Doctrine Of Severability Applicable In Suits For Specific Performance But Only In Exceptional Cases: Supreme Court

The Supreme Court clarified that the Doctrine of Severability is applicable in Suits for Specific Performance, but only in exceptional cases.

The Court clarified thus in a Civil Appeal preferred by Canara Bank, an unsuccessful Plaintiff in a Suit for Specific Performance.

The two-Judge Bench comprising Justice Aravind Kumar and Justice Vipul M. Pancholi held, “It is a well-settled principle of law that while adjudicating suits, or when examining the validity of agreements or contracts, the Courts generally have the power to sever the invalid portion of an agreement from its valid portion and give effect to the latter. There is no bar on the application of the doctrine of severability in suits for specific performance. However, this power must be exercised with great caution and only in exceptional cases.”

The Bench reiterated that the power of the Court to sever the invalid portion of an agreement from its valid portion must be exercised sparingly and only in exceptional circumstances.

Advocate Raakhi Sahijwal appeared on behalf of the Appellant, while Advocate T.K. Ganju appeared on behalf of the Respondent.

Factual Background

The Appellant-Plaintiff and the Respondent-Defendant entered into an agreement to sell wherein it was agreed that the Defendant would sell the property of Rs. 32,07,500/-. As per the agreement, the Defendant was responsible for construction of eight (8) flats on the property. Disputes arose between the parties regarding the registration of the agreement and hence, the Plaintiff filed a suit for specific performance. The Trial Court after considering the evidence available on record decreed the suit filed by the Plaintiff and directed the Defendant to execute a registered sale deed in favour of the Plaintiff.

This was challenged and the Delhi High Court’s Division Bench allowed the Appeal with respect to the seeking relief of specific performance, however ordered for the refund of the consideration which the Plaintiff had filed to the Defendant i.e., Rs. 28,86,750/- with interest at the rate of 18% per annum, compounded quarterly, for the period from April 8, 1986, to August 31, 1988. It was this Judgment that the Plaintiff challenged before the Apex Court.

Reasoning

The Supreme Court after hearing the contentions of the counsel, observed, “… the Court cannot remove the essential part of an agreement or the very object for which it was executed. We further caution that, while exercising such power, the Courts must refrain from re-writing or re-constructing the agreement between the parties to make it work, which is the law laid down by this Court in the case of Mayawanti v. Kaushalya Devi.”

It noted that the Court cannot, under the guise of severance, redraft or reconstitute the fine tunes of the contract by removing its essential terms or altering its fundamental object which the parties had arrived at by way of their consensus ad idem, as such the exercise would amount to creating a new agreement between the parties, which is impermissible in law.

“… it becomes evident that the construction of eight flats, as mentioned in Schedule–I, along with two additional flats (making a total of ten flats), was not merely an essential part of the agreement but its very object and intent with which parties entered the contract. Without the construction of these number flats, the agreement to sell does not, and cannot, subsist”, it said.

Coming to the facts of the case, the Court remarked that both the Trial Court and the Division Bench have unequivocally concluded that the agreement, in its present form, is unenforceable as it contravenes the applicable building laws.

“… the Court cannot, under the guise of severance, redraft or reconstitute the fine tunes of the contract by removing its essential terms or altering its fundamental object which the parties had arrived at by way of their consensus ad idem, as such the exercise would amount to creating a new agreement between the parties, which is impermissible in law”, it further noted.

Conclusion

The Court was of the view that the Trial Court was not justified in reworking the agreement to make it enforceable by removing its essential object namely, the construction of eight flats on the subject land.

“… the course adopted by the Trial Court in modifying or interpreting the agreement to render it workable in its present form was not legally justified and as such the appellate court has rightly reversed the findings of trial court and rejected the prayer for specific performance”, it concluded.

The Court also reiterated the observations made by the Division Bench that it is not expected from the State or its instrumentalities to enter into camouflage agreements and especially where the object of the agreement would result in law being violated.

Accordingly, the High Court dismissed the Appeal and affirmed the impugned Judgment.

Cause Title- Canara Bank v. K.L. Rajgarhia (D) Thru LRs. (Neutral Citation: 2025 INSC 127)

Appearance:

Appellant: AOR Nitin Bhardwaj and Advocate Raakhi Sahijwal.

Respondent: AOR Shekhar Kumar and Advocate T.K. Ganju.

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