Source: Supreme Court

Why in News?

The Supreme Court (SC) has ruled that, when time is not fixed for specific performance of a contract, then the limitation period for a specific performance suit will run from the date on which the plaintiff had notice of refusal on part of the defendant to perform the contract to determine the period of limitation in the matter of A. Valliammai V. K.P. Murali.

Background

• The appellant (A. Valliammai) statedly owned 11 acres of land.
• Appellant had entered into an agreement to sell the property in 1988. The amount of Rs. 1,00,000/- was received as an advance and the balance consideration was required to be paid within one year.
• The timeline for payment of the balance sale consideration and execution of the sale deed was later extended by 6 months.
• In 1991, a legal notice was issued to the appellant to accept the balance sale consideration and execute the sale deed within one month. It was agreed that the sale deed will be executed within one year from the date of the agreement.
• A partition suit was pending concerning the suit property and the sale deed was to be executed after disposal of the partition suit, which was later dismissed for default.
• Later in 1991, a suit was filed for permanent injunction to restrain the appellant from dealing with Suit Property till the execution of the sale deed.
• An order of temporary injunction was passed against the appellant by the trial court.
• Now, the present respondent (K.P. Murali) initiated the proceedings in 1995 seeking specific performance in accordance with the contract for the sale of a property upon notice made in the year 1991 regarding injunction.
• The defence was made on several grounds including the bar of limitation for specific performance of contract.
• The Trial Court framed one issue, that is, whether the plaintiffs were entitled to the relief of specific performance and directed the performance.
• The above decision of the court was affirmed by the division bench of the Madras High Court.
• The appellant has thereby approached the Apex Court in appeal.

Court’s Observations

• Justice Sanjiv Khanna and Justice Bela Trivedi of SC noted that Article 54 of First Division – Suits, of the Schedule to the Limitation Act, 1963 prescribes a 3-year limitation period for the suit of specific performance.
• The court while observing that limitation period to file a suit for specific performance had commenced in 1991 when the suit for injunction was filed and the present suit was filed in 1995 stated that “The appellants must succeed in this appeal since the suit for specific performance is clearly and without doubt barred by limitation” and the decision of the HC was thereby set aside.

Legal Provision

• The limitation period for the Specific Performance of a contract is provided by the Limitation Act, 1963.

• Specific Performance of a Contract: It is an equitable relief provided under Section 10 of the Specific Relief Act, 1963. The provision as amended by the 2018 amendment to the act is as follows:
• Section 10 - Specific performance in respect of contracts: The specific performance of a contract shall be enforced by the court subject to the provisions contained in sub-section (2) of section 11, section 14 and section 16.
• Section 11 - Cases in which specific performance of contracts connected with trusts enforceable: (2) A contract made by a trustee in excess of his powers or in breach of trust cannot be specifically enforced.
• Section 14 - Contracts not specifically enforceable: The following contracts cannot be specifically enforced, namely:—
  • (a) where a party to the contract has obtained substituted performance of contract in accordance with the provisions of section 20;
  • (b) a contract, the performance of which involves the performance of a continuous duty which the court cannot supervise;
  • (c) a contract which is so dependent on the personal qualifications of the parties that the court cannot enforce specific performance of its material terms; and
  • (d) a contract which is in its nature determinable.
• Section 16 - Personal bars to relief: Specific performance of a contract cannot be enforced in favour of a person—
  • (a) who has obtained substituted performance of contract under section 20; or
  • (b) who has become incapable of performing, or violates any essential term of, the contract that on his part remains to be performed, or acts in fraud of the contract, or wilfully acts at variance with, or in subversion of, the relation intended to be established by the contract; or
  • (c) who fails to prove that he has performed or has always been ready and willing to perform the essential terms of the contract which are to be performed by him, other than terms the performance of which has been prevented or waived by the defendant.
  • Explanation - For the purposes of clause (c)-
  • (i) where a contract involves the payment of money, it is not essential for the plaintiff to actually tender to the defendant or to deposit in court any money except when so directed by the court;
  • (ii) the plaintiff must prove performance of, or readiness and willingness to perform, the contract according to its true construction.