Specific Performance of Part of Contract – Section 12 | Specific Relief Act

Section 12 of the Specific Relief Act, 1963 Provides that:

1. Agreement:

In the case the 1st respondent was ready and willing to perform the whole of the agreement but trial Court has noted that the appellant could not perform the agreement in its entirety inasmuch as she could not deliver possession. As 1st respondent had elected not to accept performance in part. The Trial Court held that the agreement could not be specifically enforced.

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2. Bar of period:

ADVERTISEMENTS:

Since the period of limitation bars a suit for specific performance of a contract, if brought after the period of limitation, it is open to a defendant in a suit for recovery of possession brought by a transferor to take a plea in defence of part performance of the contract to protect his possession, though he may not be able to enforce that through a suit or action.

3. Claim:

The relinquishment of claim can be made at any stage in the action.

4. Consideration:

As regards the apportionment of consideration, since admittedly the appellant and respondent’s sister each have half share in the properties, the consideration can easily be reduced by 50%.

5. Defaulting party is incapable:

If a suit is laid by the other party, the Court may direct the defaulting party to perform that part of the contract which is performable on satisfying two preconditions, i.e. (i) the plaintiff pays or has already paid the whole of the consideration amount under the agreement, and that (ii) plaintiff relinquishes all claims to the performance of other part of the contract which defaulting party is incapable to perform and all rights to compensation for loss sustained by him. Thus, the ingredi­ents which would attract specific performance of the part of the contract are:

ADVERTISEMENTS:

(i) If a party to an agreement is unable to perform a part of the contract, he is to be treated as defaulting party to that extent, and

(ii) The other party to an agreement must, in a suit for such specific performance, either pays or has paid the whole of agreed amount, for that part of the contract which is capable of being performed by the defaulting party to that extent, and

(iii) The other party to an agreement must, in a suit for such specific performance, either pays or has paid the whole of the agreed amount, for that part of the contract which is capable of being performed by the defaulting party and also relinquishes his claim in respect of other part of contract which defaulting party is not capable to perform and relinquishes the claim of compensation in respect of loss sustained by him. If such ingredients are satis­fied, the discretionary relief of specific performance is ordinarily granted unless there is delay or laches or any other disability on the part of other party.

6. Demarcation of share:

There is no legal difficulty on referring the grant of the decree for specific performance because the property will have to be partitioned. Whenever a share in the property is sold the vendee has a right to apply for the partition of the property and get the share demar­cated.

7. Discretion of Court:

ADVERTISEMENTS:

When a part of the contract which, taken by itself, can and ought to be specifically performed, stands on a separate and independent footing from another part of the same contract which cannot or ought not to be specifically performed, the Court may direct specific performance of the former part. Section 10 (b) provides that “except as otherwise provided in this Chapter, the specific performance of any con­tract may, in the discretion of the Court, be enforced – (b) when the act agreed to be done is such that compensation in money for its non-perfor­mance would not afford adequate relief. It is contended for the appellant that the first respondent prayed for refund of the earnest money; since the agreement was in respect of the entire property including the half share of the appellant, the Courts below, instead of decreeing specific performance of the contract, ought to have awarded refund of the earnest money. The decree for specific performance in the circumstances is illegal. Spry in his “Equitable Remedies, 4th Edn., 1990” stated at p. 59 that:

“In the absence of special circumstances rendering equitable relief appropriate – the Courts will not grant specific performance, if dam­ages would leave the plaintiff in as favourable a position in all mate­rial respects, it is now necessary to re-assess earlier decisions in which damages have been held to be an adequate remedy.” “It has been held by Courts of equity that specific performance will not be granted to a vendor if, although he has established a good title on the balance of probabilities, that title is sufficiently uncertain to be regarded as a doubtful title in the sense in which that term is under­stood in the material authorities; for otherwise it might appear in subsequent proceedings that a title that the purchaser has obtained a deficient, and there might be no way in which he could be prop­erly compensated.”

