Bombay High Court Grants Specific Performance Of 1978 Oral Agreement; Orders Payment Of ₹25 Lakhs Extra Due To Rising Property Prices

The Bombay High Court has held that an oral agreement for the sale of immovable property can be specifically enforced where its existence and terms are admitted and proved. The Court observed that while granting such relief, it can direct payment of an additional amount to balance equities between the parties in light of the passage of time and change in circumstances.

Justice Firdosh P. Pooniwalla was hearing a first appeal filed by the heirs of the original plaintiff challenging the judgment of the Bombay City Civil Court, which had refused specific performance and instead granted a refund of Rs. 30,000/- with interest. The case arose from an oral agreement dated 31.05.1978 between neighbouring flat owners, wherein the defendant agreed to sell Flat No. 13 for Rs. 50,000/-, out of which Rs. 30,000/- was paid by the plaintiff in two instalments. The plaintiff asserted that despite repeated requests, possession was not handed over, while the defendant later sought to return the amount, citing changed circumstances and the requirement of the flat for personal use.

The Court noted that the existence of the oral agreement and the receipt of Rs. 30,000/- were admitted by the defendant, thereby leaving the primary issue as whether the plaintiff was ready and willing to perform the contract. It examined the correspondence, particularly the plaintiff's letter dated 01.09.1981, which recorded repeated assurances by the defendant to hand over possession and indicated urgency on account of the plaintiff's daughter's marriage. The Court found that this letter demonstrated readiness and willingness on the part of the plaintiff.

The Court further observed that the defendant's version that the plaintiff had expressed an inability to pay the balance amount in October 1978 was not reflected in the reply dated 05.09.1981, thereby rendering the defence less probable. It held that in the absence of such material in contemporaneous documents, the defence appeared to be an afterthought.

On the findings of the Trial Court, the High Court held that the refusal of specific performance on the ground that the plaintiff had not deposited the balance consideration during the pendency of the suit was erroneous, as such a deposit is not mandatory. It also held that considerations such as the parties being neighbours or the marriage of the plaintiff's daughter could not be grounds to deny enforcement of a concluded agreement.

However, the Court also took note of the fact that the agreement was entered into in 1978 and that there had been a steep rise in property prices. It held that granting specific performance solely on payment of the balance amount of Rs. 20,000/- would cause prejudice to the defendant. In order to address this, the Court directed the plaintiffs to pay an additional sum of Rs. 25 lakhs to the defendant to balance equities between the parties, noting that the plaintiffs had themselves expressed willingness to pay a reasonable additional amount.

Accordingly, the High Court allowed the appeal, set aside the judgment of the Trial Court, and granted specific performance of the agreement subject to payment of Rs. 25,20,000/- by the plaintiffs to the defendant.

Case Title: Specific [First Appeal No.235 of 2008]

Citation: 2026 LiveLaw (Bom) 163

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