2025 INSC 1298

REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 13507–13508 OF 2025

(Arising out of Special Leave Petition (C) Nos. 29405-29406 of 2017)

K.S. MANJUNATH AND OTHERS

…APPELLANTS

VERSUS

MOORASAVIRAPPA @

MUTTANNA CHENNAPPA BATIL,

SINCE DECEASED BY HIS LRS

AND OTHERS

…RESPONDENTS

J U D G M E N T

Special Civil Petition (C) Nos. 29405-29406 of 2017 Page 1 of 96

J.B. PARDIWALA, J.:

For the convenience of exposition, this judgment is divided into the

following parts:-

INDEX

A. FACTUAL MATRIX .................................................................. 2

B. SUBMISSIONS OF THE PARTIES ........................................... 14

(i). Submissions on behalf of the Appellants / Subsequent

Purchasers .................................................................................. 14

(ii). Submissions on behalf of the Respondents / Original

Vendees ...................................................................................... 17

C. ANALYSIS ............................................................................. 19

(I). Failure to challenge the legality and validity of termination of

ATS in the suit. .......................................................................... 19

(a) Views adopted by the High Courts on failure to seek

declaration. ................................................................................ 28

(b) Whether the ATS dated 28.04.2000 was in nature

determinable? ............................................................................ 53

(II). Bona fides of the subsequent purchasers in purchasing the

subject land ............................................................................... 73

(III). Readiness and willingness of the Original Vendees to perform

the ATS ..................................................................................... 87

D. CONCLUSION ........................................................................ 95

Special Civil Petition (C) Nos. 29405-29406 of 2017 Page 2 of 96

1. Leave Granted.

2. Since the issues raised in both the captioned appeals are the same,

the parties are same, and the challenge is also to the self-same,

judgment and order passed by the High Court, those were taken up

for hearing analogously and are being disposed of by this common

judgment and order.

3. These appeals arise from the common judgment and order passed by

the High Court of Karnataka in the Regular First Appeal Nos. 4187 of

2013 and 4160 of 2012 respectively by which the High Court allowed

the two appeals filed by the vendees and thereby , set aside the

judgment and decree dated 21.07.2012 passed by the 2

nd Additional

Senior Civil Judge at Haveri, Karnataka (“Trial Court”) in Original

Suit No. 36 of 2007, while granting the relief of specific performance

of Agreement to Sell dated 28.04.2000 (“ATS”) executed by the

Respondent Nos. 6 to 13 (“Original Vendors”) in favour of the

Respondent Nos. 15 to 22 respectively & the Respondent Nos. 1 to 5

respectively (“Original Vendees”) and holding the Appellants herein

(“Subsequent Purchasers”) not to be the bona fide purchasers of the

subject land (as defined below) for value without notice.

A. FACTUAL MATRI X

4. For the sake of convenience, the respective positions of the contesting

parties to the present lis before the various courts leading upto this

Court is tabularly illustrated herein below:

Special Civil Petition (C) Nos. 29405-29406 of 2017 Page 3 of 96

BEFORE THIS

COURT

BEFORE THE

HIGH COURT

BEFORE THE

TRIAL COURT

PARTICULARS

Appellants Respondent

Nos. 8 to 15

Defendant Nos.

9 to 16

Subsequent

Purchasers of

subject land

Respondent

Nos. 1 to 5

(Legal Heirs

of Defendant

No. 7 on

record)

Appellants Defendant No.

7

One of the

Original Vendees

of the subject

land, however, he

was arrayed as a

defendant in the

suit. This

defendant

supported the

case of plaintiffs.

Respondent

Nos. 6 to 13

(Legal Heirs

of Defendant

Nos. 4 and 6

on record)

Respondent

Nos. 1 to 6

Defendant Nos.

1 to 6

Original Vendors

of the subject land

Respondent

No. 14

Respondent

No. 7

Defendant No.

8

One of the

Original Vendees

of the subject

land, however, he

was arrayed as a

defendant in the

suit. This

defendant was

proceeded ex-

parte by the Trial

Court

Respondent

Nos. 15 to

22

Appellants Plaintiffs Original Vendees

of the subject land

Respondent Nos. 15 to 22, Respondent Nos. 1 to 5, and Respondent

No. 14 being the original purchasers of subject land are also

collectively being referred to as “Original Vendees” in the present

matter.

Special Civil Petition (C) Nos. 29405-29406 of 2017 Page 4 of 96

5. On 28.04.2000, the original vendors executed an unregistered ATS in

favour of the original vendees in respect of 354 Acres of Agricultural

Watan Land bearing survey no. 12/2 part 12/2A situated in village

Basavanakoppa, Taluk Shiggaon, District Haveri, Karnataka

(“Subject Land”) for a total sale consideration of Rs. 26,95,501/- out

of which the original vendees paid an amount of Rs. 2,00,000/- as

earnest money to the original vendors. It was agreed that an additional

amount of Rs. 5,00,000/- would be paid by the original vendees to the

original vendors at the time of registration of the ATS and the balance

sale amount would be paid at the time of registration of the sale deed.

It was also agreed that the original vendees would execute the sale

deed within two months of the original vendors, informing them about

the change of subject land from new tenure to old tenure in the record

of rights, surveying, measuring, fixing the boundaries of subject land

and shifting 19 tenants residing on the subject land to one particular

place. Between the years 2000 and 2001, the original vendees paid

some further amount to the original vendors, in all aggregating to Rs.

8,12,500/-.

6. On 24.03.2001, one Sunil Anand Rao Desai, nephew of the original

vendors, instituted the Original Suit No. 30 of 2001 in the court of the

Principal Senior Civil Judge at Haveri against the original vendors

herein inter alia seeking partition and possession of certain properties

including the subject land and revocation of a partition deed dated

29.12.1996 (unrelated to the present case) to which the original

vendees were not parties. On 11.04.2001, an order of status quo came

to be passed by the Principal Senior Civil Judge. When the original

vendees came to know about the institution of the Original Suit No.

Special Civil Petition (C) Nos. 29405-29406 of 2017 Page 5 of 96

30 of 2001, they took steps to enforce their rights under the ATS and

sought to implead themselves as parties in the said suit by filing an

impleadment application dated 27.08.2001. The said application

came to be rejected by the Principal Senior Civil Judge vide its order

dated 16.03.2005. Later, aggrieved by rejection to impleadment

application, the original vendees preferred a Writ Petition being WP

No. 17952 of 2005 before the High Court. However, the same also

came to be dismissed by the High Court vide its order dated

18.07.2005.

7. In the interregnum and during the pendency of the aforementioned

Original Suit No. 30 of 2001, the original vendees got the subject land

converted from new tenure to old tenure on behalf of the original

vendors and also persuaded those 19 tenants who were residing on

the subject land to relocate themselves to some other portion of the

land. Meanwhile, one of the original vendees i.e. the Respondent No.

14 herein entered into an agreement dated 28.12.2002 wherein he

released and relinquished his right under the ATS in favour of the

remaining original vendees.

8. On 10.03.2003, the original vendors sent a Legal Notice (“Notice of

Termination”) to the original vendees thereby terminating the ATS

and informing them of their inability to execute a sale deed inter alia

for two reasons – (i) Long pendency of the Original Suit No. 30 of 2001

and the status quo order in force therein, and (ii) The death of one of

the original vendors i.e., Smt. Godavari @ Mahalaxmi Kulkarni. In the

said notice of termination, the original vendors called upon the

original vendees to take back the earnest money paid by them and

Special Civil Petition (C) Nos. 29405-29406 of 2017 Page 6 of 96

treat the ATS as cancelled within one month from the date of receipt

of said notice, failing which the ATS would be “deemed to be

cancelled”. The relevant portion of the said notice reads as under:

“In view of the pending litigation and death of Smt. Godavari

urf Mahalakshmi G. Kulkarni, my clients are not in a

position to go ahead with the transaction as per agreement

of sale deed dt. 28.04.2000. My clients cannot wait for an

indefinite period. Furthermore they cannot be definite about

their share in the land in view of the litigation and it is also

subject to the decision of the court.

Hence, my clients are unable to execute a sale deed in

respect of the land in question as per agreement dt.

28.04.2000. Under the circumstances, you are hereby

called upon to take back your earnest money and to treat

the agreement of sale dt. 28.04.2000 as cancelled within a

period of one month from the date of receipt of this notice.

Failing which the agreement of sale dt. 28.04.2000 is

deemed to be cancelled and the legal effects and rights of

my clients will take their own course and my clients will be

at liberty to deal with the above said land in accordance

with law.”

(Emphasis Supplied)

9. To the aforesaid, the original vendees on 21.03.2003 gave a reply

stating as follows:

(i). That they had fulfilled the terms of the ATS by getting the

subject land surveyed, measured, and boundaries fixed, and

carrying out the conversion of tenure of the subject land which

otherwise was the obligation of the original vendors under the

ATS;

Special Civil Petition (C) Nos. 29405-29406 of 2017 Page 7 of 96

(ii). That they had time and again requested the original vendors to

perform their part of the obligation of executing the sale deed;

(iii). That they were always ready and willing to perform their part

of the contract;

(iv). That the further performance of the ATS had to be suspended

due to the order of status quo passed in the Original Suit No.

30 of 2001 and the same would not render the ATS

unenforceable;

(v). That the original vendors were duty bound to execute the sale

deed in their favour after the disposal of the Original Suit No.

30 of 2001;

(vi). That the death of one of the original vendors would not have

the effect of cancellation of the ATS because the legal heirs

would be bound to perform in that regard;

(vii). That for all the above grounds the question of taking back the

earnest money did not arise.

10. No further response was given by the original vendors to the aforesaid

reply to their notice of termination. On 10.02.2007, the plaintiff in the

Original Suit No. 30 of 2001 viz., Sunil Anand Rao Desai filed a memo

to withdraw the suit and get the status quo order vacated in effect

thereto. On the basis of the withdrawal memo, the Principal Senior

Civil Judge vide its order dated 14.02.2007 dismissed the Original

Suit No. 30 of 2001 as being withdrawn and thus, the status quo order

came to be vacated in effect thereto. Pursuant to the withdrawal of the

said suit, the original vendors executed the sale deeds dated

20.02.2007 and 02.03.2007 respectively in favour of the subsequent

Special Civil Petition (C) Nos. 29405-29406 of 2017 Page 8 of 96

purchasers, selling the subject land for a total sale consideration of

Rs. 71,00,000/-.

11. Having obtained knowledge of the sale deeds executed in favour of the

subsequent purchasers, the original vendees instituted the Original

Suit No. 36 of 2007 in the Trial Court on 09.07.2007 inter alia the

relief of seeking specific performance of the ATS dated 28.04.2000

against both the original vendors and the subsequent purchasers.

12. The original vendees prayed for the following reliefs:

“16. The plaintiffs pray: -

(a) That the defendants be specifically ordered to perform

the agreement dated 28.04.2000 and do all acts necessary

to put the plaintiffs in full possession of the suit property as

owners at the cost of the plaintiffs after receiving the

balance consideration from the plaintiffs;

(b) That the above acts be got done through Court

Commissioner in case defendant/s fail to execute and

register the sale deed;

(c) In case for any reason whatsoever the court comes to the

conclusion that the specific performance cannot be ordered,

then the court may be pleased to order refund of amounts

paid with damages and compensation which is total sum of

Rs. 26,95,501/-;

(d) Costs and such other reliefs as court deems fit and

proper.”

13. Pursuant to the above, the Trial Court framed the following issues:

Special Civil Petition (C) Nos. 29405-29406 of 2017 Page 9 of 96

“1. Whether plaintiffs prove that, defendants No. 1, 2, 4 and

6 and two others have agreed to sell the suit land RS No.

12/2 i.e. 12/2A measuring 354 acres of village

Basasvanakoppa for a sum of Rs: 26,95,501/ - on

28.4.2000 and paid Rs. 2,00,000/- as earnest money?

2. Whether plaintiffs prove that, defendants No. 1, 2, 4 and

6 and others have agreed to execute the sale deed within

one month after completion of the work of sub division.

3. Whether plaintiffs prove that they have paid amount of

Rs. 9,45,000/- as shown in schedule B?

4. Whether plaintiffs prove that, they are ready, ever ready

and always ready to perform their part of contract?

5. Whether defendants No.1 to 4 and 9 to 16 prove that suit

of the plaintiffs is hopelessly barred by them?

6. Whether defendant No. 1 to 4 prove that the suit of the

plaintiffs is not maintainable without seeking relief of

cancellation of sale deed?

7. Whether deft. No. 10 proves that, deft. No. 9 to 16 are

bonafide purchase of suit lands for valid consideration?

8. Whether plaintiffs are entitled to the relief of specific

performance of contract of sale?

9. What order or decree?”

14. The Trial Court answered the issues as under:

(a) Issue Nos. 1, 2, 4 and 7 respectively were answered in the

affirmative and the Issue No. 3 was answered partly in the

affirmative –

(i). That the original vendees successfully proved that the

original vendors had agreed to sell the subject land for sale

consideration of Rs. 26,95,501/- and had paid Rs.

2,00,000/- as earnest money;

Special Civil Petition (C) Nos. 29405-29406 of 2017 Page 10 of 96

(ii). That the original vendees successfully proved that the

original vendors had agreed to register the sale deed within

one month after the completion of subdivision work;

(iii). That the original vendees claim to have paid Rs.

9,45,000/- in overall to the original vendors yet the

evidence indicates that the original vendees had paid a

total of Rs. 8,12,500/- to the original vendors;

(iv). That the original vendees successfully proved that they

were always ready and willing to perform their part of the

contract;

(v). That the original vendees failed to prove that the

subsequent purchasers had prior knowledge of the ATS.

(vi). That the subsequent purchasers have proved that they are

bona fide purchasers of the subject land for valid

consideration without notice.

(b) Issue Nos. 5, 6, and 8 respectively were answered in the negative –

(i). That the delay in filing the suit was caused due to the

pendency of the Original Suit No. 30 of 2001 and the

original vendees had filed the suit after the execution of

the sale deed by the original vendors in favour of the

subsequent purchasers. Thus, the suit filed by the original

vendees was within limitation from the date of the disposal

of the Original Suit No. 30 of 2001 as well as the execution

of the sale deeds;

(ii). That the suit of the original vendees was maintainable

without seeking the relief of cancellation of the sale deeds.

Special Civil Petition (C) Nos. 29405-29406 of 2017 Page 11 of 96

This was because the original vendees were not party to

those sale deeds and they had filed the suit for specific

performance on the basis of ATS only;

(iii). That the original vendees failed to prove that they were in

actual possession of the subject land from the date of

execution of the ATS and that the subsequent purchasers

had bona fide purchased the subject land. Therefore, the

grant of relief of specific performance in favour of the

original vendees would cause hardship to the subsequent

purchasers.

(c) Issue No. 9 followed with the following order and direction –

(i). That the original vendees had failed to make good their

case for grant of relief of specific performance and that in

the alternative, the original vendees were entitled to refund

of an amount of Rs. 8,12,500/- alongwith damages @9%

p.a.

15. Aggrieved by the judgment and decree dated 21.07.2012 passed by

the Trial Court, the original vendees filed two separate appeals i.e.,

the Regular First Appeal Nos. 4160 of 2012 and 4187 of 2013

respectively, before the High Court. As no cross objections were filed

by the subsequent purchasers, the High Court framed the following

point for its determination:

“1. Whether the defendant 9 to 16 had established that they

were bona fide purchasers for value of the suit property?”

