The Supreme Court on Tuesday (June 23) reiterated that a party seeking specific performance of an agreement to sell must continuously demonstrate readiness and willingness to perform its contractual obligations from the date of the agreement, holding that financial documents created years after institution of the suit cannot be relied upon to establish such readiness

“In the present case, there is no material whatsoever to show that the appellant/plaintiff had the balance sale consideration available either at the time of execution of the agreement, within the stipulated period of four months for performance of the contract, or even at the time of filing of the suit in the year 1993. Thus, in our view, the High Court has rightly observed that the availability of funds must be proved with reference to the relevant point of time and not by relying upon financial documents generated long after the filing of the suit.”, observed a bench of Justice Prashant Kumar Mishra and Justice NV Anjaria.

The dispute arose out of an agreement to sell dated December 20, 1990, executed between the Appellant and Respondent in respect of a vacant site in Mysore for a total consideration of Rs. 3 lakh. While an earnest amount of Rs. 25,000 was admittedly paid, the balance consideration of Rs. 2.75 lakh was to be paid at the time of registration. The agreement stipulated a four-month period for completion of the transaction.

The plaintiff instituted a suit for specific performance in December 1993, nearly two years and nine months after the defendant had rescinded the agreement. Although the trial court decreed the suit in 2002, the Karnataka High Court reversed the decree in 2009, holding that the plaintiff had failed to establish continuous readiness and willingness to perform his obligations under the contract, prompting the plaintiff to move to the Supreme Court.

Before the Supreme Court, the appellants-plaintiffs argued that they possessed sufficient financial capacity to complete the transaction and relied upon four Fixed Deposit Receipts (FDRs) worth Rs. 70,000 each, aggregating Rs. 2.80 lakh.

Affirming the impugned order, the judgment authored by Justice Mishra rejected the Appellant's argument about the existence of the FDRs in their favour, noting that such FDRs came into existence only between 1999 and 2001, i.e., much after the date of institution of the suit in 1993.

“…it was argued on behalf of the appellants that they possessed a sum of Rs. 2,80,000/- at the relevant period, through four FDRs and that such availability of funds established their readiness and willingness to perform their part of the contract. However, looking at the dates on these FDRs, it can be seen that these four FDRs are dated 04.10.1999, 22.11.1999, 03.04.2001 and 23.08.2001, all of which were created after several years of the institution of the suit on 20.12.1993. Therefore, these FDRs cannot be said to establish appellants' financial readiness during the relevant period, namely from the date of the agreement till the filing of the suit.”, the court said.

The Court stressed that “though it was not necessary for the appellants to physically deposit the consideration amount before the Court, they must nevertheless have to place reliable and acceptable evidence on record to show that they possessed sufficient funds to complete the transaction at the relevant time.”

Further, the Court found that the element of delay in approaching the Court for seeking a specific relief went against the Appellant, noting that although the suit may have been filed within the limitation period, unexplained delay remains a relevant consideration while granting the equitable and discretionary relief of specific performance.

Since, there was an unexplained delay of nearly two years and nine months in filing the suit after the defendant had rescinded the agreement, this, according to the Court, also demonstrated the Appellant's lack of readiness and willingness to perform the contract.

“In fact, the appellant/plaintiff chose to file the suit for specific performance after two years and nine months i.e., on 20.12.1993. This conduct of the appellant/plaintiff, in our view, reflects lack of continuous readiness and willingness to perform his part of the contract, which is a sine qua non for the grant of relief of specific performance.”, the Court said.

In terms of the aforesaid, the appeal was dismissed.

“Keeping in view the twin statutory mandate of 'readiness' and 'willingness', the appellants not only failed to demonstrate their readiness and willingness but also failed to approach the Court with quite promptitude, which disentitle them from grant of the equitable relief of specific performance.”, the court held.

Cause Title: MOHAMMED KHALEEL (D) THROUGH LRs & ORS. VERSUS JAYAMMA

Citation : 2026 LiveLaw (SC) 638

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