Gaddipati Divija vs Pathuri Samrajyam (2023) Civil Appeal No. 4206-4207

Facts of the case

In this case, Gaddipati Divija and Gaddipati Sai, who are minors, had been represented by their maternal grandmother, Smt. Inturi Chenchamma. They are the children of the late Shri. G. V. Gopala Rao.

Shri. G. V. Gopala Rao acquired a property known as the ‘Suit Property’ during his lifetime from Smt. B. Alivelu Mangamma. He subsequently entered into an Agreement to Sell with Smt. Pathuri Samrajyam (Respondent No. 1) in August 2002, agreeing to sell the Suit Property for a total of Rs. 11,88,000, with an initial advance payment of Rs. 4,00,000.

The Agreement stipulated that Shri. G. V. Gopala Rao would execute a Sale Deed after demarcating the property and receiving the remaining sale amount within three months. However, when the three-month period passed, he issued a Notice to Respondent No. 1 on January 2, 2003, demanding the outstanding balance of Rs. 7,88,000.

In response, Respondent No. 1 denied the allegations of non-payment, and in a reply dated January 10, 2003, she expressed her willingness to proceed with the transaction but requested the removal of property attachments and measurement before paying the balance and completing the registration.

Shri. G. V. Gopala Rao had also borrowed money from Shri. Kalluri Kondaiah (Respondent No. 2) and Shri. M. Koteswara Rao (husband of Respondent No. 3). Following Shri. G. V. Gopala Rao’s death in 2003, Respondents No. 2 and No. 3 filed suits to recover the borrowed amounts.

The legal representatives of Shri. G. V. Gopala Rao, namely the Appellants, were required to resolve the property attachment and settle the debts and execute the Sale Deed in favor of Respondent No. 1. Failing to do so, Respondent No. 1 initiated a case seeking specific performance of the Agreement to sell and a directive for the Sale Deed’s execution.

The Trial Court’s judgment in August 2007 partially dismissed the case, denying specific performance but allowing recovery of the initial advance payment. Discontent with the Trial Court’s judgment and order issued, Respondent No. 1 initiated an appeal in 2008 before the High Court of Andhra Pradesh in Hyderabad. On October 5, 2010, the High Court accepted the appeal and directed the Appellants to carry out the Sale Deed in favor of Respondent No. 1, pending the receipt of the remaining sale consideration.

Subsequently, a petition in 2010 was submitted to the High Court on behalf of the minor appellants by their maternal grandmother. This petition sought the reconsideration of the High Court’s judgment issued on October 5, 2010, on the grounds that the Appellants were not allowed to present their case. Nevertheless, the High Court dismissed this petition in a decision rendered on December 10, 2010. Consequently, the Appellants appealed these decisions before the Supreme Court of India in 2011.

Issues

Whether the decision of the High Court to grant Respondent No. 1’s appeal and enforce the specific performance of the contract justified where it ruled that Shri. G. V. Gopala Rao, as well as his legal heirs, including the Appellants, failed to fulfill their obligation regarding the measurement and demarcation of the Suit Property, and the High Court also determined that Respondent No. 1 consistently showed her readiness and willingness to fulfill her part of the contract by paying the remaining sale consideration?

Arguments

Appellant’s Argument: The Senior Counsel for the Appellants, argued that the High Court’s decision to allow Respondent No. 1’s appeal for specific performance was flawed. He pointed out that Respondent No. 1 failed to sufficiently demonstrate her continuous readiness and willingness to fulfill her part of the contract, as required by legal precedent. There was no substantial evidence of her financial capacity to pay the balance. Additionally, he emphasized that G. Venugopala Rao had fulfilled his obligations, but Respondent No. 1 did not pay the balance within the stipulated three months. Instead, she remained silent for a prolonged period, only taking legal action after the property’s value had increased significantly. 

The counsel contended that the sale agreement covered 90 cents of land, while the suit only concerned 50 cents, which was not permissible under Section 12(1) of the Specific Relief Act. He also pointed out the omission of G. Venugopala Rao’s mother, a necessary party, and the absence of effective representation for the minor Appellants during the appeal. He argued that the High Court’s ex-parte handling of the appeal was legally unsustainable, and the Appellants should have been properly represented.

