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NON-REPORTABLE      IN THE SUPREME COURT OF INDIA   

CIVIL APPELLATE JURISDICTION CIVIL APPEAL NOS.4597-4598 OF 2014   

(Arising out of SLP (C) Nos. 31491-31492 of 2012)

  SHAMSHER SINGH & ORS      ……APPELLANTS

Versus RAJINDER KUMAR & ORS                   ….RESPONDENTS

J U D G M E N T

V.Gopala Gowda, J.

Leave granted.  

2. These  appeals  have  been  preferred  by  the  

appellants  (the  original  defendants)  against  the  

common  Judgment  and  final  Order  dated  17th  

September, 2012 passed by the High Court of Punjab  

and Haryana at Chandigarh in RSA Nos. 2871 & 1543  

of  2012.  By  the  said  impugned  judgment,  two  

separate RSAs filed by the appellants against the

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common  judgment  of  First  Appellate  Court  were  

dismissed by the High Court.  

3.  The factual matrix of the case is as follows:

The respondents (original plaintiffs) filed a  

suit  for  specific  performance  against  the  

appellants  herein  alleging  that  an  agreement  to  

sell dated 3rd June, 2002 was entered between them  

with respect to the suit land. It was alleged that  

out of  3,00,000/- (total agreed consideration),  

2,00,000/- had already been paid by the plaintiffs  

on 3rd June, 2002 and as per agreement, the balance  

amount were to be paid at the time of execution of  

sale  deed,  i.e.  on  20th December,  2002.  It  was  

further  alleged  that  later,  the  defendant-

appellants became dishonest and wanted to sell the  

land to some other persons. Therefore, they had to  

file the suit.   

4.  The  defendants  filed  their  written  statement  

contending in that they had never entered into any  

agreement to sell the suit land to the plaintiffs.  

It was also contended that the alleged agreement to  

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sell was a product of forgery and fabrication and  

so, it was null and void. The Trial Court having  

considered  the  contention  of  both  the  parties,  

partly decreed the suit of the plaintiffs on 13th  

May,  2009  and  directed  the  defendants  to  pay  

3,00,000/-  to  the  plaintiffs  along  with  simple  

interest @9% per annum from the date of execution  

of the agreement to sell till the date of payment.  

5. Being aggrieved by the Judgment and Decree, the  

defendant-appellants filed Civil Appeal No. 74 of  

2009 on the ground that the alleged agreement to  

sell was not valid and legal and the appellants  

never intended to sell the suit land. They further  

contended that there was no signature of any of the  

attesting  witness  on  the  receipt  of  the  earnest  

money and the land was already under mortgage with  

the  banks  and  so  there  was  no  question  of  any  

agreement to sell and urged other grounds as well.

6. The plaintiffs also filed a Special Civil Appeal  

No. 102 of 2009 against the judgment and decree  

dated 13th May, 2009 with prayer for direction of  

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execution of sale deed and transfer of possession  

of the suit land. Both the appeals were disposed of  

by the First Appellate Court vide common judgment  

and order dated 17th February, 2012. The Appellate  

Court while dismissing the appeal preferred by the  

defendant-appellants, allowed the appeal preferred  

by  the  plaintiff-respondents  and  directed  the  

defendant-appellants to get the sale deed executed  

and  registered  in  favour  of  the  plaintiff-

respondents.   

7.  Second  appeals  preferred  by  the  defendant-

appellants against the common judgment passed by  

the  First  Appellate  Court  were  dismissed  by  

impugned  common  judgment  dated  17th  September,  

2012. Hence, these appeals.

8. The main issues in this case are (i) whether a  

decree of specific performance can be passed with  

respect to the purported agreement of sale between  

the plaintiff and the defendants and (ii) whether  

the defendant nos.1 to 3 could have entered into  

this purported agreement of sale with respect to  

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the fact that their land has been contended to be  

mortgaged  with  the  defendant  nos.4  and  5  as  

security for loans that they have taken. The first  

appellate  court  as  well  as  the  High  Court  have  

decreed  the  specific  performance,  ordering  the  

defendants to enforce the agreement of sale, Ex.  