Special Civil Petition (C) Nos. 29405-29406 of 2017 Page 12 of 96

16. The High Court allowed the two appeals by a common judgment and

order dated 22.03.2017. It was held that the subsequent purchasers

had been informed of the ATS by the original vendors and a copy of

the notice of termination of ATS was also shared with the subsequent

purchasers. This in High Court’s opinion would indicate that the

subsequent execution of sale deeds in favour of the subsequent

purchasers was a deliberate act and in plain disregard to the

subsisting ATS in favour of the original vendees. The High Court also

observed that as the original vendors had not responded to the reply

of original vendees to the notice of termination, the termination of ATS

could never be said to have reached to its logical end, and that the

ATS was still alive and binding.

17. Thus, the High Court held that the subsequent purchasers were not

bona fide purchasers of the subject land for value without notice as

they were aware of the earlier ATS executed in favour of the original

vendees. The High Court directed the subsequent purchasers to

execute the sale deeds in favour of the original vendees and put them

in physical possession of the subject land. The original vendees, in

turn, were directed to pay the balance sale consideration to the

subsequent purchasers. The relevant portions of the impugned

judgment at Page Nos. 29 to 31 are as under:

“Apparently, there was no rejoinder to the reply notice. It is

also not shown that the defendants had offered to return

the advance amount received, nor was it claimed to have

been returned. The termination of the agreement was hence

Special Civil Petition (C) Nos. 29405-29406 of 2017 Page 13 of 96

not taken to its logical end. The unilateral termination could

not therefore said to be valid and binding on the plaintiffs.

Defendants no.1 to 6 were therefore aware of the

circumstance that the advance amount paid by the plaintiffs

was not refunded nor was it claimed to have been forfeited

on any alleged breach of contract on the part of the

plaintiffs. In the face of which, the circumstance that close

on the heels of, the plaintiff in the civil suit in OS 30/2001

having withdrawn the suit, that was claimed as an

impediment for completion of the sale transaction,

defendants no. I to 6 having sold the property in favour of

Defendants no.9 to 16, who in turn were said to have been

informed of the agreement of sale and the same having been

terminated under the notice dated 10-3-2001 and a copy of

the same also said to having been furnished to the said

defendants, would plainly indicate that the sale transaction

was carried out deliberately and blatantly in the face of a

subsisting agreement of sale in favour of the plaintiffs, with

a clear intention of defeating the said agreement of sale in

favour of the plaintiffs. Such a deliberate act on the part of

Defendants no. I to 6 and 9 to 16 would not enable them to

claim that as they have achieved a fait accompli, though

defendants may claim to be innocent and bona fide

purchasers for value, as it is found that they were aware of

the agreement of sale in favour of the plaintiffs, it cannot be

said that the contract is no longer capable of ; performance

as the property is now in the hands of a third party. This

may be true of genuinely bona fide purchasers and not such

third-party purchasers who have brazenly entered into the

transaction with eyes wide open and with notice of the

subsisting agreement. The consequence would be that even

defendants no. 9 to 16 would be obliged to complete the

sale, as persons claiming under Defendants no. 1 to 6 by

the due execution of a sale deed or sale deeds in favour of

the plaintiffs and to convey the suit property in favour of the

plaintiffs.

Special Civil Petition (C) Nos. 29405-29406 of 2017 Page 14 of 96

Incidentally, it is our firm opinion that it would be unjust to

grant a lesser relief to the plaintiffs in directing the refund

of the earnest money or to embark upon an exercise of

determining any damages which the plaintiffs could very

well claim. Such an exercise would have been justified if the

defendants no. 9 to 16 had established their bona fides,

which they have not.

In the result, the appeals are allowed and the judgment of

the trial court is set aside. The suit for specific performance

is decreed. Defendants 9 to 16 shall execute sale deeds in

favour of the plaintiffs in respect of such portions of the suit

property that they may have purchased from Defendants

no. 1 to 6, in favour of the plaintiffs and put them in physical

possession of the same. The plaintiffs shall pay the balance

sale price in consideration thereof, proportionately. The sale

transactions shall be completed within a period of three

months, if not earlier. In the event of default on the part of

the said defendants in this regard, the plaintiffs shall be

entitled to have the sale deeds executed through the court

below, in the manner as may be directed by it.”

(Emphasis Supplied)

18. In such circumstances referred to above, the subsequent purchasers

are here before us with the present appeals.

B. SUBMISSIONS OF THE PARTIES

(i). Submissions on behalf of the Appellants / Subsequent Purchasers

19. Dr. Aditya Sondhi, the learned senior counsel appearing for the

subsequent purchasers would submit that the courts below

Special Civil Petition (C) Nos. 29405-29406 of 2017 Page 15 of 96

committed a serios error in decreeing the suit for specific performance

filed by the original vendees in as much as the same was barred by

limitation. The learned counsel argued that as per Article 54 of the

Limitation Act, 1963, the period of the limitation to institute a suit for

specific performance is 3 years from the date when a plaintiff has

notice of refusal of performance. According to the learned counsel, the

ATS was terminated by the original vendors vide notice of termination

dated 10.03.2003 and thus, the limitation period could be said to have

expired on 10.03.2006. However, the original vendees filed the

Original Suit No. 36 of 2007 on 09.04.2007 i.e. after a delay of total

11 months.

20. He further submitted that the original vendees’ explanation as regards

delay in filing the Original Suit No. 36 of 2007 by relying on the

pendency of their impleadment application in the Original Suit No. 30

of 2001 is misconceived in as much as: (a) the impleadment

application of the original vendees’ in the Original Suit No. 30 of 2001

was filed much prior to the notice of termination and on the basis of

a wholly different cause of action and (b) the notice of termination was

issued by the original vendors on 10.03.2003 i.e. later in time to the

filing of the impleadment application, giving rise to a fresh cause of

action in respect of specific performance.

21. The learned senior counsel further submitted that the Original Suit

No. 36 of 2007 filed for seeking specific performance was not

maintainable in law in the absence of there being any prayer seeking

declaration in respect of the legality and validity of the termination of

the ATS. For this, the learned counsel placed reliance on the decisions

Special Civil Petition (C) Nos. 29405-29406 of 2017 Page 16 of 96

of this Court in I.S. Sikandar (Dead) by LRs v K. Subramani &

Ors., reported in 2013 (15) SCC 27 and R. Kandasamy (since dead)

& Ors. v T.R.K. Sarawathy & Anr. , reported in 2024 SCC OnLine

SC 3377 respectively wherein this Court had held that a suit for

specific performance is not maintainable in the absence of a prayer

for declaration that the notice of termination of agreement of sale is

bad in law.

22. The learned senior counsel further submitted that his clients are bona

fide purchasers of the subject land for value without notice and that

too after 4 years of the termination of the ATS. He would submit that

at the time of the sale of the subject land there was no suit pending.

According to the learned counsel, the ATS being an unregistered

document and the same being terminated by the original vendors,

they had no occasion to have notice to anything contrary. The learned

counsel submitted that the subsequent purchasers made bona fide

enquires about the title of the original vendors and all other necessary

particulars before purchasing the subject land. The subsequent

purchasers were made aware by the original vendors about the

termination of the ATS vide the notice of termination prior to the

purchase of the suit property. It was argued that the title and

possession of the subject land was with the original vendors at the

time of the sale.

23. In the last, the learned senior counsel submitted that the ATS was

executed in favour of six different individuals who were joint vendees

and that there was no division of each person’s interest. Four of the

original vendees chose to file the Original Suit No. 36 of 2007 as

Special Civil Petition (C) Nos. 29405-29406 of 2017 Page 17 of 96

plaintiffs. Two of the original vendees i.e. the Respondent Nos. 1 to 5

herein and the Respondent No. 14 herein respectively, were arrayed

as the defendant no. 7 and defendant no. 8 respectively in the Original

Suit No. 36 of 2007, out of which the defendant no. 7 supported the

case of the original vendees, however, the defendant no. 8 was

proceeded ex-parte by the Trial Court. This defendant no. 8 chose not

to appear before the High Court. He has not appeared before this

Court as well. One of the original vendees i.e. defendant no. 7 never

sought the relief of specific performance of the ATS. On such premise,

the learned counsel argued that the ATS being indivisible, and in the

absence of all the vendees seeking enforcement of the same, the relief

of specific performance is not enforceable in law.

(ii). Submissions on behalf of the Respondents / Original Vendees

24. Mr. Devadatt Kamat, the learned senior counsel, appearing for the

original vendees vehemently submitted that no error not to speak of

any error of law could be said to have been committed by the High

Court in passing the impugned judgement and order. On the point of

limitation, the learned counsel argued that the Trial Court after due

consideration of the facts of the present matter and the evidence on

record rightly held that the Original Suit No. 36 of 2007 filed by the

original vendees was not time barred. He submitted that the appellant

herein / subsequent purchasers had not even challenge this finding

of limitation before the High Court and that the High Court limited its

adjudication only to the issue whether the subsequent purchasers

were bona fide purchasers or not. In arguendo, the learned counsel

argued that even otherwise the original vendees would be entitled to

Special Civil Petition (C) Nos. 29405-29406 of 2017 Page 18 of 96

seek the benefit of Section 14 of the Limitation Act, 1963 in as much

as they were seeking impleadment in the Original Suit No. 30 of 2001.

25. It was sought to be argued that the time consumed in impleading

themselves as parties in Original Suit No. 30 of 2001 and in the Writ

Petition No. 17952 of 2005 has to be excluded under Section 14 of the

Limitation Act, 1963 since: (1) both the Original Suit No. 30 of 2001

and the Original Suit No. 36 of 2007 were civil proceedings; (2) the

impleadment application filed by the original vendees was dismissed

by recording a finding that they were not a necessary party; and (3)

original vendees agitated their rights under the same ATS in both the

proceedings and that specific submissions regarding their readiness

and willingness to perform the contract were made in both the

proceedings.

26. The learned counsel further submitted that the High Court was right

in holding that the subsequent purchasers are not bona fide

purchasers of the subject land. He argued that it is evident from the

conduct and flow of events that the subsequent purchasers are not

bona fide purchasers. He pointed out that the subsequent purchasers

entered into sale deeds on 20.02.2007 and 02.03.2007 respectively

i.e. within 6 (Six) days and 15 (Fifteen) days respectively of the

withdrawal order dated 14.02.2007 passed in the Original Suit No. 30

of 2001. The timing of the execution clearly shows that the sale deeds

were executed with the sole intent to defeat the rights of the original

vendees. Developing this argument further, the learned counsel

submitted that the subsequent purchasers have admitted that they

were shown the notice of termination dated 10.03.2003 and had the

Special Civil Petition (C) Nos. 29405-29406 of 2017 Page 19 of 96

subsequent purchasers not been negligent, they would have come to

know the fact that the earnest money of the original vendees was never

returned by the original vendors and that the original vendees had

objected to the notice of termination vide their reply dated

21.03.2003.

27. In the last, the learned senior counsel submitted that in so far as the

readiness and willingness of the original vendees is concerned, the

Trial Court and High Court have concurrently held that the original

vendees were always ready and ever willing to perform their part of

the ATS.

28. In such circumstance referred to above, the learned counsel prayed

that there being no merit in the present appeals those may be

dismissed.

C. ANALYSIS

29. Having heard the learned counsel appearing for the parties and having

gone through the materials on record, the only question that falls for

our consideration is whether the High Court committed any error in

passing the impugned judgment?

(I). Failure to challenge the legality and validity of termination of

ATS in the suit.

Special Civil Petition (C) Nos. 29405-29406 of 2017 Page 20 of 96

30. The subsequent purchasers have vehemently argued that the Original

Suit No. 36 of 2007 filed by the original vendees inter alia seeking

specific performance of ATS was not maintainable because the

original vendees failed to also seek a declaration from the court in

respect of whether the notice of termination of the ATS was bad in law

or invalid. We are aware that neither the subsequent purchasers nor

the original vendors had raised before the Trial Court the plea that the

suit for specific performance filed by the original vendees was not

maintainable in the absence of a declaration seeking the invalidity of

the termination of ATS, no issue came to be framed by the Trial Court

on this aspect. However, the same would not preclude this Court to

determine if the suit for specific performance filed by the original

vendees was not maintainable for want of such declaration as this

Court recently in R. Kandasamy (supra) had held that an appellate

court would not be precluded from examining whether any

jurisdictional fact exists for grant of relief of specific performance

notwithstanding the fact that the trial court omitted or failed to frame

issue on maintainability of the suit. The relevant observation is as

under:

“25. What follows from A. Kanthamani [A. Kanthamani v.

Nasreen Ahmed, (2017) 4 SCC 654: (2017) 2 SCC (Civ) 596]

is that unless an issue as to maintainability is framed by

the trial court, the suit cannot be held to be not maintainable

at the appellate stage only because appropriate declaratory

relief has not been prayed.

xxx xxx xxx

Special Civil Petition (C) Nos. 29405-29406 of 2017 Page 21 of 96

43. In Shrisht Dhawan v. Shaw Bros. [Shrisht Dhawan v.

Shaw Bros., (1992) 1 SCC 534], an interesting discussion

on “jurisdictional fact” is found in the concurring opinion of

Hon'ble R.M. Sahai, J. (as his Lordship then was). It reads:

(SCC pp. 551-52, para 19)

19. … What, then, is an error in respect of jurisdictional

fact? A jurisdictional fact is one on existence or non-

existence of which depends assumption or refusal to

assume jurisdiction by a court, tribunal or an authority.

In Black's Legal Dictionary it is explained as a fact

which must exist before a court can properly assume

jurisdiction of a particular case. Mistake of fact in

relation to jurisdiction is an error of jurisdictional fact.

No statutory authority or tribunal can assume

jurisdiction in respect of subject-matter which the

statute does not confer on it and if by deciding

erroneously the fact on which jurisdiction depends the

court or tribunal exercises the jurisdiction then the

order is vitiated. Error of jurisdictional fact renders the

order ultra vires and bad. [Wade, Administrative Law.]

In Raza Textiles [Raza Textiles Ltd. v. CIT, (1973) 1 SCC

633: (1973) 87 ITR 539] it was held that a court or

tribunal cannot confer jurisdiction on itself by deciding

a jurisdictional fact wrongly.

