Inherently Determinable Contract Cannot Be Specifically Enforced; Interim Injunction Also Cannot Protect Such Contracts: Bombay High Court
The Bombay High Court has held that a contract which is inherently determinable cannot be specifically enforced and, consequently, an interim injunction cannot be granted to protect such a contract. The Court observed that when the MOU was determinable by its very nature, specific performance of the same could not be insisted upon.
Justice Aarti Sathe was hearing an Appeal from Order filed against an order of the 5th Joint Civil Judge, which had temporarily restrained the Appellant from transferring, alienating or creating third-party interest in 5,200 sq. mtrs. of Transferable Development Rights (TDR), which was the subject matter of an agreement dated July 13, 2022. The dispute arose after the Respondent agreed to purchase TDR from the Appellant. Under the MOU, the Appellant was required to obtain the Development Rights Certificate within the stipulated period. As the Appellant was unable to obtain the DRC, it issued a notice dated October 18, 2023 cancelling the MOU.
The Appellant contended that Clauses 4A and 4B of the MOU provided for repayment of the amount paid by the Respondent in the event of cancellation or failure to obtain the DRC within the stipulated period. It was submitted that the MOU was, by its very nature, a determinable document and therefore became unenforceable under Section 14(d) of the Specific Relief Act.
The Court reproduced Clauses 4A and 4B and observed that both clauses had to be given a holistic interpretation and could not be read in isolation. It held that, on reading the two clauses, it was clear that the MOU was of such a nature that it was determinable.
“… the same would be inherently determinable as the parties do not have to assign any reason to terminate the same and the terms of termination are envisaged in the contract itself. Once that being the position, then the provisions of the Act cannot be pressed into to specifically perform the obligations contained therein,” the Court remarked.
The Court further held that there was no existence of the property or threat of dispossessing the Respondent from any property, and therefore exercising jurisdiction under Order XXXIX Rule 1 CPC without first giving a prima facie view on the enforceability of the MOU was an incorrect approach.
“… the MOU by its very nature being determinable, the specific performance of the same cannot be insisted upon. Trial Court has not rendered any finding in respect thereof and has proceeded to straight away grant injunction under the provisions of Order XXXIX, Rule 1 of CPC which to my mind is an incorrect approach adopted by the Trial Court,” the Court observed.
The Court accordingly held that the Trial Court had incorrectly proceeded to grant an injunction without giving a prima facie view on the contentions as raised by the Appellant.
The Court therefore quashed and set aside the impugned order dated February 14, 2025.
Case Title: M/s. Sada Anand Developers v. Shree Balaji Realty [Appeal From Order No. 627 of 2026]