P-2. The Trial Court, on the other hand, did not  

grant decree of specific performance, but instead  

passed a decree ordering the defendants to return  

3,00,000/- with interest to the plaintiffs on the  

ground that a balanced approach should be taken as  

the  plaintiffs  should  be  protected  and  the  

defendant  nos.  1  to  3  should  not  be  

disproportionately  penalized  and  that  the  

administration  of  justice  requires  that  the  

defendant nos. 1 to 3 should be directed to return  

the amount of  3,00,000/- to the plaintiffs along  

with simple interest @ 9% per annum from the date  

of  execution  of  the  agreement  of  sale  till  the  

date of payment. The Trial Court further went on  

to  observe  that  if  the  defendants  directed  to  

execute the agreement of sale, then comparatively  

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greater  hardship  would  be  caused  to  them.  The  

first  appellate  court,  on  the  ground  that  the  

defendants have not taken a plea of hardship has  

reversed  the  judgment  of  the  Trial  Court,  

decreeing specific performance of the agreement of  

sale, directing the defendants to execute the sale  

deed and register it in favour of the plaintiffs  

on the basis of the agreement to sell, Ex. P-2.  

The  plaintiffs  were  directed  to  deposit  the  

balance  sale  consideration  minus  earnest  amount  

already paid, within one month of the order. The  

High Court has upheld the order and judgment of  

the first appellate court.

9.  After going through the findings and reasons  

recorded by the appellate courts and the impugned  

judgment and with reference to the questions of  

law raised in these appeals and grounds urged in  

support of the same, the following points would  

arise for our consideration:

(1) Whether  the  concurrent  finding  of  the  second  appellate  court  in  reversing  the  finding of the Trial Court in its judgment  

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to  exercise  discretionary  power  not  to  grant  decree  of  specific  performance  as  provided under Section 20(2) (a) and (b)  of  the  Specific  Relief  Act,  1963,  after  referring  to  Exs.P-2,  P-8  and  other  relevant facts, is legal and valid?

(2) Whether the appellate courts were right in  ignoring the relevant legal aspect of the  case  viz.  whether  the  vendors,  who  had  mortgaged  the  schedule  property  to  the  banks,  had  the  right  to  enter  into  agreement  and  whether  such  agreement  is  valid and in that case, do the plaintiffs  then  have  the  right  of  enforcing  such  agreement  without  asking  the  vendor  to  redeem  the  mortgage  in  relation  to  the  suit  schedule  property  and  obtaining  a  valid discharge?

(3) What  order/decree  are  the  appellants  entitled to?

Answer to point no.1

10. The High Court has erred in law in dismissing  

the  Second  Appeal  filed  by  the  defendants  

questioning  the  correctness  of  the  judgment  and  

decree of the First Appellate Court in reversing  

the judgment of the Trial Court  wherein it has  

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decreed a sum of  3,00,000/- with 9% interest to  

be paid to the plaintiffs in lieu of granting the  

relief of specific performance in relation to the  

property in question in favour of the plaintiff by  

exercising  its  sound  discretionary  power  under  

Section  20(2)  (a)  and  (b)  of  the  Act.  This  

judgment and decree of the First Appellate Court  

was  challenged  by  the  defendants  urging  various  

legal grounds. The High Court should have examined  

the case of the defendant Nos. 1 to 3 keeping in  

view  the  discretionary  power  conferred  upon  the  

courts below while examining the respective claim  

and counter claims of the parties particularly in  

the  light  of  the  covenants  in  the  agreement  of  

sale, Ex.P-2 and also with reference to exhibit P-

8, the compromise arrived at between the parties  

at the Police Station. The appellate courts have  

erred in holding that the agreement of sale was  

proved by the plaintiff though the defendant Nos.  

1 to 3 in their statement denied the execution and  

pleaded that it is a mortgage and not an agreement  

of sale.  The said finding of fact recorded by the  

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Trial Court was annulled by the First Appellate  

Court in exercise of its appellate power without  

examining the pleadings and substantiated evidence  

on  record  particularly  the  recitals  of  the  

agreement of sale and the compromise deed between  

the parties. Therefore, the said finding of fact  

recorded by the First Appellate Court in reversing  

the  finding  of  the  Trial  Court  recorded  on  the  

contentious issue is not only erroneous  but also  

suffers  from  error  in  law.  Therefore,  the  

substantial question of law that would arise in  

the Second Appeal before the High Court namely, is  

whether the finding of the Trial Court in exercise  

of its discretionary power under Section 20(2) (a)  

and (b) of the Act must be reversed, keeping in  

view  the  Exhibit  P-8,  the  compromise  deed  and  

awarding monetary decree of  3,00,000/- though the  

advance amount paid is  2,00,000/-  is contrary to  

the legal evidence and the statutory provisions of  

Section 20(2) (a) and (b) and also Section 21(2)  

of  the  Specific  Relief  Act.  We  have  considered  

this question of law while answering the point No.  

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1 framed in these appeals in favour of defendant  

Nos. 1 to 3.