8. Effect of:

In the present case, the terms of the contract fully indicate that the parties did contemplate that if the sanction of the Court was not granted for transfer of the interest of the reversioners, the contract could not be enforced. Clause (6) specifically provided that in case sanc­tion by the Court was not granted, the advance money of Rs. 25.000/- shall be refunded to the purchaser. It was known to the parties that the vendor had only life interest in the property and the reversioners were not the parties to the agreement.

Even with this knowledge of limited right .he vendor and the reversioners being not signatories to the sale agreement, there is no stipulation made in the contract that if Court’s sanction was not obtained for transfer of reversioners’s interest, the vendor shall convey his life interest to the vendee.

Once respondent elected not to accept part performance it was no longer open to him, on finding that he could not get the specific perfor­mance of the whole, to claim part performance at later date. If this was to be permitted then all vendees would not pay the consideration amount on the dates fixed for performance.

Whilst such dates may not be of the es­sence of the contract, they still have some meaning. If this was to be per­mitted then vendees would withhold payments by first refusing to accept part performance and then after years of litigation agree to accept part performance at the Appellate stage. If this was to be permitted then the sellers would be kept out of their money for long periods of time by vend­ees.

9. Enforceability of contract:

Where the clause requiring obtaining of sanction was to protect interest of both the parties and when the sanction could not be obtained for reasons beyond the control of the parties, the contract cannot be directed to be specifically enforced. Mouse of Lords in the case of Hew Zealand Shipping Co. Ltd. v. Societe Des Ateliers Et Chantiers De France, 1918-19 All ER 552, in similar circumstances, negatived the claim of specific performance. It was held in that case that where two par­ties are equally blameless and none of them could be said to have brought about a situation by their act or omission to frustrate the contract, the con­tract cannot be directed to be specifically enforced.

10. Enforcement:

There was one integrated and indivisible contract by the vendor to convey full interest in the property i.e. his own life interest and the interest of the reversioners with sanction of the Court. As the Court had not granted the sanction, the contract could not be specifically en­forced. The lesser relief of transfer of life interest was not claimed within a reasonable time after the vendor had intimated that the contract, as agreed for full interest, was not possible of performance. We find that neither equity nor law is in favour of the plaintiff vendee.

11. Enforcement of contract:

Actually, a small portion of land was also due to the first respondent which he gave up. Section 12 (2) of the Specific Relief Act covers such a situation. The result is that the first respon­dent is entitled to enforce specifically the contract in his favour.

12. Granting specific performance:

There is no difficulty in granting specific performance merely because the properties are scattered at differ­ent places. There is no law that the properties to be sold must be situated at one place.

13. Grant of:

Although the petitioner is, in law, entitled to convey­ance of full title in the property by the vendor, the reversioners and the subsequent vendee, he has restricted his claim to the lesser relief of seek­ing conveyance only of life interest in the property of the vendor. Such relief can be granted under Section 12 (3) of the Specific Relief Act as the vendee is willing to pay full agreed consideration for lesser relief of convey­ance of life interest in the property.

It is also settled-law that specific performance cannot be granted to a party who has not been ready and willing at all stages to perform the contract. If a contract is not capable of being performed in whole and a party clearly indicates that he is not willing to accept part performance, then there is no readiness and willingness, at all stages, to accept part performance. In that case there can be no specific performance of a part of the contract at a later stage.

Where, only on the footing that admittedly no contract whatsoever has been entered into between the parties therein, it was held that specific performance relief cannot be granted.

14. Grant partial relief:

The power to grant partial relief, from the very language of the Section 12 (3) is discretionary with the Court to be exercised keeping in view the facts and circumstances of each case and rights and interests of the parties involved.

