Specific Performance To Be Denied If Plaintiff's Bonafides Is Even Slightly Doubtful Or Material Facts Are Suppressed: Supreme Court

The Appeal before the Apex Court was preferred by the appellant/plaintiff whose suit for specific performance of the agreement of sale was decreed by the Trial Court. However, in an appeal by the respondents/defendants, the High Court had set aside the judgment, and the suit filed by the appellant/plaintiff was dismissed.

The Division Bench of Justice Prashant Kumar Mishra and Justice Prasanna B. Varale held, “In a suit for specific performance, the conduct of the parties is significant as it assists the Court in evaluating the evidence to find out the bona fides of the parties at the time of execution of the agreement. Even a slight doubt in the mind of the Court that the plaintiff was not acting bonafidely and that the material facts, having bearing on the agreement, have been withheld in the agreement itself and from the Court also, the equitable and discretionary relief has to be denied.”

Factual Background

The sale agreement was in respect of a house property constructed on a Plot situated at Medchal Village and Mandal, Ranga Reddy District. The agreement was for a total sale consideration of Rs 13 lakh, and the defendant had received a sum of Rs 6 lakh as an advance. The agreement was registered on the same day. As per the terms of the agreement, the plaintiff had to pay the balance amount of the sale consideration of Rs 7 lakh to the defendant at the time of execution of the sale deed within 11 months from the date of the agreement. As per the plaintiff, he was always ready and willing to pay the balance amount of the sale consideration; however, the defendants avoided receiving the amount and executing the sale deed on one pretext or another. The plaintiff issued a legal notice calling upon the defendants to execute the sale deed.

The defendants neither submitted any reply nor executed the sale deed. It was in such circumstances that the subject suit came to be filed. The Trial Court decreed the suit on the reasoning that the defendants had not denied the execution of the agreement, and since the plaintiff had required funds for payment of the balance sale consideration as reflected in the bank account statement, he was always ready and willing to perform his part of the contract and was entitled to a decree of specific performance. Under the impugned judgment, the High Court allowed the defendants’ appeal to set aside the judgment of the Trial Court.

Reasoning

The Bench noted that it was the case of the defendants from the very beginning that the sale agreement was executed by way of security for a loan of Rs 6 lakh advanced by the plaintiff to the defendants, and the same was clearly reflected as recited in the MoU. The Bench also noted that said MoU was on a non-judicial stamp paper and the no-objection letter executed by the sons of the defendant was on Rs 100 non-judicial stamp paper. “Both the documents were dated 4.6.2002 and purchased from the same stamp vendor. The witnesses to both the documents were also one and the same. All these would probablise the defence of the defendant(s) that the agreement of sale was not a genuine transaction but was executed as a security for a loan transaction”, it added.

As per the Bench, the execution of the MoU made out a very strong probable case to prove that the subject agreement was a sham and a nominal document. “A plaintiff approaching the Court with uncleaned hands, like in the present case—the plaintiff having withheld the document i.e., MoU (Exhibit B-2), as the same was nowhere mentioned in the plaint, the present was a fit case for denial of relief of specific performance and the High Court has rightly allowed the appeal preferred by the respondent(s)/defendant(s) to set aside the judgment and decree passed by the Trial Court”, the Bench stated.

Thus, finding no substance in the appeal, the Bench dismissed the same.

Cause Title: Muddam Raju Yadav v. B. Raja Shanker (D) Through Lrs. & Ors. (Neutral Citation: 2026 INSC 214)

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