Respondent’s Argument: Counsel representing the Respondents, argued that the High Court’s detailed judgment, based on a thorough examination of evidence, justifies dismissing the Civil Appeal. He explained that G. Venugopala Rao’s sale agreement with Respondent No. 1 involved 90 cents of land, where G. Venugopala Rao owned 50 cents, and the rest was subject to a separate agreement with Smt. Balsa Allvelu Magamma. Despite an agreement to demarcate the land within three months, G. Venugopala Rao failed to do so.

Furthermore, G. Venugopala Rao concealed his actions, including mortgaging 25 cents to close relatives, and later issued a legal notice demanding the remaining payment. Respondent No. 1 replied, asserting that the balance was payable after demarcation, and she was always willing to fulfill her part. Additionally, she mentioned an attachment due to a money recovery suit. Subsequently, Magamma sold the 40 cents to a third party, reducing G. Venugopala Rao’s land to 50 cents. In response, Respondent No. 1 filed a suit for specific performance regarding the remaining 50 cents. During the trial, Respondent No. 1’s husband, PW1, affirmed their financial capability and readiness to fulfill the contract. The counsel emphasized that the Trial Court’s claim about the lack of evidence for their financial capacity was incorrect.

Judgment

After analysing the Apex Court in its judgment made the key observation that the relevant law for the case is Section 16(c) of the Specific Relief Act, 1963, which was amended in 2018. The amended Section 16(c) stipulates that a person seeking specific performance must prove they performed or were always ready and willing to perform essential contract terms, excluding terms waived or prevented by the defendant. Prior to the 2018 Amendment, Section 16(c) required the plaintiff to prove their readiness and willingness to perform their contract obligations, with an explanation that an actual money deposit wasn’t necessary in money-related contracts.

The High Court correctly found that the deceased party and their legal heirs failed to fulfill their obligation regarding property demarcation, while Respondent No. 1 demonstrated her readiness and willingness to fulfill her part by paying the balance amount, as required by Section 16(c).

The case of Aniglase Yohannan vs Ramlatha & Ors (2005) 7 SCC 534 emphasized that the plaintiff’s readiness and willingness to perform their part is a primary requirement under Section 16(c).

Applying these legal principles to the case, it was clear that Respondent No. 1 was consistently ready to pay the balance amount. The deceased party failed to demarcate the property. Despite this, Respondent No. 1’s actions, including an advance payment and her conduct, showed her continuous readiness to pay the balance.

The High Court noted that part of the evidence regarding Respondent No. 1’s readiness and willingness remained unchallenged in the Trial Court, and unchallenged facts can be considered admitted. The High Court correctly concluded that the stipulated time should not make time an essential aspect of the contract in the sale of immovable property. Since specific performance hadn’t occurred due to the property not being demarcated, the question of time being essential didn’t apply. 

Therefore, the Appellants couldn’t claim that time was of the essence in the Agreement to Sell.

Conclusion

In conclusion, the Supreme Court, after careful consideration, upheld the High Court’s decision to grant specific performance to Respondent No. 1. The case hinged on the application of Section 16(c) of the Specific Relief Act, which emphasizes the plaintiff’s readiness and willingness to perform essential contract terms. It was noted that the deceased party and his legal heirs, including the Appellants, failed to meet their obligation regarding property demarcation. In contrast, Respondent No. 1 consistently demonstrated her readiness to fulfill her part by paying the balance amount.

The High Court’s judgment was deemed sound as it was based on a thorough examination of the evidence, and the unchallenged aspects of Respondent No. 1’s readiness and willingness were considered admitted. Moreover, the Court clarified that stipulating a time frame for the contract did not necessarily make time an essential element, especially when specific performance had not occurred due to the property’s lack of demarcation.

In essence, the Court upheld the grant of specific performance to Respondent No. 1, affirming the High Court’s decision and dismissed both the appeals.

References

https://indiankanoon.org/doc/40683932/

https://www.casemine.com/judgement/in/644042d260b2696ce8697b9d

https://theindianlawyer.in/supreme-court-holds-respondent-entitled-to-specific-performance-of-contract-as-she-was-always-willing-to-pay-sale-consideration-to-appellants/

This Article is written by Sangini Singh of Bangalore Institute of Legal Studies, Intern at Legal Vidhiya.

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