15. Grant of sanction to sale:

In the present case, the vendor waited for a reasonable period for grant of sanction to the sale by the Court. There was a pressing need for sale as the public dues and taxes could have been recovered from the property by coercive process at any time. The vendor therefore, advisedly withdrew from the contract, negotiated sale on differ­ent terms with the subsequent vendee and ultimately entered into the con­tract with the latter.

The vendor did not actually withdraw the suit for sanc­tion. The vendee himself became co-plaintiff to the suit and unsuccessfully tried to prosecute it. The sanction suit was rendered infructuous by vendee’s own conduct of filing affidavit rusticating has claim to life interest. He suffered the dismissal of sanction suit as infructuous and did not question the correctness of the Court’s order in appeal before the Division Bench, although the subsequent vendee, of life interest, had preferred an appeal.

In this situation, even if we come to a conclusion that the vendee had rightly tried his utmost to obtain Court’s sanction and cannot be blamed for transposing him a complaint and prosecuting the sanction suit, the sanc­tion sought could not be obtained for reasons beyond the control of the parties.

The vendor cannot be held guilty of the breach as to entitle the vendee to seek specific performance of life interest of the vendor. The contract entered into between the parties was for conveying full interest in the property namely, life interest of vendor and chance of succession of reversioners. The contract was one and indivisible for full interest.

There is no stipulation in the contract that if sanction was not obtained, the vendor would transfer only his life interest for the same or lesser consideration. On the contrary, the contract stipulated that if the sanction was not granted, the contract shall stand cancelled and the advance money would be refunded to the purchaser.

16. Invoking of:

Section 12 (3) of the Specific Relief Act can be in­voked only where terms of contract permit segregation of rights and inter­est of parties in the property. The provision cannot be availed of when the terms of the contract specifically evince an intention contrary to segregat­ing interest of the vendor having life interest and spes successionis of reuersioners. Neither law nor equity is in favour of the vendee to grant Specific Performance of the Contract.

17. Jurisdiction:

The jurisdiction to order specific performance of a contract is based on the existence of a valid and enforceable contract and where a valid and enforceable contract has not been made, the Court will not make a contract for them. Undoubtedly this is the law.

18. Partial enforcement:

The house being divisible and the appellant being not a consenting party to the contract, equity and justice demanding partial enforcement of the contract, instead of refusing specific performance in its entirety, which would meet the ends of justice.

19. Partial relief:

The reversioners have surrendered their interest by accepting consideration separately and executed separate release deeds in favour of the subsequent vendee. Even though the subsequent vendee has acquired property with Knowledge of sale agreement existing with the prior vendee, the latter has no equity in his favour as to bind the reversioners and in any manner adversely affect their interest.

They were not parties to the sale agreement and have already by separate release deeds, on accept­ing separate consideration, surrendered their interest in favour of the sub­sequent vendee. Any grant of relief of transfer of life interest of the vendor to the prior vendee would involve the reversioners in further litigation. If only life interest of the vendor is allowed to be conveyed to the prior vendee, after death of vendor, the reversioners are likely to be involved in litigation in future to help in restoring possession of the property to the subsequent vendee and effectuate the release deeds executed in his favour by them.

Grant of such equitable relief would adversely affect the immediate efficacy of the release deeds and would create various hurdles in working out the rights and remedies of the reversioners vis-a-vis the subsequent vendee. It would not be a proper exercise of discretion by the Court to grant such partial relief of directing conveyance of life interest of the vendor as that would adversely affect the interest of the reversioners.

20. Part of contract:

In the case, life estate holder contracting to sell full interest with Courts sanction. Due to objection of reversioners vendor unable to get permission in reasonable time. Vendor by notice terminating contract and selling life interest to third party. Vendee neither on receipt of notice of termination nor on knowing of negotiations with third party opting for transfer of only life estate. Option exercised only in midst of trial of suit for specific performance. Decree of specific performance for lesser relief of conveyance of life interest of the vendor cannot be passed either in equity or in law. More so when transfer only of life estate was never contemplated by parties and when grant of such decree would affect the efficacy of release deeds: executed by reversioners in favour of subsequent purchaser.

