The Madras High Court has reaffirmed that a buyer’s readiness and willingness to perform a sale agreement can be established through demonstrable financial capacity and conduct, even when the agreement is unregistered. The judgment clarifies that extending the performance timeline and accepting additional advances negates the claim that time was the essence of the contract.
Background & Facts
The Dispute
The respondent, C. Selvam, filed a suit for specific performance of an agreement to purchase agricultural land from the appellants, T. Meyyappan and T. Venugopal. The dispute arose after the appellants refused to execute the sale deed despite the respondent’s repeated attempts to pay the balance consideration and fulfill his obligations under the agreement.
Key Facts
- The suit property comprised land measuring approximately 9.68 acres, valued at Rs. 6,00,000 per acre, with a total sale consideration of Rs. 58,08,000.
- An initial agreement dated 14.09.2015 was executed, wherein the respondent paid an advance of Rs. 20,00,000 and agreed to pay the balance of Rs. 38,08,000 within three months.
- On 18.12.2015, after the initial three-month period had expired, the appellants accepted a further advance of Rs. 10,00,000 and entered into a second agreement, extending the timeline for performance without specifying a new deadline.
- The respondent’s bank statement (Ex.A7) showed a balance of Rs. 72,00,000 as of the date of the second agreement.
- On 13.04.2016, the respondent had Rs. 40,00,000 in his account; on 21.04.2016, Rs. 33,00,000 remained.
- On 11.04.2016, the respondent issued a notice calling upon the appellants to execute the sale deed at the Sub-Registrar Office, Sathyamangalam, on 21.04.2016, and to receive the balance of Rs. 28,08,000.
- The appellants replied on 20.04.2016, denying readiness and willingness, claiming the respondent lacked funds, and refusing to execute the deed.
- The respondent deposited the balance sale consideration of Rs. 28,08,000 into court on 12.07.2017, prior to the filing of the written statement.
- The suit was filed on 29.09.2016, within six months of the refusal.
Procedural History
- 14.09.2015: First agreement of sale executed.
- 18.12.2015: Second agreement executed; further advance of Rs. 10,00,000 received.
- 11.04.2016: Notice issued by respondent demanding execution of sale deed.
- 20.04.2016: Reply notice issued by appellants refusing to perform.
- 29.09.2016: Suit filed before III Additional District and Sessions Court, Erode (O.S. No. 23 of 2016).
- 12.07.2017: Balance sale consideration deposited in court.
- 27.10.2017: Written statement filed by appellants.
- 06.08.2018: Trial Court decreed suit for specific performance.
- 09.03.2026: Appeal heard and reserved by Madras High Court.
- 02.04.2026: Judgment pronounced dismissing the appeal.
The Parties' Positions
Appellants (Defendants): Contended that the agreements were unregistered and therefore inadmissible; that time was the essence of the contract; that the respondent was never ready or willing to pay the balance; and that the respondent had no intention to purchase but sought to profit from resale.
Respondent (Plaintiff): Asserted that he was always ready and willing to perform; that the appellants’ acceptance of a second advance after the initial deadline negated the claim that time was essential; and that his bank statements and court deposit proved financial capacity.
Relief Sought
The respondent sought specific performance of the agreement or, in the alternative, refund of Rs. 30,00,000 (total advance paid) with interest. The Trial Court granted specific performance. The appellants appealed, seeking reversal of the decree.
The Legal Issue
The central question was whether the respondent was ready and willing to perform his part of the agreement, and whether time was the essence of the contract, given that the appellants accepted a further advance after the initial deadline and later refused to execute the sale deed.
Arguments Presented
For the Appellant
Counsel for the appellants relied on Kamal Kumar v. Premlatha Hoshi (2019) 3 SCC 704 to argue that readiness and willingness must be established at the time of the stipulated performance. He contended that the respondent’s bank balance on 21.04.2016 was insufficient to cover the balance consideration, and that funds were deposited only after the notice period. He further cited Alagammal v. Ganesan (2024) 3 SCC 232 to assert that time was the essence of the agreement, and that the appellants were entitled to forfeit the advance upon default. He also argued that the unregistered agreements were inadmissible under the Registration Act.
