The Bombay High Court has clarified a critical principle in contract law: the limitation period for filing a suit for specific performance begins not from the date stipulated in the agreement for execution of the sale-deed, but from the date the vendor breaches the agreement by selling the property to a third party. This ruling resolves longstanding ambiguity in property litigation and provides definitive guidance to practitioners handling contractual disputes.
Background & Facts
The Dispute
The dispute arose from a property transaction where the plaintiff entered into a registered agreement of sale with the original defendant on 24 January 2011, for the purchase of a specific immovable property. As part of the same arrangement, the defendant executed a registered power of attorney in favour of the plaintiff on 7 March 2011, authorizing him to execute the sale-deed in his own name upon fulfillment of terms. The agreement stipulated a five-month window for completion of the sale. However, the defendant failed to execute the sale-deed within that period. Instead, on 14 January 2015, the defendant sold the same property to third parties (defendants 3 to 6) via a registered sale-deed. The plaintiff, having paid the full consideration and possessing the power of attorney, filed a suit for specific performance on 30 March 2015, seeking to enforce his contractual rights against the original defendant and the subsequent purchasers.
Procedural History
- 24 January 2011: Registered agreement of sale executed between plaintiff and defendant No.1
- 7 March 2011: Registered power of attorney granted to plaintiff enabling him to execute sale-deed
- 14 January 2015: Defendant No.1 sold the property to defendants 3 - 6
- 30 March 2015: Plaintiff filed suit for specific performance
- 16 June 2025: Trial Court rejected defendant’s application for rejection of plaint under Order VII Rule 11 CPC
- 28 January 2026: Civil Revision Application filed by defendant’s legal representatives challenging the rejection order
Relief Sought
The revision petitioners sought rejection of the plaint on grounds of limitation and absence of cause of action. The plaintiff sought enforcement of the agreement through specific performance, asserting that the sale to third parties constituted the first actionable breach.
The Legal Issue
The central question was whether the limitation period for a suit for specific performance under Article 54 of the Limitation Act, 1963 commences from the date stipulated in the agreement for execution of the sale-deed, or only upon the vendor’s breach by transferring the property to a third party.
Arguments Presented
For the Appellant/Petitioner
The revision petitioners contended that since the agreement fixed a five-month period for execution of the sale-deed, the limitation of three years under Article 54 began to run from the expiry of that period. They argued that the plaintiff’s possession of a power of attorney negated any need to file suit, as he could have executed the sale-deed himself. They relied on the principle that a suit for specific performance must be filed within three years from the date fixed for performance, citing general interpretations of Article 54.
For the Respondent/Plaintiff
The plaintiff countered that the power of attorney was merely a contingent right, exercisable only if the vendor cooperated. The true breach occurred only when the vendor sold the property to third parties on 14 January 2015, thereby frustrating the plaintiff’s contractual right. He argued that cause of action arises only upon breach, not upon non-performance alone, and that the suit was filed within three years of that breach.
The Court's Analysis
The Court examined the nature of an agreement of sale coupled with a power of attorney, distinguishing it from a completed sale. It held that such an arrangement creates a contractual obligation, not an immediate transfer of title. The power of attorney, while enabling the plaintiff to execute the sale-deed, did not absolve the vendor of his duty to cooperate or prevent him from alienating the property to a third party.
"Cause of action, as is now well known is a bundle of facts, which, if uncontroverted, offers plaintiff right to seek relief from a Court of competent jurisdiction. Breach of the right is an essential part of cause of action."
The Court emphasized that non-performance alone, without a positive act of repudiation or alienation, does not complete the cause of action. The vendor’s sale to defendants 3 - 6 on 14 January 2015 was the first unequivocal act of breach, rendering the plaintiff’s contractual rights unenforceable against the original vendor. Until that point, the plaintiff retained the option to compel performance through the power of attorney. The Court rejected the petitioners’ narrow reading of Article 54, noting that the article applies to cases where performance is refused or impossible, not merely delayed.
The Court further held that the plaint clearly disclosed a cause of action, as it alleged payment of full consideration, existence of a binding agreement, and subsequent breach by alienation. The power of attorney did not eliminate the vendor’s liability; it merely provided an alternative mechanism for performance, which the vendor had rendered ineffective.
The Verdict
The plaintiff prevailed. The Court held that the limitation period for a suit for specific performance under Article 54 of the Limitation Act, 1963 commences only upon the vendor’s breach by transferring the property to a third party, not from the stipulated date of performance. The suit was held to be within limitation, and the application for rejection of plaint was rightly dismissed.
What This Means For Similar Cases
Cause of Action Is Triggered by Breach, Not Default
- Practitioners must now plead and prove the specific act of breach - such as sale to a third party, refusal to execute, or denial of access to the power of attorney - to establish the accrual date of limitation
- Mere non-execution of sale-deed by the vendor, without an overt act of repudiation, does not trigger limitation
- In drafting pleadings, the date of third-party sale or formal refusal must be clearly averred as the cause of action
Power of Attorney Does Not Preclude Suit for Specific Performance
- A registered power of attorney does not convert an agreement of sale into a completed transaction
- The vendor remains liable for breach even if the purchaser holds authority to execute the deed
- Courts will not assume that the purchaser could or should have acted unilaterally if the vendor obstructed performance
Article 54 Requires Contextual Application
- Article 54 cannot be mechanically applied to all agreements of sale
- The timing of limitation must be assessed based on the nature of the breach and the contractual framework
- Where the agreement contemplates mutual cooperation, limitation begins only when one party acts to defeat the other’s rights