The ingredients which would attract specific performance of the part of the contract are:

(i) If a party to an agreement is unable to perform a part of the contract, he is to be treated as defaulting party to that extent, and

(ii) The other party to an agreement must, in a suit for such specific performance, either pay or has paid the whole of the agreed amount, for that part of the contract which is capable of being performed by the defaulting party and also relinquish his claim in respect of the other part of the contract which the defaulting party is not capable to perform and relinquishes the claim of compensation in respect of loss sustained by him. If such ingre­dients are satisfied, the discretionary relief of specific perfor­mance is ordinarily granted unless there is delay or laches or any other disability on the part of the other party.

21. Performance of contract:

The relinquishment of claim to further performance of the remaining part of the contract and all rights to compen­sation can be made at any stage of litigation.

22. Period of limitation:

In the facts and circumstances of the case, the respondents were required to have a conveyance executed immedi­ately upon the conferral of occupancy rights on the abolition and the per­mission granted by the revenue authorities to him to convert the suit land into village site. The permission to convert the disputed land into village site having been obtained on 26.8.1958, insofar as a part of the land admeasuring 1,000 square yards and on 10.9.1959 as regards the remain­ing portion, it could not be said that the respondents’ suit filed on 6.9.1960 was barred by limitation.

23. Permissibility:

Wherein agreement for sale of land by a co-owner, the other co-owner not agreeing for sale it was held that specific perfor­mance can be granted in respect of the share of co-owner agreeing for the sale.

While construing the terms of sale agreement that as the reversioners’ interest in the property was likely to be affected, the contracting parties never intended piecemeal transfer of life interest of the vendor and spes successions of reversioners. What the contracting parties intended and stipu­lated was transfer of full interest in the property i.e. vendor’s life interest and reversioners’ spes successions with sanction of the Court.

It is for the above reason that parties very clearly agreed by specific Clause (6) in the agreement that if the sanction of the Court was not accorded, the agree­ment shall forthwith stand cancelled and the advance money received shall be returned to the purchaser. The contracting parties were fully aware that reversioners, who had a mere chance of succession, were not parties to the agreement.

The parties to the contract could have taken care of the eventu­ality of refusal of sanction by the Court and possibility of the vendor trans­ferring only his life interest to the vendee, but such eventuality of separate transfer of life interest is conspicuously absent in the terms of the agree­ment. Such obligation on the part of the vendor to transfer this life interest, if sanction for transfer of reversioners’ interest was not granted, cannot be read in the contract by implication and recourse to Section 12 (3) of the Specific Relief Act, therefore, is impermissible.

24. Preconditions:

If a suit is laid by the other party, the Court may direct the defaulting party to perform that part of the contract which is performable on satisfying two pre-conditions, i.e. (i) The plaintiff pays or has already paid the whole of the consideration amount under the agree­ment, and that (ii) plaintiff relinquishes all claims to the performance of other part of the contract which defaulting party is incapable to perform and all rights to compensation for loss sustained by him.

25. Proof of:

In the present case, there is neither a pleading nor a contention that the respondent and his sister did not own the property in equal shares. Secondly, the agreement of sale clearly mentions that re­spondent was entering into the agreement both on behalf of himself and his sister, and that he was , under the agreement, selling the whole of his share and also the whole of the share of his sister in the property.

Further in the agreement itself he had stated that he was responsible to get the sale- deed executed by his sister and that he would persuade her to do so. This being the case, the properties agreed to be sold were clearly distinguish­able the shares of the respective vendors. In the circumstances, when the absentee vendor, for some reason or the other, refused to accept the agreement, there is no reason why the agreement should not be enforced against the vendor who had signed it and whose property is identifiable by his specific share.