44. Borrowing wisdom from the aforesaid passage, our

deduction is this. An issue of maintainability of a suit strikes

at the root of the proceedings initiated by filing of the plaint

as per requirements of Order 7 Rule 1CPC. If a suit is barred

by law, the trial court has absolutely no jurisdiction to

entertain and try it. However, even though a given case

might not attract the bar envisaged by Section 9 CPC, it is

obligatory for a trial court seized of a suit to inquire and

ascertain whether the jurisdictional fact does, in fact, exist

to enable it (the trial court) to proceed to trial and consider

granting relief to the plaintiff as claimed. No higher court,

Special Civil Petition (C) Nos. 29405-29406 of 2017 Page 22 of 96

much less the Supreme Court, should feel constrained to

interfere with a decree granting relief on the specious

ground that the parties were not put specifically on notice in

respect of a particular line of attack/defence on which

success/failure of the suit depends, more particularly an

issue touching the authority of the trial court to grant relief

if “the jurisdictional fact” imperative for granting relief had

not been satisfied. It is fundamental, as held in Shrisht

Dhawan [Shrisht Dhawan v. Shaw Bros., (1992) 1 SCC

534], that assumption of jurisdiction/refusal to assume

jurisdiction would depend on existence of the jurisdictional

fact. Irrespective of whether the parties have raised the

contention, it is for the trial court to satisfy itself that

adequate evidence has been led and all facts including the

jurisdictional fact stand proved for relief to be granted and

the suit to succeed. This is a duty the trial court has to

discharge in its pursuit for rendering substantive justice to

the parties, irrespective of whether any party to the lis has

raised or not. If the jurisdictional fact does not exist, at the

time of settling the issues, notice of the parties must be

invited to the trial court's prima facie opinion of non-existent

jurisdictional fact touching its jurisdiction. However, failure

to determine the jurisdictional fact, or erroneously

determining it leading to conferment of jurisdiction, would

amount to wrongful assumption of jurisdiction and the

resultant order liable to be branded as ultra vires and bad.

45. Should the trial court not satisfy itself that the

jurisdictional fact for grant of relief does exist, nothing

prevents the court higher in the hierarchy from so satisfying

itself. It is true that the point of maintainability of a suit has

to be looked only through the prism of Section 9CPC, and

the court can rule on such point either upon framing of an

issue or even prior thereto if Order 7 Rule 11(d) thereof is

applicable. In a fit and proper case, notwithstanding

omission of the trial court to frame an issue touching

jurisdictional fact, the higher court would be justified in

Special Civil Petition (C) Nos. 29405-29406 of 2017 Page 23 of 96

pronouncing its verdict upon application of the test laid

down in Shrisht Dhawan [Shrisht Dhawan v. Shaw Bros.,

(1992) 1 SCC 534].

46. In this case, even though no issue as to maintainability

of the suit had been framed in the course of proceedings

before the trial court, there was an issue as to whether the

agreement is true, valid and enforceable which was

answered against the sellers. Obviously, owing to dismissal

of the suit, the sellers did not appeal. Nevertheless, having

regard to our findings on the point as to whether the buyer

was “ready and willing”, we do not see the necessity of

proceeding with any further discussion on the point of

jurisdictional fact here.

47. However, we clarify that any failure or omission on the

part of the trial court to frame an issue on maintainability of

a suit touching jurisdictional fact by itself cannot trim the

powers of the higher court to examine whether the

jurisdictional fact did exist for grant of relief as claimed,

provided no new facts were required to be pleaded and no

new evidence led.”

(Emphasis Supplied)

31. In order to fortify their submission, the subsequent purchasers have

relied upon the decision of this Court in I.S. Sikandar (supra)

wherein the plaintiff had instituted a suit for specific performance of

agreement of sale entered into with the defendants therein against the

total sale consideration of Rs. 45,000/- in the year 1983. The plaintiff

had paid Rs. 5,000 as part sale consideration. In 1985, the defendants

issued a legal notice and called upon the plaintiff to comply with his

part of the contract by paying the balance sale consideration against

which the plaintiff had issued a response calling upon the defendants

Special Civil Petition (C) Nos. 29405-29406 of 2017 Page 24 of 96

to execute a conveyance deed and receive the balance sale

consideration. By another letter, the plaintiff also requested the

defendants to go to the office of the Sub-Registrar for the purpose of

execution of the conveyance deed. However, the defendants sent a

notice declining to accede to the plaintiff’s request and rescinded the

agreement to sell. This Court thus was seized with the question of

whether the suit for specific performance of agreement of sale filed by

the plaintiff therein against the defendants was maintainable without

seeking a declaratory relief with respect to the notice of termination

vide which the agreement of sale was terminated. This Court held that

in the absence of any prayer to declare the termination of agreement

of sale as bad in law, the suit for specific performance filed by the

plaintiff therein was not maintainable. The relevant observation is as

under:

“36. Since the plaintiff did not perform his part of contract

within the extended period in the legal notice referred to

supra, the agreement of sale was terminated as per notice

dated 28-3-1985 and thus, there is termination of the

agreement of sale between the plaintiff and Defendants 1-4

w.e.f. 10-4-1985.

37. As could be seen from the prayer sought for in the

original suit, the plaintiff has not sought for declaratory

relief to declare the termination of agreement of sale as bad

in law. In the absence of such prayer by the plaintiff the

original suit filed by him before the trial court for grant of

decree for specific performance in respect of the suit

schedule property on the basis of agreement of sale and

consequential relief of decree for permanent injunction is not

maintainable in law.

Special Civil Petition (C) Nos. 29405-29406 of 2017 Page 25 of 96

38. Therefore, we have to hold that the relief sought for by

the plaintiff for grant of decree for specific performance of

execution of sale deed in respect of the suit schedule

property in his favour on the basis of non -existing

agreement of sale is wholl y unsustainable in law.

Accordingly, Point (i) (see para 32.1) is answered in favour

of Defendant 5.”

(Emphasis Supplied)

32. Furthermore, in a recent decision of this Court in Sangita Sinha v.

Bhawana Bhardwaj, reported in 2025 SCC OnLine SC 723 , this

Court had occasion to consider and deal with I.S. Sikander (supra)

and R. Kandasamy (supra) respectively. In the said case the suit

property that was allotted to the vendor by a cooperative society under

a registered sub-lease. Later, an unregistered agreement to sell

concerning the said property was executed between the vendors and

the vendee for a total sale consideration of Rs. 25,00,000/-. At the

time of the execution of the agreement to sell, the vendee had paid a

sum of Rs. 2,51,000/- in cash to the vendors and had issued three

post-dated cheques of the amount of Rs. 7,50,000/-. When the vendee

visited the property along with her husband, the tenants of the

vendors created a ruckus and drove them out. In January 2008, the

vendors issued a notice to the vendee cancelling the agreement to sell

and refunded to the vendee an amount of Rs. 2,11,000/- through five

demand drafts and also returned two of the three post-dated cheques

of Rs. 2,50,000/- each. It was the case of the plaintiff that an advance

amount of Rs. 40,000/- still remained unpaid and that the agreement

for sale was unilaterally terminated. The abovementioned refunded

amount was later encashed by the vendee without any objection as

regards the unpaid amount. When the vendee instituted the suit for

Special Civil Petition (C) Nos. 29405-29406 of 2017 Page 26 of 96

specific performance, they failed to seek a declaration that the

termination of agreement for sale was invalid. In this backdrop, this

Court deliberated upon the issue of whether the suit filed by the

vendee was maintainable in the absence of the declaration that the

notice of termination was invalid. This Court while relying on the

decisions in I.S. Sikander (supra) and R. Kandasamy (supra)

respectively, held that a suit for specific performance is not

maintainable in the absence of a declaratory relief that the

termination of agreement was bad in law. The relevant observation is

as under:

“THE AGREEMENT TO SELL DATED 25TH JANUARY 2008

STOOD CANCELLED/TERMINATED.

21. This Court is also of the view that the act of the

Respondent No. 1-buyer in encashing the demand drafts

leads to an irresistible conclusion that the agreement in

question stood cancelled.

22. The contention of the learned counsel for the Respondent

No. 1- buyer that the Agreement to Sell dated 25

th January

2008 could not have been cancelled unilaterally is contrary

to facts as the letter dated 07

th February 2008 along with

the refund of the demand drafts and two post -dated

cheques was nothing but repudiation of the Agreement to

Sell dated 25

th January 2008 by the seller and the

encashment of the demand drafts was acceptance of such

repudiation by the Respondent No. 1-buyer, leading to

cancellation of the Agreement to Sell dated 25

th January

2008.

23. The contention that the demand drafts were encashed

under protest is misconceived on facts as there is nothing

Special Civil Petition (C) Nos. 29405-29406 of 2017 Page 27 of 96

on record to show that the demand drafts were encashed

under protest. In fact, PW-2, who is the husband of the

Respondent No. 1-buyer, has deposed that upon receipt of

the demand drafts and cheques, the Respondent No. 1 -

buyer had not issued any letter to the seller stating that the

amounts received by them were less than the earnest

money paid by them.

ABSENT A PRAYER FOR DECLARATORY RELIEF THAT

CANCELLATION OF THE AGREEMENT IS BAD IN LAW, A

SUIT FOR SPECIFIC PERFORMANCE IS NOT

MAINTAINABLE

24. This Court further finds that the seller had admittedly

issued a letter dated 7th February 2008 cancelling the

Agreement to Sell dated 25th January 2008, prior to the

filing of the subject suit on 5th May 2008. Even though the

demand drafts enclosed with t he letter dated 07th

February, 2008 were subsequently encashed in July, 2008,

yet this Court is of the view that it was incumbent upon the

Respondent No. 1- buyer to seek a declaratory relief that the

said cancellation is bad in law and not binding on parties

for the reason that existence of a valid agreement is sine

qua non for the grant of relief of specific performance.

25. This Court in I.S. Sikandar (Dead) By LRs. v. K.

Subramani, (2013) 15 SCC 27 has held that in absence of a

prayer for a declaratory relief that the termination of the

agreement is bad in law, the suit for specific performance of

that agreement is not maintainable. Though subsequently,

this Court in A. Kanthamani v. Nasreen Ahmed, (2017) 4

SCC 654 has held that the declaration of law in I.S.

Sikander (Dead) By LRs. v. K. Subramani (supra) regarding

non-maintainability of the suit in the absence of a challenge

to letter of termination is confined to the facts of the said

case, yet the aforesaid issue has been recently considered

in R. Kandasamy (Since Dead) v. T.R.K. Sarawathy (supra)

Special Civil Petition (C) Nos. 29405-29406 of 2017 Page 28 of 96

authored by brother Justice Dipankar Datta and the conflict

between the judgment of I.S. Sikander (Dead) By LRs. v. K.

Subramani (supra) and A. Kanthamani v. Nasreen Ahmed

(supra) has been deliberated upon. In R. Kandasamy (Since

Dead) v. T.R.K. Sarawathy (supra), it has been clarified that

the appellate court would not be precluded from examining

whether the jurisdictional fact exists for grant of relief of

specific performance, notwithstanding the fact that the trial

Court omitted or failed to frame an issue on maintainability

of the suit […]

26. Since in the present case, the seller had issued a letter

dated 07th February, 2008 cancelling the agreement to sell

prior to the institution of the suit, the same constitutes a

jurisdictional fact as till the said cancellation is set aside,

the respondent is not entitled to the relief of specific

performance.

27. Consequently, this Court is of the opinion that absent a

prayer for declaratory relief that termination/cancellation of

the agreement is bad in law, a suit for specific performance

is not maintainable.”

(Emphasis Supplied)

33. Before delving into the discussion of whether decisions of this Court

in I.S. Sikander (supra) and Sangita Sinha (supra) would be of any

help to subsequent purchasers herein, we deem it necessary to look

into the views adopted by various High Courts with respect to the

issue at hand.

(a) Views adopted by the High Courts on failure to seek declaration.

Special Civil Petition (C) Nos. 29405-29406 of 2017 Page 29 of 96

34. The Punjab and Haryana High Court in Brahm Dutt v. Sarabjit

Singh, reported in 2017 SCC OnLine P&H 5489 , had observed that

unilateral cancellation by one party is impermissible in law except in

cases where the agreement itself is determinable under Section 14 of

the Specific Relief Act, 1963 (for short, “the Act of 1963”). As per the

court, to hold otherwise would have enabled a defendant to frustrate

virtually every suit for specific performance by resorting to unilateral

cancellation. The court emphasized that the Act of 1963 had made

elaborate provisions on this aspect under Chapter IV i.e., where a

party seeks to rescind an agreement to sell, it is incumbent upon such

party to approach the court and obtain a declaration as to the validity

of such revocation or rescission. If a party claims that he had valid

reasons to terminate or rescind the contract, then such terminating

party should seek a declaration from the competent court, as required

under Sections 27 and 31 of the Act of 1963 respectively. Therefore,

in such a situation, the burden to seek a declaration regarding the

validity of cancellation or termination of the contract would rest upon

the defendant, who has raised such termination as a defence to resist

the suit for specific performance, and not upon the plaintiff. The

relevant observation is as under:

“17. However, otherwise also the defendant could not have,

unilaterally, cancelled the agreement in question. Unilateral

cancellation of agreement to sell by one party is not

permissible in law except where the agreement is

determinable in terms of Section 14 of this Specific Relief

Act. Such cancellation cannot be raised as a defence in a

suit for specific performance. If any such a plea of

cancellation/termination is raised by the defendant than

the Court can just ignore this and the plaintiff need not

Special Civil Petition (C) Nos. 29405-29406 of 2017 Page 30 of 96

challenge such an alleged cancellation. If such unilateral

cancellation of non-determinable agreement is permitted as

a defence then virtually every suit for specific performance

can be frustrated by the defendant. Therefore the Specific

Reliefs Act has made detailed provisions for this aspect. The

bare perusal of the provisions of the Specific Relief Act

shows that once a party claims the right of revocation or

rescission, of the agreement then such a party is required to

seek a declaration from the Court regarding the validity of

revocation or rescission, as the case may be. In the present

case also, it was not the duty cast upon the plaintiff to

challenge the alleged cancellation of agreement, which,

otherwise also, is not proved on record. On the contrary, if

the defendant so claimed that he had valid reasons to

terminate the contract or rescind the contract then he should

have sought a declaration from the competent Court, as

required under Sections 27 and 31 of Specific Relief Act.

Hence the plea of termination of agreement raised by the

defendant has rightly not been accepted by the Courts

below.

18. So far as the judgment of the Hon'ble Supreme Court in

case of I.S. Sikandar (supra) is concerned, there is no

dispute regarding the proposition laid down by the Hon'ble

Supreme Court. However, that judgment is distinguishable

on the facts of the present case. In the case before the

Hon'ble Supreme Court, the defendant had, in fact, asked

the plaintiff to make the payment of the money and to get

the sale deed executed. On failure of the plaintiff to make

the payment the agreement had become determinable and

the defendant had terminated the contract by specific

communication. This action of the defendant was within the

realm of the Contract Act, as provided under Sections 38

and 51 of the Contract Act and Section 14 of Specific Relief

Act, which provides that in case of the performance which

was required of the plaintiff/promisee is refused by him

Special Civil Petition (C) Nos. 29405-29406 of 2017 Page 31 of 96

then the defendant/promisor need not perform his part of

the agreement.”

(Emphasis Supplied)

35. The view taken in Brahm Dutt (supra) stood affirmed by this Court in

Brahm Dutt v. Sarabjit Singh , reported in 2018 SCC Online SC

3961, wherein this Court found no good reason to interfere with the

view taken by the High court. The relevant portion of the order is as

under:

“3. We do not find any ground to interfere with the

impugned order. The special leave petition is, accordingly,

dismissed.”

36. Later, in Balwinder Sarpal v. Ram Kumar Bansal , reported in

2022 SCC OnLine P&H 4408 , the Punjab and Haryana High Court

was again confronted with a suit for possession by way of specific

performance. The case arose out of an agreement for sale where the

total sale consideration was fixed at Rs. 7,00,000/-, of which Rs.

1,00,000/- was paid as earnest money, and the sale deed was to be

executed on 05.07.2006 upon payment of the balance consideration.

