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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.

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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.

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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

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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,

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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 Ors1 ,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…”

1

AIR 1987 SC 2328

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(iv) These principles were followed by this Court in A.C. Arulappan v. Smt.

Ahalya Naik4, 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

4

(2001) 6 SCC 600 5

(2002) 8 SCC 146

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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.”

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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

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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

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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]