The present is not a case of the performance of a part of the contract but of the whole of the contract so far as the contracting party, namely, the respondent is concerned. Under the agreement, he had contracted to sale whole of his property. The two contracts, viz., for the sales of his share and of his sister’s share were separate and were severable from each other although they were incorporated in one agreement. In fact, there was no contract between the appellant and the respondent’s sister and the only valid contract was with respondent in respect of his share in the property.

26. Question of:

That suit for sanction which was of summary nature happened to be clubbed with the suit for specific performance. The two suits were jointly tried. A common judgment was passed dismissing the sanction suit as infructuous and partly decreeing the suit for specific perfor­mance. An appeal was filed against the common judgment. Therefore, non-­filing of appeal against the dismissal of sanction suit as infructuous does not operate as res judicata and is no ground to refuse specific performance of the grant of decree of specific performance of contract for transfer of life interest for which no sanction of the Court was needed.

27. Relief:

The relief under sub-section (3) of Section 12 of the Act can be -claimed at the Appellate stage by amendment in the plaint.

28. Rejection of relief of Specific Performance—Propriety of:

It is not in dispute that first defendant has sold the property to respondents 2 and 3 under registered sale deed and they came to be impleaded for the first time in the first appeal. It is obvious from Ex. P. 1, that the time stipu­lated for sale in favour of plaintiff had expired and sale was not effected, there is nothing unreasonable on the part of respondents 2 and 3 to have purchased the property when the claim of the plaintiff was a debatable one.

There are no allegations made against defendants 2 and 3 that the sale in their favour is collusive one. In that view of the matter, 1 find that rejection of the relief of specific performance is fully justified. No grounds to inter­fere with. Evaluation of facts and appreciation of evidence by the Courts below is sound and proper. The questions of law are answered in the negative.

29. Right of vendee:

The act of rescinding contract, pending suit for sanction of the Court and selling the property with only life interest to the subsequent vendee, who later on, obtained surrender deeds from the re­versioners by independently paying them, were acts done in conspiracy between vendor and the subsequent vendee. They were self-induced ac­tions to render the suit for seeking sanction as infructuous and frustrate the contract.

It is contended that in such a situation, the prior vendee can take recourse to Section 90 read with Sections 91 and 92 of the Indian Trusts Act, and is entitled to seek specific performance of the contract of full rights of the property i.e., life interest of the vendor and spes successionis of the reversioners. To give effect to the right of the vendee to specific perfor­mance – the vendor, reversioners and subsequent vendee can be compelled in law to convey full title of the property to the plaintiff.

30. Sale of share:

Admittedly, the property has been jointly inherited by two brothers and three sisters. As heirs under the Hindu Succession Act, they inherited the property as co-owners. In the absence of partition be­tween them, the two brothers together had undivided share in the property and they could not have agreed for sale of the entire property.

They were competent to execute agreement to the extent only of their undivided share in the property. In the event of sale of such undivided share, the vendee would be required to file a suit for partition to work out his right in the property. The left out three sisters as co-owners having undivided share in the whole property, the two brother are incompetent to abide by the award.

In the absence of sisters being parties to the agreement, the vendee can at best obtain undivided interest of two brothers in the property. Sec­tion 12 of the Specific Relief Act cannot be invoked by the vendee to obtain sale of undivided share of the two brothers with a right to force partition on the sisters who were not parties to the agreement of sale. Such a relief under Section 12 cannot be obtained by a vendee, on purchase of an undi­vided share of the property of some of the co-owners, against other co-­owners who were not parties to the sale agreement.

Validity or otherwise of an arbitration agreement or award has to be judged by the Court on the facts and situations on the date of its consider­ation for being made a rule of Court. An award, which is found unenforce­able and invalid on the date it is sought to be made a rule of Court, cannot be upheld on possibilities and eventualities which might occur in future. An award cannot be upheld on guess and speculations.