On the appointed date, the plaintiff remained present in the office of

the Sub-Registrar with the requisite balance sale consideration, for

the purpose of execution and registration of the sale deed. The

defendants, however, failed to appear and the sale deed could not be

executed, thereby compelling the plaintiff to institute the suit. The

trial court noted that under a notice of termination, the defendants

purported to cancel the agreement and forfeit the earnest money.

Thus, the trial court, relying on the termination notice, held that the

agreement stood terminated and the earnest money stood forfeited,

Special Civil Petition (C) Nos. 29405-29406 of 2017 Page 32 of 96

and that in the absence of any declaratory relief sought, the suit for

specific performance was not maintainable. Aggrieved by the decision

of the trial court, the plaintiff preferred an appeal which came to be

allowed and thus, the suit for specific performance was decreed in

favour of plaintiff. In second appeal, the defendants placed reliance

upon I.S. Sikandar (supra) to contend that, since the plaintiff had

not sought a declaration challenging the termination, the suit was not

maintainable. The High court, however, distinguished I.S. Sikandar

(supra). It was observed that in I.S. Sikandar (supra), the vendor had

called upon the purchaser to complete the transaction by paying the

balance sale consideration, and even afforded him a further

opportunity with a caveat that failure would result in termination. The

purchaser defaulted despite such opport unity, and in such

circumstances, this Court upheld the termination. In other words, it

was under such circumstances that the failure to seek a declaration

that the termination was unilateral and void, was considered to be

detrimental to the suit for specific performance instituted by the

plaintiff therein. By contrast, in Balwinder Sarpal (supra), the

defendants had issued the notice of termination within five days of the

stipulated date, without granting any opportunity to the plaintiff to

tender the balance consideration and get the sale deed executed. On

these distinguishing facts, the High court held that I.S. Sikandar

(supra) could not be applied to the case at hand. Instead, reliance was

placed on Brahm Dutt (supra) to hold that a unilateral termination of

an agreement for sale, effected in such manner, is not permissible.

The High court observed that once it was found that the termination

was unilateral and without giving any opportunity to the purchaser to

perform his part of the contract, no separate declaratory relief was

Special Civil Petition (C) Nos. 29405-29406 of 2017 Page 33 of 96

required with respect to the termination. The relevant observation is

as under:

“9. In the present facts and circumstances wherein, the

agreement in question is dated 05.04.2006 with

05.07.2006 being the target date, notice dated 10.07.2006

regarding its termination and forfeiture of earnest money

was issued on 10.07.2006 whereas the suit for possession

by way of specific performance came to be filed at the

instance of respondent-plaintiff on 17.08.2006 i.e. without

causing any delay what so ever. This itself shows that in

fact the respondent/plaintiff was always ready and willing

to perform his part of agreement and the amazing swiftness

shown by the appellants/defendants was not at all bona

fide and the uncalled for. Before terminating the agreement

in question, the appellant/defendant never called upon the

respondent/plaintiff to come forward and execute the sale

deed in pursuance to the agreement in question which

happens to be the most relevant distinguishing factor as

compared to the facts in the case of I. S. Sikandar (D) By

LRs. v. K. Subramani, (2014) 1 RCR (Civil) 236. To point out

the same, relevant portion from paragraph No. 17 of the

aforesaid judgment is reproduced as under:—

“…………. The period of five months stipulated under

clause 6 of the Agreement of Sale for execution and

registration of the sale deed in favour of the plaintiff

had expired. Despite the same, the defendant Nos. 1-4

got issued legal notice dated 06.03.1985 to the plaintiff

pointing out that he has failed to perform his part of the

contract in terms of the Agreement of Sale by not paying

balance sale consideration to them and getting the sale

deed executed in his favour and called upon him to pay

the balance sale consideration and get the sale deed

executed on or before 18.3.1985. The plaintiff had

issued reply letter dated 16.3.1985 to the advocates of

Special Civil Petition (C) Nos. 29405-29406 of 2017 Page 34 of 96

defendant Nos. 1-4, in which he had admitted his

default in performing his part of contract and prayed

time till 23.05.1985 to get the sale deed executed in his

favour. Another legal notice dated 28.03.1985 was

sent by the first defendant to the plaintiff extending

time to the plaintiff asking him to pay the sale

consideration amount and get the sale deed executed

on or before 10.04.1985, and on failure to comply with

the same, the Agreement of Sale dated 25.12.1983

would be terminated since the plaintiff did not avail the

time extended to him by defendant Nos. 1-4. Since the

plaintiff did not perform his part of contract within the

extended period in the legal notice referred to supra,

the Agreement of Sale was terminated as per notice

dated 28.03.1985 and thus, there is termination of the

Agreement of Sale between the plaintiff and defendant

Nos. 1-4 w.e.f. 10.04.1985. As could be seen from the

prayer sought for in the original suit, the plaintiff has

not sought for declaratory relief to declare the

termination of Agreement of Sale as bad in law. In the

absence of such prayer by the plaintiff the original suit

filed by him before the trial court for grant of decree for

specific performance in respect of the suit schedule

property on the basis of Agreement of Sale and

consequential relief of decree for permanent injunction

is not maintainable in law……….”.

10. From the portion reproduced hereinabove, it can be

easily traced out that in the case of I.S. Sikandar (Supra),

the purchaser was initially called upon by the vendor to get

the sale deed executed on payment of balance sale

consideration. The purchaser having failed to do so, another

opportunity was even granted to him to perform his part of

the agreement with a caveat that in case the purchaser

failed to do so by the stipulated date, the agreement would

stand terminated. It was under those circumstances, when

the purchaser failed to perform his part of obligation under

Special Civil Petition (C) Nos. 29405-29406 of 2017 Page 35 of 96

the agreement, the Hon'ble Supreme Court accepted the plea

of termination of the agreement. On the contrary, in the

present case, notice of termination was issued by

appellants/defendants merely within 5 days of the target

dates and that too without granting any opportunity to the

respondent/plaintiff to pay the balance consideration and

get the sale deed executed. In these distinguishing

circumstances, the judgment passed in the case of I. S.

Sakandar (supra) can't be made applicable to the present

case. More than that even the unilateral termination of

agreement in question could not be accepted, in view of the

law laid down by this Court in case of Brahm Dutt v.

Sarabjit Singh, 2018 (1) L.A.R. 119 […]

11. Once the alleged termination of agreement in question,

in the facts and circumstances of the present case has not

been found to be bona fide being done in a unilateral

manner without even calling upon the respondent/plaintiff

to perform their part of agreement and particularly under

the circumstances, wherein, the suit was filed promptly

thereafter, no declaration, challenging the alleged

termination was called for.”

(Emphasis Supplied)

37. In S.K. Ravichandran v. M. Thanapathy , reported in 2022 SCC

OnLine Mad 9094 , the plaintiff had instituted a suit for specific

performance of an agreement for sale of immovable property owned

by the defendant. The parties had entered into a written agreement

for sale dated 19.08.2007 for a total consideration of Rs. 11,80,000/-

, out of which the plaintiff paid Rs. 1,50,000/- as advance on the very

same day. The agreement stipulated that upon payment of the balance

consideration of Rs. 10,30,000/- on or before 15.10.2007, the sale

deed would be executed and registered. The plaintiff tendered the

balance consideration and was assured by the defendant that he

Special Civil Petition (C) Nos. 29405-29406 of 2017 Page 36 of 96

would attend the office of the Sub-Registrar prior to the stipulated

date. It was further agreed that both the parties would appear before

the Sub-Registrar on 09.10.2007. While the plaintiff duly presented

himself on that date, the defendant failed to do so. Consequently, on

12.10.2007, the plaintiff dispatched a telegram and a detailed letter

requesting the defendant to attend the Sub -Registrar’s office on

15.10.2007. The plaintiff remained present on the appointed day, but

despite due receipt of the communication, the defendant neither

appeared nor responded. The plaintiff thereafter learnt that the

defendant was attempting to alienate the suit property to third parties,

compelling him to institute a suit for specific performance and

permanent injunction. The defendant by relying on I.S. Sikandar

(supra) resisted the suit on the ground that, in the absence of a

specific challenge to the alleged termination of the agreement, the suit

was not maintainable. The plaintiff, on the other hand, contended that

the agreement did not contain any clause permitting termination in

the event of default, and that unilateral cancellation was

impermissible in law. Relying upon the decision in Brahm Dutt

(supra), it was urged that unilateral cancellation of a contract, except

in cases where the agreement is determinable under Section 14 of the

Act of 1963 is not sustainable in the eyes of law. Such a cancellation,

if pleaded as a defence, could be ignored by the court and the plaintiff

did not require to seek a separate declaratory relief. Relying on the

dictum as laid in Brahm Dutt (supra), the Madras High Court held

that since the agreement in question did not provide for termination

upon the purchaser’s failure to pay the balance consideration by a

stipulated date, the unilateral cancellation pleaded by the defendant

Special Civil Petition (C) Nos. 29405-29406 of 2017 Page 37 of 96

was of no legal effect. It was reiterated that law does not permit such

unilateral termination. The relevant observation is as under:

“15. He would further submit that since the appellant did

not come forward to get the sale deed by paying balance

sale consideration and he was not ready and willing to

perform his part of contract, the respondent cancelled the

sale agreement and when the respondent communicated

the appellant, regarding the cancellation of the deed, the

appellant has not challenged the cancellation of the sale

agreement. Without challenging the cancellation of the sale

agreement, the Suit is not maintainable.

16. In support of his contention, he relied on the following

Judgments:— (i) I.S. Sikandar (D) by LRS., v. K. Subramani,

(2013) 15 SCC 27; (ii) Ravindran v. Danton Shanmugam,

(2017) 3 Mad LJ 265; (iii) Mohinder Kaur v. Sant Paul Singh,

(2019) 9 SCC 358 and (iv) Prabakaran v. Geetha, (2022) 3

CTC 650.

xxx xxx xxx

25. It is the contention of the learned counsel for the

respondent that the suit itself was not maintainable on the

ground that though the respondent cancelled the

agreement, the appellant has not challenged the

cancellation. In this regard, the learned counsel for the

appellant would submit that the sale agreement does not

speak about the termination of the contract. Unilateral

cancellation is not permissible under law, except where the

agreement is determinable in terms of Section 14 of the

Specific Relief Act. Such cancellation cannot be raised as a

defence in a suit for specific performance. If any such plea

is raised by the respondent, the Court can just ignore the

same and the plaintiff need not challenge the unilateral

cancellation separately. Further, the plea regarding the

Special Civil Petition (C) Nos. 29405-29406 of 2017 Page 38 of 96

maintainability of the suit is to be raised at the first instance

in the written statement. Therefore, the said plea cannot be

adjudicated in the appeal. The citation referred to by the

learned counsel for the respondent is not applicable to the

present case on hand.

26. A careful perusal of the sale agreement Ex.A.1 clearly

shows that the time stipulated for the balance sale

consideration is on or before 15.10.2007, it does not speak

about the termination of the contract, in case the appellant

will not pay the balance sale consideration on particular

date. Therefore, the law does not permit unilateral

cancellation as referred to above.”

(Emphasis Supplied)

38. The view taken by the Madras High Court in S.K. Ravichandran

(supra) also came to be affirmed by this Court in S.K. Ravichandran

v. M. Thanapathy, reported in 2022 SCC Online SC 2369, wherein

one of us, J.B. Pardiwala, J., was a part of the Bench. This Court

found no good reason to interfere with the above decision. The relevant

portion is as under:

“2. We do not find any reason to interfere with the impugned

order. The Special Leave Petition is accordingly dismissed.”

39. The Delhi High Court was also seized of a similar issue in the case of

Rajesh Sethi S.C. v. P.C. Sethi, reported in 2023 SCC OnLine Del

7010. In the said case, the plaintiff had filed a suit for specific

performance of agreement to sell. The agreement to sell was

terminated by the defendants on the ground that the property was an

HUF property. The High court observed that such unilateral

termination is not permissible under law, especially when the

Special Civil Petition (C) Nos. 29405-29406 of 2017 Page 39 of 96

defendant vendor neither had any valid reason nor had filed any suit

seeking a declaration that the agreement to sell was void. Thus, the

plea that the agreement to sell was unilaterally terminated by the

defendant vendor as the suit property was an HUF property is not

valid. The relevant observation is as under:

“145. The question which now needs deliberation is

whether the Agreement to Sell dated 14.01.2004 Ex P-1/D-

2 had been validly terminated by Col. P.C. Sethi vide his

Letter dated 21.03.2004, before the expiry of the three

month period for execution as provid ed in the said

Agreement.

146. To evaluate the validity of a unilateral rescission of a

contract it would be apposite to refer to the judgment of the

Madras High Court in Raja Rajeswara Dorai v. A.L.A.R.R.M.

Arunachellan Chettiar, 1913 SCC OnLine Mad 276 where it

was observed that a unilateral expression of rescission of a

contract by one of the parties to the contact cannot be held

to relieve him from his obligation to have the contract

rescinded by Court under the substantive law and within

the time allowed by statutory law if he wants as a plaintiff

the assistance of the Court in obtaining certain reliefs on the

basis that the contract has ceased to exist. It was observed

that repudiation of a contract by one party alone cannot get

the party any relief except as consequent of getting a

declaration and a rescission by the Court. Thus, a contract

can be properly rescinded without the intervention of a

Court only by the act of both parties or, if the original

contract or Deed itself, by clauses of forfeiture or similar

clauses, puts an end to the contract or transaction.

However, even the latter case has to be determined by both

the parties and only then the aid of the Court is not required.

Therefore, even though a contract or transaction may be

voidable at the instance of one party, its rescission is

Special Civil Petition (C) Nos. 29405-29406 of 2017 Page 40 of 96

effectuated, not by the mere repudiation of one party, but by

the decree of declaration of this Court.

147. It has been further explained by Punjab and Haryana

High Court in the case of Brahm Dutt v. Sarabjit Singh, 2017

SCC OnLine P&H 5489 that unilateral cancellation of

Agreement to Sell by one party is not permissible in law

except where the agreement is determinable in terms of

Section 14 of this Specific Relief Act, 1963 and such

cancellation cannot be raised as a defense in a suit for

Specific Performance. If any such plea of

cancellation/termination is raised by the defendant, the

Court can just ignore the same and the plaintiff is also not

required to challenge such a cancellation or revocation. It

was further observed that if such unilateral cancellation of

non-determinable agreements is permitted as a defense,

then virtually every suit for specific performance can be

frustrated by the defendant. On the contrary, if the

defendant so claimed that he had valid reasons to terminate

the contract or rescind the contract then he ought to have

sought a declaration from the competent Court, as required

under Sections 27 and 31 of Specific Relief Act, 1963.

148. Thus, once a party claims the right of revocation or

rescission of the Agreement, then such a party is required

to seek a declaration from the Court regarding the validity

of revocation or rescission, as the case may be.

