Specific Performance Denied: Supreme Court Cancels Land Sale Agreement Over Delay in Payment

The Supreme Court of India, in its judgment dated February 24, 2023, ruled on a significant case concerning specific performance of a contract. The case of P. Shyamala vs. Gundlur Masthan revolved around the enforcement of a sale agreement and the extension of time for payment under the Specific Relief Act, 1963. The Court ultimately rescinded the agreement due to an 853-day delay in payment by the buyer, reinforcing the principle that buyers must act diligently to enforce their contractual rights.

The judgment has important implications for real estate transactions, highlighting the necessity for timely fulfillment of contractual obligations. The ruling also emphasizes that courts should not extend time for payment as a matter of course, particularly when delays are unjustified.

Background of the Case

The case arose from a sale agreement dated May 9, 2012, between the respondent, Gundlur Masthan (original plaintiff), and the appellant, P. Shyamala (legal heir of the original defendant). The agreement required the defendant to sell a property for Rs. 23,00,000, of which Rs. 8,00,000 was paid as an advance.

The trial court passed an ex-parte decree for specific performance on October 12, 2013, requiring the plaintiff to deposit the balance amount of Rs. 15,00,000 within two weeks. However, the plaintiff failed to deposit the amount within the stipulated period, leading to a delay of 853 days before seeking an extension under Section 148 of the Code of Civil Procedure and Section 28 of the Specific Relief Act.

Legal Proceedings

Trial Court Decision

The trial court granted an extension for payment despite the long delay and dismissed the appellant’s application seeking rescission of the contract under Section 28 of the Specific Relief Act. The court allowed the plaintiff to deposit the balance amount with interest at 18% per annum.

High Court Decision

The appellant challenged the order before the Telangana High Court, arguing that the long delay demonstrated the plaintiff’s unwillingness to fulfill the agreement. However, the High Court upheld the trial court’s decision, prompting the appellant to approach the Supreme Court.

Arguments of the Parties

Arguments by the Appellant (P. Shyamala)

The plaintiff failed to deposit the amount within the stipulated period and had not shown any reasonable cause for the 853-day delay.
The explanation provided—illness due to jaundice and high blood pressure—was not believable since it did not justify a delay of over two years.
The plaintiff made no effort to get the sale deed executed or deposit the amount even after the defendant’s death.
The value of the property had significantly increased over time, and the delay in payment suggested that the plaintiff was trying to take undue advantage.
The trial court erred in exercising its discretion to extend the time, and the High Court failed to correct this error.

Arguments by the Respondent (Gundlur Masthan)

The delay was unintentional and caused by medical issues, which were supported by records.
The trial court’s decision to allow an extension with 18% interest was fair and should not be disturbed.
The balance amount had now been deposited, and rescinding the contract at this stage would be unfair.
Courts have the discretion to extend time for payment to ensure justice.

Supreme Court’s Observations and Judgment

The Supreme Court set aside the High Court’s decision and rescinded the sale agreement, holding that the plaintiff had been grossly negligent in fulfilling contractual obligations. The Court made the following key observations:

“The plaintiff was required to deposit the balance sale consideration of Rs. 15,00,000/- within two weeks from the date of judgment and decree dated 12.10.2013. However, the plaintiff failed to do so and only filed an application for extension after a delay of 853 days. Such an inordinate delay cannot be condoned without sufficient cause.”

The Court also referred to V.S. Palanichamy Chettiar Firm vs. C. Alagappan & Another (1999) 4 SCC 702, which held that equitable considerations play a significant role in granting specific performance. The Court stated:

“Provisions to grant specific performance of an agreement are quite stringent. Equitable considerations come into play, and courts must assess if the vendee has conducted himself in a reasonable manner under the contract.”

Key Takeaways from the Judgment

Strict enforcement of contractual deadlines: Buyers must deposit the balance amount within the stipulated period, and delays must be backed by strong justification.
Courts must exercise discretion carefully: Extensions should not be granted as a matter of routine, especially when the delay is excessive.
Equitable considerations matter: The Court emphasized that granting specific performance is discretionary, and courts must ensure fairness to both parties.
Property value appreciation does not justify delays: The increase in property prices cannot be used as a reason to delay payments.

Implications of the Judgment

This ruling sets a precedent for future disputes concerning specific performance and delay in payment. It reinforces the need for strict adherence to contractual terms and protects sellers from undue delays that might be financially disadvantageous.

Conclusion

The Supreme Court’s decision in this case highlights the importance of honoring contractual obligations within the stipulated time. By refusing to extend the time for payment after an 853-day delay, the Court has reinforced the principle that legal agreements must be respected and performed in a timely manner. This judgment serves as a cautionary tale for buyers and sellers alike, emphasizing that courts will not tolerate unjustified delays in executing property transactions.

Petitioner Name: P. Shyamala.
Respondent Name: Gundlur Masthan.
Judgment By: Justice M. R. Shah, Justice C.T. Ravikumar.
Place Of Incident: Telangana.
Judgment Date: 24-02-2023.

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