The civil Court was, therefore, justified in setting aside the first award on the ground that all the co-owners of the property being not parties to the arbitration agreement, both the agreement and the consequent award were unenforceable and hence invalid. Clause (c) of Section 30 of the Arbitration Act allows Court to set aside an award if it is found to be ‘otherwise invalid.

In our view, by ignoring the two grounds of setting aside the first award, the civil Court could not have allowed revival of arbitration proceedings on the same agreement, by permitting substitution of another arbitrator to the panel in place of the deceased arbitrator. The High Court was, therefore, fully justified in reversing the order of the civil Court and coming to the conclu­sion that the arbitration could not have been revived.

31. Separate footing:

Respondent in the case and his sister owned some properties. He entered into an agreement with appellant for sale of the property and he undertook to get the sale-deed registered. His sister having refused to sell her share, he was not able to perform the contract.

In a suit filed for specific performance of the agreement the Trial Court granted a decree. On appeal the High Court set aside the judgment and decree relying on the provisions contained in Section 12 of the Specific Relief Act. On further appeal to the Supreme Court it was held that this is not a case which is covered by Section 12 of the Act.

The present is not a case of the performance of a part of the contract but the whole of the contract, so far as the contracting party, viz., the respondent is concerned. It is observed that the agreement was to sell the whole of the property.

The two contracts, viz., for sale of his share and of his sister’s share were separate and sever­able from each other though they were incorporated in one agreement. The Supreme Court held that there was no contract between the appellant and the respondent’s sister and the only valid contract was with respondent in respect of his share in the property.

32. Specification of time:

The law is well-settled that mere specifica­tion of the time on or before which a contract is to be performed, would not make the time the essence of the contract. Time is the essence of the contract if the parties intend it to be so. The Supreme Court observed as follows:

“It is not merely because of specification of time at or before which the thing to be done under the contract is promised to be done and default in compliance therewith, that the other party may avoid the contract. Such an option arises only if it is intended by the parties that time is the essence of the contract. Intention to make time an essence, if expressed in writing, must be in language which is un­mistakable; it may also be inferred from the nature of the property agreed to be sold, conduct of the parties and the surrounding cir­cumstances at or before the contract. Specific performance of a contract will ordinarily be granted, notwithstanding default in carry­ing out the contract within the specified period, if having regard to the express stipulations of the parties, nature of the property and the surrounding circumstances it is not inequitable to grant the relief. If the contract relates to sale of immovable property, it would normally be presumed that time was not the essence of the con­tract. Mere incorporation in the written agreement of a clause im­posing penalty in case of default does not by itself evidence an intention to make time an essence.

33. Specific performance:

In the instant case, respondents had come into possession after the suit was instituted and agreement to sell was en­tered into. Therefore, the High Court rightly allowed the appeal holding them to be not a bona fide purchasers and directed decree for specific performance in pursuance of agreement to sell dated 6.5.1988.

If the con­tention of the respondents is given acceptance, no contract can be en­forced and the party will seek to avoid contract by inducting third party into possession. Therefore, the view taken by the first Appellate Court in that behalf is clearly illegal.

Having regard to the fact that respondents are not bona fide purchaser and admittedly came into possession after the suit was instituted and the agreement was entered into, the High Court has rightly rejected their contention. The contention since they have come into pos­session the suit for specific performance will be an impediment in that behalf bears no force.

The facts in the said case were that the property was owned jointly by three brothers. The purchaser clearly stated that at their meeting with one of the brothers, he told that he is yet to consult his two brothers about sale consideration. Tenor of several letters between the parties showed that sale consideration was not finalised in their meeting. It was held that there was no concluded contract between the parties on which decree for specific performance could not be passed. In the said case, Supreme Court held that in a suit for specific performance the evidence and proof of agreement must be absolutely clear and certain.

Where respondents had come into possession after the suit was insti­tuted and agreement to sell entered into, the High Court rightly allowed the appeal holding them to be not a bona fide purchasers directed decree for specific performance in pursuance of agreement to sell.