149. In the present case, the Col. PC Sethi has given

contrary reasons in his Letter of Revocation dated

21.03.2004 to those which have been stated in his Written

Statement clearly reflecting that the reason for rescission on

the ground that the property was an HUF was an after-

thought. Be that as it may, the reason provided in the Letter

of Rescission dated 21.03.2004 cannot by any means be

construed as a valid one to unilaterally rescind the

Agreement to Sell even before the tenure of executing the

Special Civil Petition (C) Nos. 29405-29406 of 2017 Page 41 of 96

same had expired. Col. PC Sethi clearly had second -

thoughts about the sale and wanted to wriggle out of this

Agreement to Sell on one ground or the other. Such

unilateral rescission is not permissible under law,

especially when the Col. PC Sethi neither had any valid

reason, nor filed any suit for seeking a declaration that the

Agreement to Sell was void. Therefore, the plea that the

Agreement to Sell dated 14.01.2004 was unilaterally

rescinded by Col. PC Sethi as the suit property is an HUF

asset is not sustainable in the present case.

150. Thus, the cancellation/termination of Agreement by

Col. P.C. Sethi is not valid and the Agreement to Sell is held

to be subsisting and executable to the extent of the share of

Col. P.C. Sethi.”

(Emphasis Supplied)

40. Further, in the case of Kavi Ghei v. Rohit Vaid, reported in 2024

SCC OnLine Del 6118 , the plaintiff had filed a suit for specific

performance of agreement to sell executed by the defendant nos. 1

and 2 respectively therein and the cancellation of subsequent sale

deed executed by the defendant nos. 1 and 2 respectively in favour of

the defendant no. 3. The facts of the case were such that the plaintiff

and the defendant nos. 1 and 2 therein had entered into an agreement

to sell for the sale of property for a consideration of Rs. 3,22,50,000/-

. Pursuant to execution of the agreement to sell, the plaintiff paid Rs.

21,00,000/- to the defendant nos. 1 and 2 respectively. In terms of

the agreement to sell, the sale deed was to be executed on or before

15.05.2004. For the purpose of raising the funds for the purchase of

suit property, the plaintiff had also availed a loan of Rs. 2,00,00,000/-

from a bank. However, the plaintiff received a notice of termination

from the defendant nos. 1 and 2 dated 21.04.2004, wherein they

Special Civil Petition (C) Nos. 29405-29406 of 2017 Page 42 of 96

informed the plaintiff that they had decided not to sell the suit

property to the plaintiff. The reason for such refusal was stated to be

that the plaintiff himself had supposedly reduced the sale

consideration to Rs. 2,00,00,000/- from the agreed sum of Rs .

3,22,50,000/- and informed the neighbours about the sale even

though sale had not been effected, and also attempted to avoid the

brokerage. The defendant nos. 1 and 2 respectively further sought to

refund the aforesaid amount paid by the plaintiff by annexing cheques

with the notice of termination. The High court found that none of the

reasons as assigned in the notice of termination were acceptable as

they did not reflect any dubious conduct on part of the plaintiff which

would justify a premature termination of the agreement to sell. The

High court while placing reliance on Brahm Dutt (supra) held that the

termination of agreement to sell was not in accordance with any of the

clauses of the agreement and further it was not with the consent of

the both parties. Thus, it was held therein that the unilateral

termination of agreement to sell by the defendant nos. 1 and 2 was

not valid and that agreement to sell was still subsisting and

executable. The relevant observation is as under:

“82. It is argued on behalf of Defendant 3 that without

challenging the termination of agreement to sell dated 21-3-

2004, the present suit for Specific Performance is not

maintainable under the law.

xxx xxx xxx

115. The facts of the present case may thus, be analysed to

ascertain whether the unilateral termination of ATS, was

justified. Admittedly, the parties entered into an agreement

Special Civil Petition (C) Nos. 29405-29406 of 2017 Page 43 of 96

to sell dated 21-3-2004, Ext. PW 1/1 in regard to the suit

property for the sale consideration of Rs 3,22,50,000 and

that a sum of Rs 21,00,000 was paid by the plaintiff as

advance money to the defendants and a balance amount of

Rs 3,01,50,000 remained to be paid at the time of

registration of the sale deed at which time the physical

vacant possession was to be handed over to the plaintiff […]

116. this agreement to Sell was not only signed by the

plaintiff and the defendants but was also witnessed by

the two witnesses, namely, Colonel C.K. Vaid r/o B -1,

Sundar Nagar, New Delhi and by Ms Ranjana Ahuja r/o

903, Nirmal Towers, 26 Barakhamba Ro ad. It was thus,

clearly stipulated in terms of the agreement to Sell that the

sale deed was required to be executed by 15-5-2004. 117.

However, before the expiry of the stipulated period for

honouring the respective obligations, the defendant has

admittedly terminated the agreement on 20-4-2004 i.e.

much prior to the date stipulated for completion of the

obligations under the agreement.

xxx xxx xxx

121. From the notice of termination, the three grounds

stated for premature cancellation are: (i) Renegotiations of

terms in regard to the cash competent of the agreed sale

consideration. (ii) Informing the neighbours even though the

sale had not been effected. (iii) The endeavour to avoid the

broker in order to save the brokerage amount.

xxx xxx xxx

132. Any of the reasons as stated in this Letter of

Termination, Ext. DW 1/1, has not been proved or

established and it does not reflect to any conduct of the

plaintiff which justify premature termination of the

agreement to Sell.

Special Civil Petition (C) Nos. 29405-29406 of 2017 Page 44 of 96

xxx xxx xxx

152. It cannot be overlooked that even though Defendant 3

was being cautious in enter into this sale transaction and

had been conscious and aware of the earlier subsisting

Agreement to Sell, he has admitted that he did not in any

manner contact the plaintiff or otherwise satisfy himself

about the valid termination of the earlier Agreement to Sell.

The manner in which the entire transaction has been

executed, clearly establishes that Defendant 3 while has

been a party to the creation and execution of the documents

and has even mentioned about the earlier Agreement to Sell

in the sale deed, Ext. PW 1/1 but has deliberately not

contacted the plaintiff, to confirm from him about the alleged

cancellation of the earlier Agreement to Sell, as any prudent

reasonable person would do in the given circumstances

especially when the consequences of the earlier Agreement

to Sell, were well within the knowledge and of all the

parties.

153. Defendant 3 has acted selectively and had chosen to

ensure that there was proper paper work done and has not

acted like a reasonable person, to ensure the cancellation of

earlier Agreement to Sell. Though he has claimed himself to

be a bona fide purchaser, but from the fact that earlier ATS

was well within the knowledge of the defendants, manner

in which the documents have been executed and also the

fact that the notice of termination of the agreement to Sell

has been served subsequently, the only inference that can

be drawn is that the subsequent sale in favour of Defendant

3, has been made without there being any valid termination

of prior Agreement to Sell with the plaintiff. The termination

has neither been in accordance with any Clause of ATS nor

is it with the consent of both the parties.

154. Thus, the unilateral cancellation/termination of

agreement to sell dated 21-3-2024 Ext. PW 1/1 by

Special Civil Petition (C) Nos. 29405-29406 of 2017 Page 45 of 96

Defendants 1 and 2 is not valid and the agreement to Sell

is held to be subsisting and executable. Moreover, it is

proved that Defendant 3 is not a bona fide purchaser as

claimed by him.

155. In conclusion, there being a valid subsisting Agreement

to Sell, which was well within the knowledge of Defendant

3. He cannot defend the subsequent Sale Deed executed

in his favour. The plaintiff continues to have a right to seek

the execution of the agreement to Sell, Ext. PW 1/1, in his

favour.”

(Emphasis Supplied)

41. A similar view was taken by the Andhra Pradesh High Court in A.

Kanthudu v. S. Venkat Narayana , Appeal No. 678 of 2007 and the

Delhi High Court in Ajay Narain v. Arti Singh, reported in (2025)

316 DLT 425.

42. In addition to the views expressed by various High courts, as

discussed above, this Court, in the recent decision of Annamalai v.

Vasanthi, reported in 2025 SCC OnLine SC 2300 , wherein one of

us, J.B. Pardiwala, J., was a member of the Bench, had the occasion

to consider whether a suit for specific performance is maintainable

without seeking a declaration that the termination of the agreement

was invalid in law. This Court held that where a contract confers upon

a party the right to terminate it under certain conditions, and if such

right is exercised, then the continued subsistence of the contract

becomes doubtful. In such cases, the plaintiff must first obtain a

declaration that the termination is invalid before seeking specific

performance. However, where no such contractual right to terminate

exists, or where the right has been waived, and a party nevertheless

Special Civil Petition (C) Nos. 29405-29406 of 2017 Page 46 of 96

proceeds to terminate the contract unilaterally, such termination

would amount to a repudiatory breach, in which event the non-

terminating party can directly seek specific performance without first

seeking a declaration as aforesaid. The relevant observation is as

under:

“Issues for consideration

12. Upon consideration of the rival submissions and having

regard to the facts of the case, in our view, following issues

arise for our consideration:

A. Whether the High Court was justified in interfering

with the finding of the first appellate

court qua payment of additional amount of Rs.

1,95,000 by the plaintiff-appellant? If receipt of

additional payment by D-1 and D-2 is proved, as found

by the first appellate court, whether it could be held

that plaintiff was not ready and willing to perform its

part under the contract?

B. Whether the suit for specific performance was

maintainable without seeking a declaration that

termination of the agreement was invalid in law?

C. Whether in the facts of the case the plaintiff was

entitled to the discretionary relief of specific

performance?

xxx xxx xxx

When a declaratory relief is essential

25. A declaratory relief seeks to clear what is doubtful, and

which is necessary to make it clear. If there is a doubt on

the right of a plaintiff, and without the doubt being cleared

no further relief can be granted, a declaratory relief becomes

essential because without such a declaration the

Special Civil Petition (C) Nos. 29405-29406 of 2017 Page 47 of 96

consequential relief may not be available to the plaintiff. For

example, a doubt as to plaintiff's title to a property may

arise because of existence of an instrument relating to that

property. If plaintiff is privy to that instrument, Section 31 of

Specific Relief Act, 1963 enables him to institute a suit for

cancellation of the instrument which may be void or

voidable qua him. If plaintiff is not privy to the instrument,

he may seek a declaration that the same is void or does not

affect his rights. When a document is void ab initio, a decree

for setting aside the same is not necessary as the same is

non est in the eye of law, being a nullity. Therefore, in such

a case, if plaintiff is in possession of the property which is

subject matter of such a void instrument, he may seek a

declaration that the instrument is not binding on him.

However, if he is not in possession, he may sue for

possession and the limitation period applicable would be

that as applicable under Article 65 of the Limitation Act,

1963 on a suit for possession. Rationale of the aforesaid

principle is that a void instrument/transaction can be

ignored by a court while granting the main relief based on

a subsisting right. But, where the plaintiff's right falls under

a cloud, then a declaration affirming the right of the plaintiff

may be necessary for grant of a consequential relief.

However, whether such a declaration is required for the

consequential relief sought is to be assessed on a case-to-

case basis, dependent on its facts.

26. A breach of a contract may be by non-performance or by

repudiation, or by both. In Anson's Law of Contract (29

th

Oxford Edn.), under the heading “Forms of Breach Which

Justify Discharge”, it is stated thus:

“The right of a party to be treated as discharged from

further performance may arise in any one of three

ways: the other party to the contract (a) may renounce

its liabilities under it; (b) may by its own conduct make

it impossible to fulfill them, (c) may fail to perform what

Special Civil Petition (C) Nos. 29405-29406 of 2017 Page 48 of 96

it has promised. Of these forms of breach, the first two

may take place not only in the course of performance

but also while the contract is still wholly executory i.e.,

before either party is entitled to demand a performance

by the other party of the other's promise. In such a case

the breach is usually termed an anticipatory breach.

The last can only take place at or during the time for

performance of the contract.”

27. Ordinarily, for a breach of contract, a party aggrieved

by the breach i.e., failure on the part of the other party to

perform its part under the contract can claim compensation

or damages by accepting the breach as a termination of the

contract, or/and, in certain cases, obtain specific

performance by not recognizing the breach as termination of

the contract. In a case where the contract between the

parties confers a right on a party to the contract to

unilaterally terminate the contract in certain circumstances,

and the contract is terminated exercising that right, a mere

suit for specific performance without seeking a declaration

that such termination is invalid may not be maintainable.

This is so, because a doubt/cloud on subsistence of the

contract is created which needs to be cleared before grant

of a decree enforcing contractual obligations of the parties

to the contract.

28. Now we shall consider few decisions of this Court where

the question of grant of relief of specific performance of a

contract in teeth of termination of the contract without

seeking a declaration qua subsistence of the contract was

considered. In I.S. Sikandar v. K. Subramani, the agreement

for sale stipulated sale within a stipulated time frame; on

failure of the plaintiff to respond to the notice seeking

execution of sale, the agreement was terminated. In that

context, this Court held:

Special Civil Petition (C) Nos. 29405-29406 of 2017 Page 49 of 96

“36. Since the plaintiff did not perform his part of

contract within the extended period in the legal notice

referred to supra, the agreement of sale was

terminated as per notice dated 28-3-1985 and thus,

there is termination of the agreement of sale between

the plaintiff and defendants 1-4 w.e.f. 10-4-1985

37. As could be seen from the prayers sought for in the

original suit, the plaintiff has not sought for declaratory

relief to declare the termination of agreement of sale as

bad in law. In the absence of such prayer by the

plaintiff the original suit filed by him before the trial

court for grant of decree for specific performance in

respect of the suit scheduled property on the basis of

agreement of sale and consequential relief of decree for

permanent injunction is not maintainable in law.

38. Therefore, we have to hold that the relief sought for

by the plaintiff for the grant of decree for specific

performance of execution of sale deed in respect of the

suit scheduled property in his favor on the basis of non-

existing agreement of sale is wholly unsustainable in

law.”

29. In A. Kanthamani (supra), the decision in I.S. Sikandar

(supra) was considered, and it was held:

“30.3. Third, it is a well settled principle of law that the

plea regarding the maintainability of suit is required to

be raised in the first instance in the pleading (written

statement) then only such plea can be adjudicated by

the trial court on its merits as a preliminary issue under

Order 14 Rule 2 CPC. Once the finding is rendered on

the plea, the same can be examined by the first or/and

second appellate court. It is only in appropriate cases,

where the court prima facie finds by mere perusal of

plaint allegations that the suit is barred by any express

Special Civil Petition (C) Nos. 29405-29406 of 2017 Page 50 of 96

provision of law or is not legally maintainable due to

any legal provision; a judicial notice can be taken to

avoid abuse of judicial process in prosecuting such suit.

Such is, however, not the case here.

30.4. Fourth, the decision relied on by the learned

counsel for the appellant in I.S. Sikandar turns on the

facts involved therein and is thus distinguishable.”

30. In R. Kandasamy (since dead) v. T.R.K. Sarawathy, this

Court considered both I.S. Sikandar (supra) and A.

Kanthamani (supra), and clarified the law by observing as

under:

“47. However, we clarify that any failure or omission

on the part of the trial court to frame an issue on

maintainability of a suit touching jurisdictional fact by

itself cannot trim the powers of the higher court to

examine whether the jurisdictional fact did exist for

grant of relief as claimed, provided no new facts were

required to be pleaded and no new evidence led.”

31. From the aforesaid decisions what is clear is that though

a plea regarding maintainability of the suit, even if not

raised in written statement, may be raised in appeal,

particularly when no new facts or evidence is required to

address the same, the issue whether a declaratory relief is

essential or not would have to be addressed on the facts of

each case.

