Inherently Determinable Contract Cannot Be Specifically Enforced

Bombay High Court 

Why in News? 

Justice Aarti Sathe, in M/s. Sada Anand Developers v. Shree Balaji Realty (2026), allowed an Appeal from Order and set aside a Trial Court order that had restrained the Appellant from dealing with certain Transferable Development Rights (TDR), holding that since the underlying MOU was inherently determinable, its specific performance could not be insisted upon and, consequently, could not be protected by way of interim injunction. 

What was the Background of M/s. Sada Anand Developers v. Shree Balaji Realty (2026) Case? 

• The dispute arose from an agreement dated July 13, 2022, under which the Respondent agreed to purchase 5,200 sq. mtrs. of Transferable Development Rights (TDR) from the Appellant. 
• Under the MOU, the Appellant was required to obtain the Development Rights Certificate (DRC) 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 Respondent thereafter approached the 5th Joint Civil Judge, which, by order dated February 14, 2025, temporarily restrained the Appellant from transferring, alienating, or creating any third-party interest in the TDR. 
• The Appellant challenged this order by way of an Appeal from Order, contending 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, and that the MOU was, by its very nature, a determinable document, rendering it unenforceable under Section 14(d) of the Specific Relief Act, 1963. 

What were the Court's Observations? 

• On the Nature of the MOU as a Determinable Contract: 
  The Court reproduced and holistically interpreted Clauses 4A and 4B of the MOU, holding that the two clauses could not be read in isolation and that, on a combined reading, the MOU was inherently determinable, since the parties were not required to assign any reason to terminate it and the terms of termination were themselves envisaged within the contract. 
• On the Bar Under Section 14(d) of the Specific Relief Act: 
  The Court held that once a contract is found to be inherently determinable, the provisions of the Specific Relief Act cannot be invoked to specifically enforce the obligations contained in it, and that specific performance of such a contract cannot be insisted upon. 
• On the Grant of Interim Injunction by the Trial Court: 
  The Court held that there was no existing property or threat of dispossession from any property that warranted protection, and that the Trial Court had erred in exercising jurisdiction under Order XXXIX Rule 1 of the CPC without first forming a prima facie view on the enforceability of the MOU itself. 
• On the Correctness of the Trial Court's Approach: 
  The Court found that the Trial Court had proceeded straightaway to grant injunction under Order XXXIX Rule 1 CPC without rendering any finding on the Appellant's contention regarding the determinable nature of the MOU, and held this to be an incorrect approach. 
• The Court accordingly quashed and set aside the impugned order dated February 14, 2025, and allowed the Appeal from Order. 

What is a Determinable Contract under the Specific Relief Act, 1963? 

Background & Purpose: 

• Section 14 of the Specific Relief Act, 1963 lists the categories of contracts that cannot be specifically enforced. 
• Clause (d) of Section 14 bars specific performance of a contract that is, in its nature, determinable — that is, a contract which either party may terminate or put an end to without assigning any reason, where the terms of such termination are themselves contained in the contract. 
• The rationale is that courts will not compel performance of, or protect through injunction, an obligation that a party is otherwise free to bring to an end under the contract's own terms.