For the Respondent
Counsel for the respondent emphasized the bank statement (Ex.A7) showing sufficient funds on 13.04.2016 and 21.04.2016, and the deposit of Rs. 28,08,000 into court on 12.07.2017. He argued that the appellants’ acceptance of a second advance after the initial deadline constituted a waiver of the time clause. He relied on Padmakumari v. Dasayyan (2015) 8 SCC 695 and R. Gnana Arulmoni v. R.S. Maharajan (2019) 3 CTC 564 to show that conduct, not mere assertion, determines readiness. He further invoked the proviso to Section 49 of the Registration Act to argue that unregistered agreements may be used as evidence of contract.
The Court's Analysis
The Court undertook a detailed examination of the parties’ conduct, the timing of payments, and the legal implications of the second agreement. It held that the appellants’ acceptance of Rs. 10,00,000 after the initial three-month period was not merely a passive act but a conscious decision to extend the contractual timeline, thereby negating the claim that time was the essence of the agreement.
"This would indicate that the appellants had consciously not considered that time should be the essence of the agreement since they received a further advance of Rs.10,00,000/- after the expiry of three months period. Therefore, time could never have been the essence of the agreement."
The Court further noted that the respondent’s bank statement (Ex.A7) demonstrated clear financial capacity, with Rs. 40,00,000 available on 13.04.2016 and Rs. 33,00,000 on 21.04.2016 - the very dates relevant to performance. The appellants’ claim that the respondent lacked funds was directly contradicted by documentary evidence.
The Court emphasized that the respondent’s deposit of the balance consideration into court on 12.07.2017, before the written statement was even filed, was a decisive act of performance. This conduct, coupled with the timely filing of the suit within six months of refusal, satisfied the requirements under Article 54 of the Limitation Act, 1963.
Regarding the unregistered agreements, the Court held:
"Under the proviso to Section 49 of the Registration Act, the documents may be used as contract and could be taken into consideration even if the agreements were inadmissible in evidence for want of registration."
The Court concluded that all four criteria from Kamal Kumar v. Premlatha Hoshi were satisfied: a valid contract existed; the respondent was ready and willing; he had performed his part; and granting specific performance caused no hardship to the appellants.
The Verdict
The appeal was dismissed. The Madras High Court confirmed the Trial Court’s decree dated 06.08.2018, directing the appellants to execute the sale deed in favor of the respondent, C. Selvam, within 30 days of the judgment. The respondent’s deposit of Rs. 28,08,000 shall be adjusted against the sale consideration. Costs of Rs. 50,000 were awarded to the respondent.
What This Means For Similar Cases
Readiness Is Proven by Conduct, Not Just Words
- Practitioners must now focus on objective evidence - bank statements, court deposits, and conduct - to establish readiness and willingness, not merely oral assertions.
- A buyer’s deposit of the balance amount into court before the defendant files a written statement is a powerful, conclusive act of performance.
Accepting Additional Payments Waives Time-as-Essence Clauses
- When a seller accepts further payments after the original deadline, courts will treat this as an implied extension of time, rendering the original time clause inoperative.
- This principle applies even if the new agreement lacks an explicit extension clause.
Unregistered Agreements Are Not Fatal to Specific Performance
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The proviso to Section 49 of the Registration Act allows unregistered agreements to be used as evidence of contract, even if they cannot be used to transfer title.
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This enables courts to enforce obligations arising from such agreements, provided other elements of specific performance are satisfied.
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Always document financial capacity with bank statements dated close to performance deadlines.
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If the seller delays or refuses performance, deposit the balance amount into court immediately to preserve the claim.
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Never assume that an unregistered agreement is unenforceable - challenge its admissibility only if the other elements of specific performance are weak.