32. In our view, a declaratory relief would be required where

a doubt or a cloud is there on the right of the plaintiff and

grant of relief to the plaintiff is dependent on removal of that

doubt or cloud. However, whether there is a doubt or cloud

on the right of the plaintiff to seek consequential relief, the

same is to be determined on the facts of each case. For

example, a contract may give right to the parties, or any one

Special Civil Petition (C) Nos. 29405-29406 of 2017 Page 51 of 96

of the parties, to terminate the contract on existence of

certain conditions. In terms thereof, the contract is

terminated, a doubt over subsistence of the contract is

created and, therefore, without seeking a declaration that

termination is bad in law, a decree for specific performance

may not be available. However, where there is no such right

conferred on any party to terminate the contract, or the right

so conferred is waived, yet the contract is terminated

unilaterally, such termination may be taken as a breach of

contract by repudiation and the party aggrieved may, by

treating the contract as subsisting, sue for specific

performance without seeking a declaratory relief qua

validity of such termination.

(Emphasis Supplied)

43. Thus, in view of the above discussion, the following principles of law

are discernible:

(i). Unilateral termination of the agreement to sell by one party is

impermissible in law except in cases where the agreement itself

is determinable in nature in terms of Section 14 of the Act of

1963;

(ii). If such unilateral termination of a non-determinable agreement

to sell is permitted as a defence, then virtually every suit for

specific performance can be frustrated by the defendant by

placing an unfair burden on the plaintiff, who despite

performing his part of the obligations and having showcased

readiness and willingness, would require to also seek a

separate declaration that the termination was bad in law. In

such cases, the burden cannot be casted upon the plaintiff to

challenge the alleged termination of agreement;

Special Civil Petition (C) Nos. 29405-29406 of 2017 Page 52 of 96

(iii). Where a party claims to have valid reasons to terminate or

rescind a non-determinable agreement to sell, with a view to

err on the side of caution, it should be such terminating party,

if at all, who ideally should approach the court and obtain a

declaration as to the validity of such termination or rescission,

and not the non-terminating party. However, this must not

mean that the defendant (the terminating party) in such cases

would mandatorily be required to seek a declaration because

Sections 27 and 31 of the Act of 1963 respectively, while using

the phrase “may sue” merely give an option to any person to

have the contract rescinded or adjudged as void or voidable;

(iv). Once the alleged termination of a non-determinable agreement

in question is found to be not for bona fide reasons and being

done in a unilateral manner on part of the defendant, it cannot

be said that any declaration challenging the alleged

termination was required on part of plaintiff;

(v). If a contract itself gives no right to unilaterally terminate the

contract, or such right has been waived, and a party still

terminates the contract unilaterally then that termination

would amount to a breach by repudiation, and the non -

terminating party can directly seek specific performance

without first seeking a declaration; and

(vi). In the event it is found that the termination of agreement to sell

by the defendant was not valid, then such an agreement to sell

will remain subsisting and executable.

44. Before applying the aforesaid principles of law to the facts of the

present case, and bearing in mind that unilateral termination of an

agreement to sell by one party is impermissible in law except where

Special Civil Petition (C) Nos. 29405-29406 of 2017 Page 53 of 96

the agreement is by its very nature determinable, it is, as a necessary

corollary, essential to also determine whether the ATS dated

28.04.2000 was determinable in nature or not.

(b) Whether the ATS dated 28.04.2000 was in nature determinable ?

45. The Commentary on the Indian Contract Act and S pecific Relief Act

authored by Pollock & Mulla (17

th Edition) states that determinable

contracts derive their existence from the determination clause

envisaged in the contract and there are essentially three types of

determination clauses, viz. (i) termination for cause that allows a party

to terminate the contract if the other party breaches a specific term or

if a specified event occurs, (ii) termination for convenience that allows

a party to end the contract without having to give a reason and (iii)

termination upon expiry of the term of the contract.

46. The law regarding the contracts that are determinable first came up

before this Court in Indian Oil Corporation v. Amritsar Gas Service

and Ors., reported in (1991) 1 SCC 533, wherein this Court had held

the contract to be determinable in nature because one of the clauses

of the contract permitted either parties to terminate the same without

assigning any reason and by sending a 30 day notice to the other

party. The relevant paragraph is reproduced as follows:

“12. The arbitrator recorded finding on Issue No. 1 that

termination of distributorship by the appellant-Corporation

was not validly made under clause 27. Thereafter, he

proceeded to record the finding on Issue No. 2 relating to

grant of relief and held that the plaintiff-respondent 1 was

entitled to compensation flowing from the breach of contract

Special Civil Petition (C) Nos. 29405-29406 of 2017 Page 54 of 96

till the breach was remedied by restoration of

distributorship. Restoration of distributorship was granted

in view of the peculiar facts of the case on the basis of which

it was treated to be an exceptional case for the reasons

given. The reasons given state that the Distributorship

Agreement was for an indefinite period till terminated in

accordance with the terms of the agreement and, therefore,

the plaintiff-respondent 1 was entitled to continuance of the

distributorship till it was terminated in accordance with the

agreed terms. The award further says as under:

“This award will, however, not fetter the right of the

defendant Corporation to terminate the distributorship

of the plaintiff in accordance with the terms of the

agreement dated April 1, 1976, if and when an

occasion arises.”

This finding read along with the reasons given in the

award clearly accepts that the distributorship could be

terminated in accordance with the terms of the

agreement dated April 1, 1976, which contains the

aforesaid clauses 27 and 28. Having said so in the

award itself, it is obvious that the arbitrator held the

distributorship to be revokable in accordance with

clauses 27 and 28 of the agreement. It is in this sense

that the award describes the Distributorship

Agreement as one for an indefinite period, that is, till

terminated in accordance with clauses 27 and 28. The

finding in the award being that the Distributorship

Agreement was revokable and the same being

admittedly for rendering personal service, the relevant

provisions of the Specific Relief Act were automatically

attracted. Sub-section (1) of Section 14 of the Specific

Relief Act specifies the contracts which cannot be

specifically enforced, one of which is ‘a contract which

is in its nature determinable’. In the present case, it is

not necessary to refer to the other clauses of sub-

Special Civil Petition (C) Nos. 29405-29406 of 2017 Page 55 of 96

section (1) of Section 14, which also may be attracted

in the present case since clause (c) clearly applies on

the finding read with reasons given in the award itself

that the contract by its nature is determinable. This

being so granting the relief of restoration of the

distributorship even on the finding that the breach was

committed by the appellant-Corporation is contrary to

the mandate in Section 14(1) of the Specific Relief Act

and there is an error of law apparent on the face of the

award which is stated to be made according to ‘the law

governing such cases’. The grant of this relief in the

award cannot, therefore, be sustained.”

(Emphasis Supplied)

47. The High Court of Madras in A Murugan and Others v Rainbow

Foundation Ltd and Ors ., reported in 2019 SCC OnLine Mad

37961, had further elaborated on the aspect of determinable

contracts. For the purpose of ascertaining determinability, the court

bifurcated contracts into several categories: (i) contracts that are

unilaterally and inherently revocable or capable of being dissolved

such as licenses and partnerships at will; (ii) contracts that are

terminable unilaterally on a “without cause” or “no fault” basis; (iii)

contracts that are terminable forthwith for cause or that cease to

subsist “for cause”, without a provision for remedying the breach; (iv)

contracts which are terminable for cause subject to a breach notice

being issued and an opportunity to cure the breach being given, and;

(v) contracts without a termination clause, which could be terminated

for breach of a condition but not a warranty , as per applicable

common law principles. The court held that the abovementioned (iii),

(iv) and (v) categories of contract are not determinable contracts. The

court further observed that although the (iv) and (v) categories are

Special Civil Petition (C) Nos. 29405-29406 of 2017 Page 56 of 96

terminable yet the same cannot be said to be in nature determinable.

The relevant observations are as under:

“17. On examining the judgments on Section 21(d) of SRA

1877 and Section 14(c) of the Specific Relief Act, as

applicable to this case, i.e. before Act 18 of 2018, I am of the

view that Section 14(c) does not mandate that all contracts

that could be terminated are not specifically unenforceable.

If so, no commercial contract would be specifically

enforceable. Instead, Section 14(c) applies to contracts that

are by nature determinable and not to all contracts that may

be determined. If one were to classify contracts by placing

them in categories on the basis of ease of determinability,

about five broad categories can be envisaged, which are not

necessarily exhaustive. Out of these, undoubtedly, two

categories of contract would be considered as determinable

by nature and, consequently, not specifically enforceable :

(i) contracts that are unilaterally and inherently revocable or

capable of being dissolved such as licences and

partnerships at will; and (ii) contracts that are terminable

unilaterally on “without cause” or “no fault” basis.

Contracts that are terminable forthwith for cause or that

cease to subsist “for cause” without provision for remedying

the breach would constitute a third category. In my view,

although the Indian Oil case referred to clause 27 thereof,

which provided for termination forthwith “for cause”, the

decision turned on clause 28 thereof, which provided for “no

fault” termination, as discussed earlier. Thus, the third

category of contract is not determinable by nature;

nonetheless, the relative ease of determinability may be a

relevant factor in deciding whether to grant specific

performance as regards this category. The fourth category

would be of contracts that are terminable for cause subject

to a breach notice and an opportunity to cure the breach and

the fifth category would be contracts without a termination

clause, which could be terminated for breach of a condition

Special Civil Petition (C) Nos. 29405-29406 of 2017 Page 57 of 96

but not a warranty as per applicable common law

principles. The said fourth and fifth categories of contract

would, certainly, not be determinable in nature although

they could be terminated under specific circumstances.

Needless to say, the rationale for Section 14(c) is that the

grant of specific performance of contracts that are by nature

determinable would be an empty formality and the

effectiveness of the order could be nullified by subsequent

termination.”

(Emphasis Supplied)

48. In Narendra Hirawat & Co. v. Sholay Media Entertainment Pvt.

Ltd., reported in (2020) SCC OnLine Bom 391 , the Bombay High

Court observed that the phrase “a contract which is in its nature

determinable” would mean a contract which is determinable at the

sweet will of a party to it, without reference to the other party or

without reference to any breach committed by the other party or

without any eventuality or circumstance. In other words, the phrase

would contemplate a unilateral right in a party to a contract to

determine the contract without assigning any reason. The relevant

observation is as under:

“8. […] When the relevant provision [section 14(d) of the

Specific Relief Act] uses the words “a contract which is in its

nature determinable”, what it means is that the contract is

determinable at the sweet will of a party to it, that is to say,

without reference to the other party or without reference to

any breach committed by the other party or without

reference to any eventuality or circumstance. In other

words, it contemplates a unilateral right in a party to a

contract to determine the contract without assigning any

reason or, for that matter, without having any reason. The

Special Civil Petition (C) Nos. 29405-29406 of 2017 Page 58 of 96

contract in the present case is not so determinable; it is

determinable only in the event of the other party to the

contract committing a breach of the agreement. In other

words, its determination depends on an eventuality, which

may or may not occur, and if that is so, the contract clearly

is not “in its nature determinable”.”

(Emphasis Supplied)

49. The Delhi High Court in DLF Home Developers Limited v. Shipra

Estate Limited, reported in 2021 SCC OnLine Del 4902 , while

considering an agreement to sell a property held that the question

whether a contract is in its nature determinable must be answered by

ascertaining whether the party against whom it is sought to be

enforced would otherwise have the right to terminate or determine the

contract when the other party is willing to perform and is not in

default. In other words, where a contract cannot be terminated so long

as the other party remains willing to perform its part, such a contract

is not determinable and, in equity, is specifically enforceable. The

relevant observation is as under:

“78. Section 14 of the Specific Relief Act, 1963 sets out

certain classes of contracts that are not specifically

enforceable. One such class of contracts comprises of

contracts, which are in their nature determinable. Clause (d)

of Section 21 of the Specific Relief Act, 1877 expressly

provided that contracts which are in their nature ‘revocable’

are unenforceable. The said statute was repealed and

replaced by the Specific Relief Act, 1963. Clause (c) of

Section 14(1) of the Specific Relief Act, 1963, as was in force

prior to Specific Relief Act, 1877, expressly provided that

contracts, which are in the nature determinable, were not

specifically enforceable. The word ‘revocable’ as used in

Special Civil Petition (C) Nos. 29405-29406 of 2017 Page 59 of 96

Clause (d) of Section 21 of the Specific Relief Act, 1877 was

replaced by the word ‘determinable’. The rationale for

excluding such contracts, which are in their nature

determinable, from the ambit of those contracts which may

be specifically enforced, is apparent. There would be little

purpose in granting the relief of specific performance of a

contract, which the parties were entitled to terminate or

otherwise determine. The relief of specific performance is an

equitable relief. It is founded on the principle that the parties

to a contract must be entitled to the benefits from the

contracts entered into by them. However, if the terms or the

nature of that contract entitles the parties to terminate the

contract, there would be little purpose in directing specific

performance of that contract. Plainly, no such relief can be

granted in equity.

⁠79. Viewed in the aforesaid perspective, it is at once

apparent that the contract is in its nature determinable if

the same can be terminated or its specific performance can

be avoided by the parties. Thus, contracts that can be

terminated by the parties at will or are in respect of

relationships, which either party can terminate; would be

contracts that in their nature are determinable. If a party

can repudiate the contract at its will, it is obvious that the

same cannot be enforced against the said party.

80. However, if a party cannot terminate the contract as

long as the other party is willing to perform its obligations,

the contract cannot be considered as determinable and it

would, in equity, be liable to be enforced against a party

that fails to perform the same. Almost all contracts can be

terminated by a party if the other party fails to perform its

obligations. Such a contract cannot be stated to be

determinable solely because it can be terminated by a party

if the other ⁠party is in breach of its obligations. The party

who is not in default would, in equity, be entitled to seek

Special Civil Petition (C) Nos. 29405-29406 of 2017 Page 60 of 96

performance of that contract. In such cases, it cannot be an

answer to the non-defaulting party's claim that the other

party could avoid the contract of the party seeking specific

performance, had breached the contract; therefore, the

same is not specifically enforceable. Thus, the question

whether a contract is in its nature determinable, must be

answered by ascertaining whether the party against whom

it is sought to be enforced would otherwise have the right to

terminate or determine the contract even though the other

party are ready and willing to perform the contract and are

not in default.

81. The contention advanced on behalf of Indiabulls that the

ATS is in its nature determinable as Indiabulls could

terminate it on failure of ⁠the other parties to perform their

obligations is, plainly, unmerited. This contention is

premised on the basis that Indiabulls is correct in its

assumption that the other parties had breached the terms

of their obligation. Concededly, if the other parties were

ready and willing to fully perform their obligations,

Indiabulls would not have any recourse to the termination

clause. Such recourse is contingent on the failure of the

other parties to perform the contract. It cannot be stated that

the contract by its very nature is not specifically enforceable

because it entitles a party to terminate the contract if the

other parties have failed to perform their obligations.

xxx xxx xxx

94. The question whether the contract by its very nature is

determinable is required to be answered by ascertaining the

nature of the contract. Contracts of agency, partnerships,

contracts to provide service, employment contracts,

contracts of personal service, contracts where the

standards of performance are subjective, contracts that

require a high degree of supervision to enforce, and

Special Civil Petition (C) Nos. 29405-29406 of 2017 Page 61 of 96

contracts in perpetuity are, subject to exceptions, in their

nature determinable. These contracts can be terminated by

either party by a reasonable notice.

