The Bombay High Court has underscored the necessity of strict adherence to contractual terms in suits for specific performance, dismissing an appeal where the plaintiff failed to demonstrate readiness and willingness to comply with obligations under an agreement for sale. The judgment clarifies that interim injunctions cannot be granted in respect of entire property when the contract itself excludes encroached portions and requires prior measurement.
Background & Facts
The Dispute
The appellant, Jhabarmal Bhagvanram Jhangid, entered into an agreement for sale dated 6th May, 2014 with the respondents (original defendants) for the purchase of agricultural land situated at Mouje Palsai, Taluka Wada, District Palghar, admeasuring 23 Hectares 89 Roods. The consideration was fixed at Rs. 15 lakhs per acre, with the sale deed to be executed within six months of government measurement and preparation of the map. The appellant paid Rs. 35 lakhs by cheque at the time of execution and claimed to have paid an additional Rs. 30 lakhs in cash for settling encroachers and demarcating the property.
Key Facts
- 6th May, 2014: Agreement for sale executed; appellant paid Rs. 35 lakhs by cheque
- 19th January, 2015: Public notice issued; third-party claim raised; respondents assured negotiations were ongoing
- March, 2017: Appellant learnt respondents were attempting to create third-party rights
- 15th August, 2017: Complaint filed with Dindoshi and Wada Police Stations
- 20th May, 2019: Legal notice issued by appellant calling upon respondents to clear encroachments and execute sale deed
- 20th October, 2019: Follow-up notice (contents not specified in judgment)
- 2019: Suit for specific performance filed (Special Civil Suit No. 740 of 2019)
Terms of the Agreement
The agreement stipulated the following obligations:
- Sale deed to be executed within six months of government measurement
- Respondents to bear payments due on the property and ensure measurement
- Appellant to pay for measurement charges and balance consideration for the un-encroached portion post-measurement
- Encroached portions to be excluded from the sale transaction
- Fencing costs to be borne by the appellant
Procedural History
- Exhibit 5: Interim application for injunction filed before the Trial Court
- 23rd January, 2023: Trial Court rejected the injunction application, holding the agreement was unregistered and thus unenforceable
- 26th March, 2023: Bombay High Court, in an earlier order, opined that the Trial Court’s view was not in consonance with law, as agreements for sale do not require compulsory registration, but directed no third-party rights to be created in respect of gat nos. 7 and 29
- 2023: Appeal from Order No. 313 of 2023 filed before the Bombay High Court
Relief Sought
The appellant sought:
- Injunction restraining respondents from creating third-party rights in respect of the entire suit property
- Specific performance of the agreement for sale
- Other consequential reliefs
The Legal Issue
The central question was whether the appellant had made out a prima facie case for specific performance of the agreement for sale, entitling him to an interim injunction restraining the respondents from creating third-party rights in the suit property, despite:
- The agreement excluding encroached portions from the sale transaction
- The appellant’s failure to call upon the respondents to carry out measurement or demonstrate readiness and willingness to pay the balance consideration
- The absence of a concluded contract for a definite area of land
Arguments Presented
For the Appellant
- The agreement for sale was valid and enforceable, with the appellant having paid Rs. 65 lakhs (Rs. 35 lakhs by cheque and Rs. 30 lakhs in cash)
- The respondents were obligated to settle encroachers and deliver clear title, as implied from the appellant’s payments and the respondents’ assurances
- The Trial Court erred in rejecting the injunction application on the ground of non-registration, as agreements for sale do not require compulsory registration
- Irreparable injury would be caused if third-party rights were created, given the appellant’s substantial payments
For the Respondents
- The appellant failed to communicate with the respondents for five years (from 6th May, 2014 to 20th May, 2019) calling upon them to comply with the agreement
- The agreement stood terminated as the appellant did not respond to a notice dated 19th January, 2015, calling upon him to complete the transaction within 7 days
- The appellant’s notice dated 20th May, 2019 did not call for measurement or express willingness to pay the balance consideration, but instead sought settlement of encroachers, a term not agreed upon
- The agreement provided for sale of only the un-encroached portion post-measurement, and no definite area was agreed upon
- Granting injunction over the entire property would prejudice third-party encroachers, who were not parties to the proceedings
The Court's Analysis
The Court undertook a detailed examination of the agreement for sale and the appellant’s conduct, holding that the appellant failed to make out a prima facie case for specific performance or interim injunction.
