Introduction
Specific performance of a contract refers to a remedy wherein the court compels the defaulting party to perform its obligations under the contract. This remedy has emerged as a form of equitable relief and does not require an express contractual provision. The Specific Relief Act, 1963 (Act) is the governing statute for specific performance as it lays down the conditions and qualifications for claiming the relief. One of the important pre-requisites under the Act for seeking specific performance is that the party seeking the specific performance is required to prove its “readiness and willingness” to perform its part of the contract. Recently, the Supreme Court of India in U.N. Krishnamurthy v. A.M. Krishnamurthy (Krishnamurthy Judgement) has thrown light on the concept of “readiness and willingness”.
Brief facts
U.N. Krishnamurthy (Owner) was the owner of the property, while A.M. Krishnamurthy (Buyer) was the buyer of the said property. According to the Buyer, the Owner had agreed to sell the property to him for a consideration of INR 15,10,000 out of which INR 10,001 was paid by the Buyer in advance. The terms and conditions of the agreement for sale of the property were recorded by the Owner in his own handwriting in a letter given by the Owner to the Buyer.
The Buyer alleged that he had approached the Seller with the balance consideration several times and requested that a sale deed be executed in his favor, but the Seller kept deferring the execution of the sale deed on various pretexts. Consequently, the Buyer issued a legal notice for execution of the sale deed, which was refused by the Seller, leading to the Buyer filing a suit seeking specific performance of the contract and execution of the sale deed. The trial court found that the Buyer was willing to perform his part of the contract and thus was entitled to the relief of specific performance. The trial court’s order was upheld by the High Court in an appeal. Subsequently, an appeal was filed by the Seller before the Supreme Court to determine whether the relief of specific performance was correctly granted in favor of the Buyer.
Findings of the Supreme Court
The Supreme Court noted that under the Act, a party claiming specific performance must prove that it has always been ready and willing to perform its side of the contract, unless waived or prevented by the other party.
The Supreme Court elaborated on the issue of “readiness and willingness” of performance of the contract. While explaining the two requisites, the Court opined that while “readiness” means one’s capacity to perform the contract, it would also include his financial position, whereas “willingness” relates to the conduct of such party. For examining “readiness and willingness”, the party’s conduct prior to and subsequent to filing of the suit becomes relevant. Applying the principles in the present case, the Supreme Court held that the Buyer, through his own conduct, had proven its unreadiness and unwillingness since:
a. the Buyer had only paid a miniscule amount as advance, and no evidence was provided as to how he was in a position to pay or make arrangements for payment of the balance sale consideration;
b. the balance sheet of the Buyer revealed that he did not have sufficient funds to discharge his part of contract and complete the sale within the agreed period; and
c. that the suit was filed after three years, just before expiry of the period of limitation.
The Supreme Court held that the trial court and the High Court had erred in not adjudicating upon the issue of “readiness and willingness” and had made a far-reaching observation that the Buyer, being a businessman, had sources to arrange the balance funds. Thus, the Supreme Court was of the view that Buyer was not entitled to the relief of specific performance and the orders of the High Court and the trial court were set aside.
Our thoughts
In the Krishnamurthy Judgement, the Supreme Court clarifies the scope of “readiness and willingness” to imply that the person seeking specific performance must be prepared to carry out those parts of the contract to their logical end, so far as they depend upon his performance. A party seeking to enforce a contract must show that all conditions precedents have been fulfilled and that it has performed or has been ready and willing to perform, all the terms which ought to have been performed. If the party fails to prove the same, granting the relief of specific performance would be impractical, given the unwillingness or unreadiness of the said party to discharge its obligations under the contract.
The Supreme Court’s decision to adjudge whether the party seeking performance of the contract is ready and willing to perform its part of the contract is a welcome step. This will ensure that courts take into consideration the capacity of the claimant, including availability of funds and its conduct, both prior to and subsequent to the filing of the suit, while considering grant of specific performance.
Authors: Renjith Nair, Altamash Qureshi and Niyati Bhogayta
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