(Emphasis Supplied)

50. In Affordable Infrastructure & Housing Projects (P) Ltd. v.

Segrow Bio Technics India (P) Ltd., reported 2022 SCC OnLine Del

4436, the lease deed provided for a termination clause. Under the

termination clause, the respondent had an option to terminate the

lease deed by serving a 15 days’ written notice in case the petitioner

failed to make the payment for two consecutive months. The Delhi

High Court on the strength of DLF Home (supra) observed that almost

all contracts can be terminated by a party, if the other party fails to

perform its obligations and that such contracts cannot be stated to be

determinable solely because it can be terminated by a party if the

other party is in breach of an obligation. The non-defaulting party

would in equity be entitled to seek performance of that contract. The

court held that the question whether a contract is in its nature

determinable must be answered by ascertaining whether the party

against whom it is sought to be enforced would otherwise have a right

to terminate or determine the contract even though the other party is

ready and willing to perform the contract and is not in default. The

relevant observation is as under:

“37. The law as stated above mandates against grant of

stay against Termination Notice in respect of the Contracts

which are determinable. The petitioner has relied upon DLF

Home Developers Limited v. Shipra Estate Limited, (2022)

286 DLT 100, wherein it was observed that a party cannot

terminate the Contract so long as the other party is willing

Special Civil Petition (C) Nos. 29405-29406 of 2017 Page 62 of 96

to perform its obligations. The Contract cannot be

considered as determinable as it would in equity be liable

to be enforced against a party that fails to perform the same.

Almost all Contracts can be terminated by a party, if the

other party fails to perform its obligations. Such a Contract

cannot be stated to be determinable solely because it can

be terminated by a party if the other party is in breach of

the obligations. The party who is not in default would in

equity be entitled to seek performance of that Contract. In

such cases, it cannot be an answer to a non-defaulting

party's claim that the other party could avoid the Contract

of the party seeking specific performance and the same is

not specifically enforceable. Thus, the question whether the

Contract is in its nature determinable must be answered by

ascertaining whether the party against whom it is sought to

be enforced would otherwise have a right to terminate or

determine the Contract even though the other party is ready

and willing to perform the Contract and is not in default.”

(Emphasis Supplied)

51. The Bombay High Court in Kheoni Ventures (P) Ltd. v. Rozeus

Airport Retail Ltd., reported in 2024 SCC OnLine Bom 773 , also

observed that in order to arrive at a conclusion whether a contract is

determinable or not, it is to be ascertained whether the parties have a

right to terminate it on their own, without the stipulation of any

contingency and without assigning any reason. The relevant

observation is as under:

“11. In order to infer whether a contract is determinable or

otherwise, it is to be ascertained, whether the parties have

a right to terminate it on their own, without stipulation of

any contingency and without assigning any reason. An

inherently determinable contract would permit either party

Special Civil Petition (C) Nos. 29405-29406 of 2017 Page 63 of 96

to terminate it without assigning any reason and merely by

indicating, that the contract shall come to an end, either by

giving a notice for specified period, if stipulated or even

without such a notice.”

(Emphasis Supplied)

52. Having discussed the law on unilateral termination vis-a-vis

determinable contracts as above, we now advert to the facts of the

present matter. The existence of the ATS executed between the

original vendors and the original vendees is not in dispute. The

question that falls for our consideration is with respect to the

requirement of seeking a declaration from the court as regards the

legality and validity of the purported termination of the said ATS by

the notice of termination dated 10.03.2003 issued by the original

vendors. It may not be out of place to state at this stage that the ATS

in question does not contain any clause enumerating the events of

default under which the ATS could be terminated. Nor is it the case of

the parties that time was made the essence of contract. In fact, the

Trial Court has already gone into this issue and held that the terms

of the ATS did not reflect any intention to make time the essence of

the contract as no specific date for execution of the sale deed is to be

found in the ATS. Clause 7 of the ATS clearly provides that upon

change of entries in the record of rights from new tenure to old tenure,

the sale deed would be executed. Clause 11 further provides that it

was for the original vendors to intimate the original vendees upon

completion of the work of sub -division, survey, and fixation of

boundary of the subject land, and only thereafter the sale deed was to

be executed within one month of such intimation. Thus, the execution

of the sale deed was pegged not to a fixed date but t o future

Special Civil Petition (C) Nos. 29405-29406 of 2017 Page 64 of 96

contingencies dependent upon the acts of the original vendors

themselves. There is nothing on record to indicate that the original

vendors had performed their part of the obligation by informing the

original vendees about the completion of the work of sub-division,

survey, and fixation of boundary of the subject land.

53. Despite such stipulations, the original vendors issued the notice of

termination dated 10.03.2003 upon the original vendees purporting

to terminate the ATS on two grounds, namely, (i) the pendency of

Original Suit No. 30 of 2001 and the order of status quo therein, and

(ii) the death of one of the original vendors, i.e. Late Smt. Godavari @

Mahalaxmi Kulkarni. The notice also called upon the original vendees

to take back the earnest money paid and to treat the ATS as cancelled

within one month, failing which the ATS would be deemed to have

been cancelled and the original vendors would be at liberty to deal

with the land.

54. We have given our thoughtful consideration to the reasons so assigned

in the notice of termination. We find it difficult to accept that either of

the grounds could constitute a valid basis for terminating the ATS.

The pendency of a civil suit and an order of status quo therein cannot

by itself frustrate the ATS. At the highest, the performance of the ATS

could have stood suspended pending the disposal of the said

proceedings. Since the original vendees had no role to play in the

institution or continuance of the Original Suit No. 30 of 2001, they

could not have been made to suffer the consequences of a litigation to

which they were complete strangers. Likewise, the death of one of the

original vendors did not and could not have absolved the other

Special Civil Petition (C) Nos. 29405-29406 of 2017 Page 65 of 96

remaining vendors of their obligations. The legal heirs could have very

well stepped into the shoes of the deceased vendor and performed the

contract. The reasons assigned, therefore, appears not only tenuous

but also wholly extraneous to the obligations of the original vendors.

It is also pertinent to note that the original vendees immediately

responded to the notice of termination by way of their detailed reply

dated 21.03.2003. In the said reply, the original vendees categorically

denied the validity of the termination and refuted the grounds stated

therein. In the reply, the original vendees asserted that they had

already performed their obligations by making substantial payments

of Rs. 8,12,500/- out of the total sale consideration of Rs. 26,95,501/-

, by getting the land surveyed, measured, boundaries fixed, and the

tenure converted on the original vendors’ behalf. The original vendees

also asserted that the performance of ATS was only suspended by

virtue of the status quo order which could not have rendered the ATS

impossible of performance and that the death of one of the vendors

did not in law affect the enforceability, and thus, the ATS remained

subsisting. They further made it clear that in such circumstances

there was no question of refund of earnest money at all.

55. Despite such a categorical stance of the original vendees, no response

was sent by the original vendors to further assign reasons or

substantiate the termination. The original vendors chose to remain

silent, content to live off their unilateral notice without taking the

termination to its logical conclusion. This conduct on the part of the

original vendors cannot be countenanced as a bona fide exercise. We

are of the firm view that the ATS being non-determinable in nature (as

discussed below), no unilateral expression of termination could have

Special Civil Petition (C) Nos. 29405-29406 of 2017 Page 66 of 96

lawfully extinguished the obligations undertaken thereunder. What

emerges from the record is that the grounds cited in the notice of

termination were pressed into service more as a matter of convenience

to the original vendors rather than as a consequence of any breach or

failure attributable to the original vendees. The pendency of an earlier

suit and the death of one of the vendors were circumstances wholly

extraneous to the performance of the ATS and incapable in themselves

of furnishing a lawful foundation for termination. Such grounds

merely afforded a convenient pretext to the original vendors to disown

their obligations. We are of the firm view that the law ought not be

read in a manner to permit the original vendors to invoke convenience

as a cloak for such unilateral cancellation of the ATS.

56. It is further significant to note that in the notice of termination dated

10.03.2003, the original vendors purported to call upon the original

vendees to “take back” the earnest money and other amounts already

paid under the ATS. However, the record reveals that even after

issuance of the said notice and despite original vendees having

immediately repudiated the termination of ATS through their reply

dated 21.03.2003, no steps whatsoever were taken by the original

vendors to actually effectuate the refund. No draft, cheque, or any

other mode of repayment was tendered at any point of time. In

substance, therefore, the recital in the notice asking the original

vendees to “take back” the money was nothing more than an empty

formality, bereft of any real intent to restore the parties to their

respective original positions. This conduct of the original vendors

assumes significance for more than one reason. First, none of the

clauses of the ATS empowered the original vendors to either terminate

Special Civil Petition (C) Nos. 29405-29406 of 2017 Page 67 of 96

the agreement unilaterally or to forfeit the earnest money. Secondly,

if the original vendors were genuinely desirous of putting an end to

the ATS, the natural and necessary corollary of such termination

would have been to refund the amounts received without casting upon

the original vendees the burden of physically claiming or taking back

what was rightfully theirs. It appears from the conduct of the original

vendors that by seeking to shift the burden in this manner, the

original vendors sought to cloak their inaction and conveniently get

rid of themselves of the obligations flowing from the ATS, while

continuing to retain the monies that had been paid towards part

performance of the ATS by the original vendees. Termination, if at all

validly effected, requires both relinquishment of rights under the

contract and restitution of benefits already received. In failing to

refund the earnest money, the original vendors not only acted

contrary to the terms of the ATS which contained no clause of

forfeiture but also demonstrated the lack of bona fide intention to

truly rescind the agreement. If indeed the original vendors were

assiduous in their attempt to bring the ATS to an end, in principle

they should have approached a competent court to seek a declaration

as to the termination of contract as observed by various precedents

as above-mentioned.

57. We are of the view, having regard to the peculiar and distinguishable

facts of the present case, that the decisions of this Court in I.S.

Sikander (supra) and Sangita Sinha (supra) would not be of any

help to the subsequent purchasers as both of them are

distinguishable as far as the present case is concerned.

Special Civil Petition (C) Nos. 29405-29406 of 2017 Page 68 of 96

58. The reliance placed by the subsequent purchasers upon the decision

of this Court in I.S. Sikandar (supra), in our considered view, is

wholly misconceived. The factual foundation of I.S. Sikandar (supra)

was materially distinct from the circumstances of the present case

and therefore, the ratio thereof cannot be invoked to the aid of the

subsequent purchasers herein. In I.S. Sikandar (supra), the

purchaser had defaulted in performing his part of the contract despite

being afforded multiple opportunities by the vendors. The vendors

therein had, by way of a legal notice, specifically called upon the

purchaser to tender the balance sale consideration and complete the

execution of the sale deed within a stipulated period. Upon the

purchaser’s failure to comply, the vendors further extended the time,

coupled with a caveat that if the purchaser did not perform his

obligations by the extended date, the agreement would stand

terminated. It was only after the purchaser again defaulted, despite

such repeated opportunities, that the vendors terminated the

agreement. In such circumstances, this Court held that the purchaser

could not maintain a suit for specific performance without first

seeking a declaration that the termination was invalid, since by his

own conduct he had allowed the agreement to become determinable

and its termination was rooted in his own breach. However, the

present case stands on an entirely different footing. The alleged

termination was not preceded by any call upon the original vendees

to perform their obligations nor was any opportunity granted to the

original vendees to tender the balance sale consideration or secure

execution of the sale deed. On the contrary, the original vendors

sought to terminate the ATS citing reasons entirely extraneous to the

performance of the original vendees. In I.S. Sikandar (supra), the

Special Civil Petition (C) Nos. 29405-29406 of 2017 Page 69 of 96

termination was an outcome of the purchaser’s repeated failure to

perform his contractual obligations despite reminders and extensions,

thereby rendering the agreement determinable. In contrast, the

termination in the present case was a unilateral act of convenience on

the part of the original vendors unconnected with any default on the

part of the original vendees in the performance of ATS. This unilateral

termination was effected without any preceding notice, without

opportunity to the original vendees of further performance, and

without refund of earnest money.

59. Further, the decision in Sangita Sinha (supra) is also distinguishable

for in that case this Court held the suit for specific performance to be

not maintainable owing to the absence of a declaratory relief, since

the vendee’s act of encashing the demand drafts amounted to

acceptance of the vendor’s repudiation and having no readiness and

willingness to perform the contract, thereby effectively cancelling the

agreement to sell, whereas, in the present case, the termination was

effected by the original vendors despite the readiness and willingness

of original vendees, which we shall discuss below, and despite the fact

that no part of the earnest money or any further sums paid by the

original vendees was ever refunded by the original vendors while

terminating the ATS.

60. In fact, as explained in Brahm Dutt (supra), the unilateral

cancellation of an agreement to sell is impermissible except where the

agreement is determinable within the meaning of Section 14 of the Act

of 1963. This principle now stands affirmed by this Court also in

Special Civil Petition (C) Nos. 29405-29406 of 2017 Page 70 of 96

Brahm Dutt (supra), Balwinder Sarpal (supra) and S.K.

Ravichandran (supra) respectively.

61. In view of the above discussion, it is as clear as a noon day that as far

as the facts of present case are concerned, the notice of termination

dated 10.03.2003 was nothing but a unilateral act of repudiation by

the original vendors. As discussed above, the ATS contained no clause

permitting termination in the circumstances cited. The reasons relied

upon by the original vendors for termination were matters over which

the original vendees had no control. Further, the act of the original

vendors merely asking the original vendees to “take back” the monies

paid, while never actually refunding it, reinstates that the alleged

termination was not genuine on their part but rather a device of

convenience to escape their contractual obligations under the ATS.

Moreover, there is no evidence on record to indicate that the original

vendors ever called upon the original vendees to perform their part of

the contract prior to such termination. In view of all that is stated

above, the termination of ATS vide notice of termination dated

10.03.2003 was not only unilateral but also not bona fide and cannot

be sustained. Once such termination is found to be invalid, what next

follows is that the ATS continues to remain alive, subsisting, and

executable. Further, as the law subsists, once the alleged termination

of agreement in question is found to be not bona fide and being done

in a unilateral manner, no declaration challenging the alleged

termination is required.

62. Since in principle unilateral termination of the contract is

impermissible except where the agreement is determinable within the

Special Civil Petition (C) Nos. 29405-29406 of 2017 Page 71 of 96

meaning of Section 14 of Act of 1963, it also becomes necessary, at

this juncture, to examine whether the ATS dated 28.04.2000 was in

its nature determinable. This question requires to be answered on a

scrutiny of the terms of the ATS and the nature of the rights and

obligations flowing therefrom.

63. On perusal of the clauses of the ATS, it becomes clear that none of

the terms thereof conferred upon either party any right to unilaterally

terminate or rescind the contract, whether for cause, for convenience,

or on the happening of any contingency. The scheme of the contract,

as discernible from its clauses, particularly clauses 7 and 11

respectively, indicate that the execution of the sale deed was made

conditional upon the fulfilment of certain antecedent events, namely,

the conversion of the subject land from new tenure to old tenure and

the completion of the work of sub-division. Clause 7 of the ATS

contemplated that upon change of entries in the record of rights from

new tenure to old tenure, the sale deed would be executed whereas

clause 11 provided that it was for the original vendors to intimate the

original vendees about the completion of the work of sub-division,

survey, and fixation of boundary of the subject land, and only

thereafter the sale deed was to be executed within one month of such

intimation. It is therefore clear that the ATS was not a contract

conferring any right upon either party to bring it to an end at will. Its

life and performance were tethered to the completion of certain

obligations. None of the clauses of the ATS envisaged that the same

could be terminated on any cause or no-cause basis, much less that

the original vendors could retain the amounts already paid by the

original vendees.