Interpretation of Agreement Terms
The Court observed that the agreement expressly excluded encroached portions from the sale transaction. The sale consideration was fixed at Rs. 15 lakhs per acre for the un-encroached portion, which was to be ascertained only after government measurement. The Court noted:
"Prima facie, it appears that as the land was yet to be measured and the encroached portion to be excluded from the sale transaction, the sale consideration was fixed at the rate of per acre instead of lumpsum amount."
The Court rejected the appellant’s contention that the respondents were obligated to settle encroachers, holding that no such term existed in the agreement. The appellant’s notice dated 20th May, 2019 sought settlement of encroachers and demarcation of the entire property, which was contrary to the agreement’s terms.
Readiness and Willingness
The Court emphasized that to succeed in a suit for specific performance, the plaintiff must demonstrate readiness and willingness to perform their obligations under the agreement. The appellant’s five-year inaction (from 2014 to 2019) in calling upon the respondents to carry out measurement or express willingness to pay the balance consideration was fatal to his case. The Court held:
"In order to make out prima facie case for grant of specific performance, it is necessary for the Plaintiffs to demonstrate readiness and willingness to comply with its obligations. The obligations of the Plaintiff was to make payment of the measurement charges and balance sale consideration. The notice of 20th October, 2019 does not state that the Plaintiff is ready and willing to make the payment of the balance sale consideration to complete the sale transaction."
Definiteness of Contract
The Court further held that the agreement did not specify a definite area of land to be sold, as the sale was contingent upon measurement and exclusion of encroached portions. Without measurement, the contract could not be said to be concluded for any definite area. Granting an injunction over the entire property would adversely affect third-party encroachers, who were not parties to the suit.
Trial Court’s Error
While the Trial Court erred in rejecting the injunction application on the ground of non-registration (as agreements for sale do not require compulsory registration), the High Court upheld the rejection on substantive grounds, namely the appellant’s failure to make out a prima facie case.
The Verdict
The Appeal from Order No. 313 of 2023 and Interim Application No. 3947 of 2023 were dismissed. The Court held that the appellant failed to establish a prima facie case for specific performance or interim injunction, as:
- The agreement excluded encroached portions, and no definite area was agreed upon
- The appellant did not demonstrate readiness and willingness to pay the balance consideration or measurement charges
- The appellant’s five-year inaction and contrary pleadings undermined his case
- Granting injunction over the entire property would prejudice third-party encroachers
What This Means For Similar Cases
Strict Compliance with Agreement Terms
- Specific performance will not be granted where the plaintiff’s pleadings or conduct are contrary to the agreement’s terms. Courts will scrutinize whether the plaintiff has strictly adhered to the obligations under the contract
- Implied terms cannot be read into an agreement where they are expressly excluded or not agreed upon. Parties must ensure all obligations are clearly delineated in the agreement
Readiness and Willingness Are Non-Negotiable
- Plaintiffs must actively demonstrate readiness and willingness to perform their obligations. Inaction or delay (e.g., five years without communication) can be fatal to a claim for specific performance
- Notices issued by plaintiffs must clearly call upon the defendants to comply with the agreement’s terms and express willingness to pay the balance consideration. Vague or contrary demands (e.g., settlement of encroachers when not agreed upon) will not suffice
Definiteness of Contract Is Critical
- Agreements contingent upon future events (e.g., measurement, exclusion of encroached portions) must clearly define the mechanism for concluding the contract. Without definiteness, courts may refuse to grant specific performance or injunctions
- Interim injunctions will not be granted over entire properties where portions are excluded by agreement, especially if third parties (e.g., encroachers) may be prejudiced
Registration Is Not Always Mandatory
- Agreements for sale do not require compulsory registration under the Registration Act, 1908, and rejection of injunction applications on this ground alone is erroneous. However, this does not absolve plaintiffs of proving substantive compliance with the agreement
