

In a recent judgment, the Supreme Court of India (in case cited as 2023(3) civil court cases 298 SC) set aside the decree for specific performance of a sale agreement passed by the High Court of Punjab and Haryana on the ground that the agreement to sell had a condition that if the seller failed to execute the sale deed, the seller shall be liable to pay to the buyer double of the amount paid as earnest money.?

The dispute revolved around a sale agreement for a plot of land, which stipulated a sale price of Rs. 17,61,700 and set a tentative date for execution and registration of the sale deed. The respondent/buyer paid Rs. 2 lakh as earnest money.

The respondent filed a civil suit seeking specific performance of the sale agreement with consequential relief of injunction. The Trial Court, and the First Appellate Court, refused to pass a decree for specific performance but awarded a compensation amount of Rs 4 lacs which was double of the earnest money, in favour of the respondent in accordance with the terms of the agreement.

The respondent/buyer then preferred second appeal to the High Court, which allowed the appeal and granted the decree for specific performance. The High Court relied on the finding that the respondent/buyer was ready and willing to perform their part of the contract.

The appellants/sellers subsequently knocked the doors of the Supreme Court challenging the verdict of High Court. The SC noted that there is a condition in the agreement that the buyer would be entitled to double of the amount paid as an advance if the seller failed to execute the sale deed within the stipulated time.

Referring to the decision in P. D’Souza vs. Shondrilo Naidu and M L Devender Singh vs.s Syed Khaja, the Supreme Court held that where the named sum is an amount the payment of which may be substituted for the performance of the act at the election of the person by whom the money is to be paid or the act done, the court may refuse a decree for specific performance. Accordingly, the Supreme Court concluded and held that the Trial Court and the First Appellate Court were correct in refusing to pass such a decree for specific performance and awarding Rs. 4 lakhs as compensation to the respondent.

The Supreme Court held that the Respondent/Plaintiff/buyer was bound by the clause in the sale agreement that provided for payment of double of the earnest money paid in case of failure on the part of the Appellant/Defendant/seller to execute the sale deed. Therefore, relief of specific performance could not have been granted.

Vaishali Madaan, Advocate

(Jain Law Offices)

06.09.2023

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