11.  An extremely important aspect of this case is  

the compromise, Ex. P-8 which had been arrived at  

between the parties to the suit, and has also been  

brought  on  record  as  evidence.  The  Trial  Court  

relied  on  the  same  to  show  that  the  defendants  

have agreed to the agreement of sale and at the  

compromise arrived at by the parties at the Police  

Station, the condition agreed upon was that the  

defendant  Nos.  1  to  3  would  return  the  earnest  

amount. The said compromise also bears the thumb  

impressions  of  the  defendants.  The  Trial  Court  

held that the compromise is an important document  

that  contradicts  the  version  put  forth  by  the  

defendants,  as  it  has  been  stated  in  the  

compromise that the defendants had expressed their  

willingness  to  execute  the  sale  deed  uptil  

25.07.2002. The defendants cannot then do a u-turn  

and deny the existence of the agreement of sale.  

Thus, on this ground too, we have to hold that  

since  the  defendants  had  agreed  to  return  the  

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amount as per the compromise, the judgment of the  

Trial  Court  decreeing  return  of  an  amount  of  

3,00,000/- with 9% simple interest from the date  

of  execution  of  the  agreement  of  sale  till  the  

date of payment, must be upheld and that of the  

appellate courts decreeing specific performance be  

rejected.    

Therefore,  the  first  appellate  court  has  

grossly  erred  in  law  by  decreeing  the  suit  for  

specific performance considering the well-reasoned  

order of the Trial Court. The High Court has also  

erroneously upheld the same.  As per section 20(2)

(b) of the Specific Relief Act,1963 (in short “the  

Act”),  the  jurisdiction  to  grant  decree  of  

specific performance is discretionary and section  

20(2)  lists  the  cases  in  which  the  court  may  

properly exercise discretion  not to grant decree  of specific performance. Section 20(2) (a) and (b)  reads thus:

“(2)  The  following  are  cases  in  which  the  court  may  properly  exercise  discretion  not  to  decree  specific performance:-

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(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.”

12. On  perusal  of  the  original  records  in  this  

case, it has come to light that both the purported  

agreement  of  sale,  Ex.  P-2  as  well  as  the  

compromise,  Ex.P-8  have  major  discrepancies  in  

them. Certain clauses in both the documents seem  

to unduly favour the plaintiffs. In Ex.P-2, the  

operative part of the agreement of sale which is  

originally  in  Hindi,  the  English  translation  of  

the same reads as under:

“….The last date for execution  of  sale  deed  is  fixed  as  20th  December, 2002. By that date if  the seller fails to get the sale  deed executed in favour of the  

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buyer then the seller will pay  the amount double of the advance  money taken, and if by the due  date the buyer does not get the  sale  deed  executed  then  the  advance money paid by him will  be  forfeited  and  instead  of  claiming compensation the buyer  shall have the right to get the  sale deed executed through court  in his name or in anyone else’s  name without paying the balance  amount and the seller will have  no right of any objection.  The  buyer  shall  bear  all  costs  of  registration……”

This does not seem equitable and it seems unlikely  

that a seller would agree to such a clause. This  

seems to be a clear case of terms of a contract  

resulting  in  an  unfair  advantage  for  the  

plaintiffs  over  the  defendants.  Since  the  

defendants are disputing the agreement of sale and  

claiming that the document on which they put their  

thumb impressions was in fact a mortgage deed in  

lieu of the loan of   85,000/- that they had asked  

from the plaintiffs for their household expenses,  

it puts the plaintiffs in a position of ‘unfair  

advantage’ over the defendants, thus bringing the  

case  for  not  granting  decree  of  specific  

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performance  within  Section  20(2)(a)of  the  Act.  

Further, the Trial Court has clearly explained the  

reasons  for  not  granting  a  decree  of  specific  

performance  and  instead  granted  a  decree  for  

recovery of the money from the defendants and this  

falls squarely within the conditions set out in  

Section  20(2)  (a)  and  (b)  of  the  Act.  This  

position of the law has been carefully enunciated  

by this Court in the case of  A.C. Arulappan  v.  

Ahalya Naik1, wherein it was held that:-

“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....If  it  is  inequitable  to  grant  specific relief, then also the  court  would  desist  from  granting  a  decree  to  the  plaintiff.”

It is clear that it will be inequitable to grant a  

decree of specific performance in this case where  

it  is  clear  that  the  plaintiffs  have  an  unfair  

advantage over the defendants and the Trial Court  

1 (2001) 6 SCC 600

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has rightly exercised its discretion not to grant  

specific performance.  

