Supreme Court Refuses Specific Performance in Lapsed Land Sale Agreement — Directs Refund at 7.5% Interest

Overview of the Dispute

The Supreme Court of India adjudicated a set of appeals arising out of a suit for specific performance connected to two agreements for the sale of agricultural land. The agreements, dated 26.03.1997 and 27.03.1997, pertained to land admeasuring Acs. 40.08 gts. situated in Budvel Village, Rajendra Nagar Mandal, Ranga Reddy District, Hyderabad. The total agreed sale consideration was Rs. 40,20,000/-.

The purchaser — Siddamsetty Infra Projects Pvt. Ltd. — had paid a substantial portion of the consideration, leaving a balance of Rs. 5,39,150/- to be paid within three months, as stipulated under Clause 3 of the agreements. This balance was never paid within the contractual timeframe. The suit, filed as OS No. 88 of 2002, came up for final determination before the Supreme Court after the High Court for the State of Telangana at Hyderabad reversed the trial court's dismissal through its judgment dated 23.04.2021 in A.S. No. 998 of 2010.

Case Name and Parties

Smt. Katta Sujatha Reddy & Anr. Vs Siddamsetty Infra Projects Pvt. Ltd. & Ors.
Court: Supreme Court of India

Background and Factual Matrix

The origins of the dispute trace back to an agreement dated 19.03.1994, under which the predecessor-in-interest of certain respondents — late D Narayana — had agreed to sell agricultural land bearing Sy. No. 300–309, admeasuring 141.05 acres. Two registered Joint General Powers of Attorney dated 28.03.1994 were executed in favour of the appellants (vendors) for an extent of Acs. 127.27 gts. However, the 1994 agreement did not materialise, leading to fresh agreements in 1997.

The two fresh agreements provided:

  • Agreement dated 26.03.1997 — Acs. 35.15 gts. for a consideration of Rs. 38,37,500/-
  • Agreement dated 27.03.1997 — Acs. 1.33 gts. for a consideration of Rs. 1,82,500/-

Out of the total consideration of Rs. 40,20,000/-, the purchaser paid Rs. 34,80,850/- through cash and cheques — a fact that was not contested. The balance of Rs. 5,39,150/- was to be paid within three months, i.e., by approximately 27.06.1997. The suit was ultimately filed only on 09.08.2002, more than five years after the agreements were executed.

Proceedings Before the Trial Court

The trial court framed five issues and dismissed the suit on the following grounds:

  • The purchaser had not made the complete payment stipulated under the agreement.
  • A cheque for Rs. 5,00,000/- issued by the purchaser was dishonoured, and this material fact was suppressed.
  • The purchaser failed to demonstrate readiness and willingness to perform the contract.
  • The suit was barred by limitation under Article 54 of the Limitation Act, 1963, as the three-year period commenced from the date stipulated for performance — i.e., June 1997 — and expired in June 2000, whereas the suit was filed in August 2002.
  • Alternative relief for recovery of the advance amount was also barred under Article 47 of the Limitation Act.

High Court's Reversal

The High Court framed seven issues and partly allowed the purchaser's appeal. Its key findings were:

  1. Limitation: Clause 3 of the agreements did not fix a calendar date for performance of the contract; it only prescribed a timeline for payment of consideration. Since the vendors also failed to procure requisite certificates, the first part of Article 54 was inapplicable.
  2. Possession: One of the defendants had admitted in pleadings that the purchaser was placed in possession; the High Court held this was sufficient.
  3. Readiness and Willingness: The purchaser had paid approximately 90% of the consideration and deposited the balance in court, demonstrating bona fides.
  4. 2018 Amendment: The High Court held that Section 10 of the Specific Relief Act, 1963 as amended by the 2018 Amendment Act was procedural and retrospective, making specific performance a mandatory remedy applicable to pending proceedings.
  5. Relief Granted: The High Court directed the vendors to register the suit property in favour of the purchaser to the extent of 90% of the total sale consideration, and ordered refund of Rs. 5,39,150/- deposited by the purchaser pursuant to the trial court's order dated 11.07.2005 in IA No. 925/2005.

Issues Framed by the Supreme Court

The Supreme Court identified four principal issues for determination: