Can you claim specific performance of a contract when you approach the court after a lapse of 2 years?

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Shubham Budhiraja[1]

 

Mr. A and Mr. B enter into an agreement to sell land wherein Mr. B has paid earnest money deposit (EMD). The contract to be executed within 1 year. Mr. A, on date fixed, appeared before sub- registrar but Mr. B failed to appear. Mr. A served the Legal notice and forfeited the EMD. Mr. B after lapse of 2 years filed a suit for specific performance of the agreement. Meantime the land was acquired by the state under land acquisition act and Mr. B amended the plaint accordingly. The trial court, 1st Appellate court and High Court held that the forfeiture by Mr. A was wrong and directed to refund the EMD. The Hon'ble Supreme Court held that when time was the essence of contract and the purchaser has failed to perform its part as required in the agreement then specific performance cannot be granted especially when the purchaser has moved the court after a lapse of 2 years. Just because there is a limitation of 3 years, there is no answer to claim specific performance. The question of obligation of Mr. A to take NOC from Development authority wouldn't arise had Mr. B have performed it's part of the agreement.[2]

 

(i)                    Every suit for specific performance need not be decreed merely because it is filed within the period of limitation by ignoring the time-limits stipulated in the agreement. The courts will also “frown” upon suits which are not filed immediately after the breach/refusal. The fact that limitation is three years does not mean that a purchaser can wait for 1 or 2 years to file a suit and obtain specific performance.

 

(ii)                   The three-year period is intended to assist the purchasers in special cases, as for example, where the major part of the consideration has been paid to the vendor and possession has been delivered in part-performance, where equity shifts in favour of the purchaser.

 

(i)                    In a scenario where the contractual terms clearly provide the factum of the pre estimate amount being in the nature of ‘earnest money’, the onus to prove that the same was ‘penal’ in nature squarely lies on the party seeking refund of the same. Failure to discharge such burden would treat any pre-estimated amount stipulated in the contract as a ‘genuine pre-estimate of loss.


[1] Advocate, Delhi High Court [LLB, ACS, BCOM(H)], Budhirajalawchambers@gmail.com , M:+91-9654055315

[2] CIVIL APPEAL NO. 921 OF 2022, Judgment dated 14/12/2022

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