Further we find it necessary to refer to para  

3 of the pleadings wherein it is stated as under:-

“3. That the defendants no.1 to  3 entered into an agreement to  sell the suit land as detailed  and described in the head note  of  the  plaint  with  plaintiffs  for  a  sum  of  3,00,000/-  (Rs.  Three  Lacs)  and  they  executed  agreement  to  sell  dated  3.6.2002  and  received  earnest  money  of   2,00,000/-(Rs.  Two  Lacs)  and  executed  a  valid  receipt  on  the  foot  of  the  agreement  to  sell  dated  3.6.2002  in  the  presence  of  witnesses.”

This receipt has been executed on the same day,  

i.e. on 3-6-2002 as the agreement of sale, and the  

terms of the receipt are in direct contradiction  

with the terms of the agreement, as the receipt  

says  that  2,00,000/-  has  been  received  by  the  

defendant Nos.1 to 3 whereas the agreement of sale  

speaks only of 1,00,000/- that has changed hands  

and the plaintiff will pay the defendant Nos.1 to  

3  the  remaining  2,00,000/-  at  the  time  of  

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registration. Further, in the written statement,  

the defendants have pleaded that they only took a  

loan  of  85,000  and  mortgaged  their  land  as  

security and were tricked into putting their thumb  

impressions on the purported agreement of sale.  

It  is  clear  from  all  this  that  the  

discrepancies make it difficult for us to accept  

that the defendant Nos.1 to 3 have intended for  

this  to  be  an  agreement  of  sale  and  it  is  

extremely likely that the plaintiff has tried to  

take unfair advantage of them. It is prudent on  

our part, therefore, to uphold the Trial Court’s  

judgment not to decree specific performance of the  

purported agreement of sale. We will modify the  

Trial  Court’s  decree  insofar  as  the  amount  is  

concerned and order the defendant Nos.1 to 3 to  

return 2,00,000/- with interest and not an amount  

of 3,00,000/- as directed by the Trial Court.

Answer to point no.2

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13. Another important aspect of this case that has  

slipped  the  eyes  of  the  courts  below  is  the  

question of the mortgage of the suit property, as  

pleaded by the defendant Nos. 4 and 5. They placed  

the  confirmation  of  mutation  in  favour  of  the  

Bank, Ex. D-1 and the Mortgage deed, Ex. D-2 as  

evidence. The plaintiffs have referred to the same  

in para 2 of their pleadings and the defendants,  

in reply have admitted this in para 2 of their  

written statement wherein they have stated that it  

is  a  matter  of  record  that  they  have  mortgaged  

their portion of the land in favour of defendant  

Nos.  4  and  5.  More  importantly,  the  plaintiffs  

have admitted the same in para 2 of their plaint,  

therefore it was in their knowledge that the land  

in question was already mortgaged with defendant  

Nos. 4 and 5. There has been no finding recorded  

on the same by either the appellate courts or the  

Trial Court and as per Section 13(c) of the Act,  

when the vendor (the defendants herein) professes  

to  sell  unencumbered  property  but  the  same  is  

mortgaged,  then  the  vendor  has  only  a  right  to  

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redeem  it  and  the  purchaser  may  compel  him  to  

redeem  the  mortgage  and  to  obtain  a  valid  

discharge. This aspect of the matter, too, has not  

been  dealt  with  by  the  Trial  Court  or  the  

appellate courts.  

Answer to point no.3

14.  Thus,  the  judgment  and  order  of  the  Trial  

Court  must  be  modified  and  the  judgments  and  

orders of the appellate courts must be reversed.  

There are many discrepancies on the face of this  

case and the Trial Court would have done well to  

examine all the evidence with care and diligence,  

which has not been done in the present case. In  

spite of the same, it would be prudent to uphold  

the  judgment  and  decree  of  the  Trial  Court  by  

modifying it instead of the judgments and orders  

of  the  appellate  courts  which  have  decreed  the  

original  suit  for  specific  performance  of  the  

agreement to sell the suit schedule property.  

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15. For the foregoing reasons, these appeals are  

allowed, the impugned judgment and order passed by  

the High Court is set aside and the judgment and  

decree  passed  by  the  Trial  Court  in  Civil  Suit  

no.755 of 2003 is modified in the aforesaid terms.  

We thereby, order and direct the defendant Nos.1  

to  3  to  repay  the  plaintiff  an  amount  of  

2,00,000/- with interest @6% per annum within six  

weeks from the date of receipt of the certified  

copy of this judgment.

                         ………………………………………………………………………J.   [SUDHANSU JYOTI MUKHOPADHAYA]

            ………………………………………………………………………J.       [V. GOPALA GOWDA]

New Delhi,                                      April 16, 2014   

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