Special Civil Petition (C) Nos. 29405-29406 of 2017 Page 72 of 96

64. In this backdrop, it would be useful to advert to the classification set

out in A. Murugan (supra), wherein the Madras High Court

categorised contracts into five broad classes depending on their ease

of determinability. Out of those, the first two i.e., (i) contracts

inherently revocable such as licences and partnerships at will, and (ii)

contracts terminable unilaterally on a “without-cause” basis, were

held to be determinable in nature. The remaining classes, namely, (iii)

contracts terminable for cause w ithout provision for cure, (iv)

contracts terminable for cause with notice and opportunity to cure,

and (v) contracts without a termination clause but terminable only for

breach of a condition, were all held not determinable in nature.

65. Further, as laid down in DLF Home (supra), the question whether a

contract is in its nature determinable lies in ascertaining whether the

party against whom specific performance is sought has the right to

terminate the contract even when the other party is ready and willing

to perform. This means if the contract cannot be terminated so long

as the other party stands willing to perform, it is not determinable in

its nature and would, in equity, be specifically enforceable. The same

reasoning was followed in Affordable Infrastructure (supra), where

it was held that a contract terminable for breach cannot merely for

that reason be regarded as determinable, otherwise, no contract could

ever be specifically enforced.

66. Applying these principles, the ATS in the present case cannot be said

to be a determinable contract. Viewed in light of the classification as

set out in A. Murugan (supra), the ATS would squarely fall within

Special Civil Petition (C) Nos. 29405-29406 of 2017 Page 73 of 96

category (v) as mentioned above. The ATS was devoid of any clause

enabling termination for convenience or otherwise empowering either

party to terminate unilaterally. The only conceivable circumstance in

which ATS could be brought to an end in the present case was upon

a breach of a condition by either of the parties. Thus, the original

vendors did not possess any contractual right to terminate the ATS in

the absence of default by the original vendees. The grounds cited in

the notice of termination dated 10.03.2003, namely, the subsistence

of a status quo order and the death of one of the original vendors

cannot be said to be based on any default or breach by the original

vendees. The original vendees had performed their part by paying a

substantial amount and were also ready and willing to perform the

terms of ATS.

(II). Bona fides of the subsequent purchasers in purchasing the

subject land

67. The counsel for subsequent purchasers submitted that appellants /

subsequent purchasers are bona fide purchasers of the subject land

for value without the notice of the prior ATS. It is the case of the

subsequent purchasers that they made bona fide enquires about the

title of the original vendors and all other particulars that they could

enquire upon. The case of the subsequent purchasers before the Trial

Court and High Court respectively was that they had purchased the

subject land on the information and instructions furnished by the

original vendors wherein the subsequent purchasers were informed

that the original vendors had a clear and alienable title on the subject

land and that the ATS executed in favour of the original vendees had

Special Civil Petition (C) Nos. 29405-29406 of 2017 Page 74 of 96

been terminated by the original vendors by issuing the notice of

termination dated 10.03.2003. The subsequent purchasers have

admitted that they were made aware of the termination of the ATS by

the original vendors and were handed over a copy of the notice of

termination by the original vendors prior to their purchase of the

subject land. It is also the case of the subsequent purchasers that

they had verified the documents of title of the original vendors and

had also ascertained that the Original Suit No. 30 of 2001 had been

withdrawn and the status quo order has come to an end due to such

withdrawal. The subsequent purchasers have further submitted that

from the date of execution of sale deeds dated 20.02.2007 and

02.03.2007 executed by the original vendors in their favour, they are

in physical possession of the subject land and their names have been

mutated in the revenue records.

68. In such circumstances referred to above, the subsequent purchasers

are seeking to bring themselves within the status of a bona fide

purchaser under Section 19(b) of the Act of 1963. Section 19 provides

for the categories of persons against whom specific performance of a

contract may be enforced. Amidst all, Clause (b) of Section 19 states

that specific performance may be enforced against any other person

claiming under him by a title arising subsequently to the contract

except a transferee for value who has paid his money in good faith

and without notice of the original contract. Thus, a transferee for

value who has paid his money in good faith and without notice of the

original contract is excluded from the purview of the said clause. In

the case of Ram Niwas v. Bano, reported in (2000) 6 SCC 685, this

Court had set out three factors that a subsequent transferee must

Special Civil Petition (C) Nos. 29405-29406 of 2017 Page 75 of 96

show to fall within the excluded class: (a) he has purchased for value

the property, which is the subject matter of the suit for specific

performance; (b) he has paid his money to the vendor in good faith;

and (c) he had no notice of the earlier contract for sale specific

performance of which is sought to be enforced against him. The court

observed that “notice” can be (i) actual notice or (ii) constructive notice,

or (iii) imputed notice. As per Section 3 of Transfer of Property Act,

1882, a person is said to have notice of a fact when he actually knows

that fact or when but for wilful abstention from inquiry or search

which he ought to have made, or gross negligence, he would have

known it. The relevant observation is as under:

“3. Section 19 provides the categories of persons against

whom specific performance of a contract may be enforced.

Among them is included, under clause (b), any transferee

claiming under the vendor by a title arising subsequently to

the contract of which specific performance is sought.

However, a transferee for value, who has paid his money in

good faith and without notice of the original contract, is

excluded from the purview of the said clause. To fall within

the excluded class, a transferee must show that: (a) he has

purchased for value the property (which is the subject-

matter of the suit for specific performance of the contract);

(b) he has paid his money to the vendor in good faith; and

(c) he had no notice of the earlier contract for sale (specific

performance of which is sought to be enforced against him).

4. The said provision is based on the principle of English

law which fixes priority between a legal right and an

equitable right. If 'A' purchases any property from 'B' and

thereafter 'B' sells the same to 'C' the sale in favour of 'A',

being prior in time, prevails over the sale in favour of 'C' as

Special Civil Petition (C) Nos. 29405-29406 of 2017 Page 76 of 96

both 'A' and 'C' acquired legal rights. But where one is a

legal right and the other is an equitable right

"a bona fide purchaser for valuable consideration who

obtains a legal estate at the time of his purchase without

notice of a prior equitable right is entitled to priority in

equity as well as at law". (Snell's Equity — 13th Edn., p.

48.)

This principle is embodied in Section 19(b) of the Specific

Relief Act.

5. It may be noted here that "notice" may be (i) actual, (ii)

constructive, or (iii) imputed.”

(Emphasis Supplied)

69. Similarly, in Durg Singh v. Mahesh Singh , reported in 2004 SCC

OnLine MP 9, the Madhya Pradesh High Court had observed that

there are two factors that are necessary for the adjudication of suit for

specific performance of the contract where the subject matter property

has been sold to a subsequent purchaser: (i) that whether the plaintiff

remained always ready and willing to perform his part of the contract

to purchase the suit property and the readiness and willingness should

exist till the date of the passing of the decree, and (ii) that whether

subsequent transferee was having prior knowledge of the earlier

agreement executed in favour plaintiff. Both these factors need to have

nexus with the facts of each case and conduct of parties. The relevant

observation is as under:

“11. In a suit of specific performance of the contract where

the property in dispute has been sold to the subsequent

purchaser, two things are necessary for the adjudication,

they are; (i) that whether the plaintiff remained always

ready and willing to perform his part of the contract to

Special Civil Petition (C) Nos. 29405-29406 of 2017 Page 77 of 96

purchase the suit property and the readiness and

willingness should exist till the date of the passing of the

decree; and (ii) whether the subsequent transferee was

haying prior knowledge of the earlier agreement executed

in favour of plaintiff. In other words, we may say that if

plaintiff fails to plead and prove by his conduct the

readiness and willingness to purchase the suit property and

if the subsequent purchaser was a bona fide purchaser

without prior notice of the original contract who had paid the

value of the suit property to the vendor, the suit of specific

performance cannot be decreed. Both these essential

ingredients are having nexus with the facts of each case as

well as the conduct of the parties of that case. No straight-

jacket formula can be framed in this regard and each case

should be tested on the touchstone of its own facts and

circumstances coupled with the evidence. Thus, I shall now

examine the present case in that regard.”

(Emphasis Supplied)

70. The expression “wilful abstention from inquiry or search” recalls the

expression used by Sir James Wigram VC in the case of Jones v.

Smith, reported in (1841) 1 Hare 43, wherein the High Court of

Chancery of England & Wales had held that constructive notice is

basically a manifestation of equity which treats a man who ought to

have known a fact, as if he had actually known it. The court noted

that:

“It is, indeed, scarcely possible to declare a priori what shall

be deemed constructive notice, because, unquestionably,

that which would not affect one man may be abundantly

sufficient to affect another. But I believe, I may, with

sufficient accuracy for my present purpose and without

Special Civil Petition (C) Nos. 29405-29406 of 2017 Page 78 of 96

danger assert that the cases in which constructive notice

has been established resolve themselves in two classes:

First, cases in which the party charged has had actual

notice that the property in dispute was in fact charged,

encumbered or in some way affected, and the court has

thereupon bound him with constructive notice of facts and

instruments, to a knowledge of which he would have been

(sic) led by an enquiry after the charge, encumbrance or

other circumstances affecting the property of which he had

actual notice; and secondly, cases in which the court has

been satisfied from the evidence before it that the party

charged had designedly abstained from enquiry for the very

purpose of avoiding notice [...]”

(Emphasis Supplied)

71. Similar to the importance of the term “notice” used in Section 19(b) of

the Act of 1963, the term “good faith” which is also used in Section

19(b) is equally important. The term “good faith” is defined in Section

3(22) of the General Clauses Act, 1897 (for short, “GC Act”) as well as

Section 2(11) of the Bhartiya Nyaya Sanhita, 2023 (for short, “BNS”).

Section 3(22) of GC Act defines “good faith” is defined in the following

terms:

“3(22). A thing shall be deemed to be done in good faith

where it is in fact done honestly whether it is done

negligently or not.”

72. Section 2(11) of the BNS defines “good faith” in the following terms:

Special Civil Petition (C) Nos. 29405-29406 of 2017 Page 79 of 96

“2(11). “Good faith - Nothing is said to be done or believed

in “good faith” which is done or believed without due care

and attention”

73. Therefore, in order to come to a conclusion that an act was done in

good faith it must have been done with (i) due care and attention, and

(ii) there should not be any dishonesty. This Court recently in case of

Manjit Singh v. Darshana Devi , reported in 2024 SCC OnLine

3431, wherein one of us, J.B. Pardiwala, J., forming a part of the

Bench, construed the usage of the term “good faith” under Section

19(b) of the Act of 1963 in the above sense and held that each of the

abovementioned aspects is a complement to the other and not an

exclusion of the other. This Court observed that the definition of the

BNS emphasizes due care and attention whereas the definition of the

GC Act emphasizes honesty. The relevant observation is as under:

“13. Section 3(2) of the General Clauses Act defines ‘good

faith’ as follows:—

3(22). A thing shall be deemed to be done in good faith

where it is in fact done honestly whether it is done

negligently or not.

14. Section 2(11) of the Bhartiya Nyaya Sanhita, 2023

defines “good faith”, as follows:—

2(11). “Good faith- Nothing is said to be done or

believed in “good faith” which is done or believed

without due care and attention;

15. The abovesaid definitions and the meaning of the term

‘good faith” indicate that in order to come to a conclusion

Special Civil Petition (C) Nos. 29405-29406 of 2017 Page 80 of 96

that an act was done in good faith it must have been done

with due care and attention and there should not be any

negligence or dishonesty. Each aspect is a complement to

the other and not an exclusion of the other. The definition of

the Penal Code, 1860 emphasises due care and attention

whereas General Clauses Act emphasises honesty.

16. The effect of abstention on the part of a subsequent

purchaser, to make enquiries with regard to the possession

of a tenant, was considered in Ram Niwas v. Bano, (2000)

6 SCC 685 […]

17. In the case reported in Kailas Sizing, Works v.

Municipality, B. & N., reported in 1968 Bombay Law

Reporter 554, the Bombay High Court observed as

follows:—

A person cannot be said to act honestly unless he acts

with fairness and uprightness. A person who acts in a

particular manner in the discharge of his duties in spite

of the knowledge and consciousness that injury to

someone or group of persons is likely to result from his

act or omission or acts with wanton or wilful negligence

in spite of such knowledge or consciousness cannot be

said to act with fairness or uprightness and, therefore,

he cannot be said to act with honesty or in good faith.

Whether in a particular case a person acted with

honesty or not will depend on the facts of each case.

Good faith implies upright mental attitude and clear

conscience. It contemplates an honest effort to

ascertain the facts upon which the exercise of the

power must rest. It is an honest determination from

ascertained facts. Good faith precludes pretence, deceit

or lack of fairness and uprightness and also precludes

wanton or wilful negligence.”

(Emphasis Supplied)

Special Civil Petition (C) Nos. 29405-29406 of 2017 Page 81 of 96

74. This aspect also deserves a reference to the case of Jammula Rama

Rao v. Merla Krishnaveni, reported in 2002 SCC OnLine AP 646 ,

wherein the Andhra Pradesh High Court while holding that honesty is

the essential condition in ‘good faith’ observed that when subsequent

purchasers were informed about the existence of the agreement in

favour of the prior vendee, then the subsequent purchasers should

have made enquiries from the prior vendee to satisfy themselves

whether the agreement in favour of prior vendee is only a nominal one

as alleged by the vendors. The court held that the failure on the part

of the subsequent purchasers in not conducting such an enquiry with

the prior vendee would render them susceptible to the complaint that

subsequent purchasers had not acted honestly and in good faith. The

relevant observation is as under:

“7. In view of the language employed in Sec. 19(b) of Specific

Relief Act, the subsequent purchaser has to establish that

he paid money in good faith, without notice of the original

contract. Since ‘good faith’ is not defined in Specific Relief

Act, its meaning has to be understood from the definition of

‘good faith’ in General Clauses Act, 1897, Sub-sec. 22 of

Sec. 3 of General Clauses Act, defined ‘good faith’ as “a

thing shall be deemed to be done in ‘good faith’ if it is done

honestly”. So, honesty is the essential condition in ‘good

faith’. When appellants, were informed about the existence

of the suit agreement in favour of the 1st respondent,

appellants should have made enquiries from the 1st

respondent to satisfy themselves whether the agreement in

favour of 1st respondent is only a nominal one, as alleged

by respondents 2 to 5. If they have not done so, it cannot be

said that they acted honestly, and consequently it cannot

be said that appellants acted in good faith.”

Special Civil Petition (C) Nos. 29405-29406 of 2017 Page 82 of 96

(Emphasis Supplied)

75. At the outset, it must be noted that the subsequent purchasers have

themselves admitted that prior to their purchase they were handed

over a copy of the notice of termination dated 10.03.2003 by the

original vendors and were also specifically informed that the ATS

stood terminated by virtue of the said notice. This single fact is of

decisive importance. The said notice of termination in the present case

is not a peripheral document, rather, it is a self-contained recital of

the very material terms of the contract. The said notice of termination

makes a clear reference to the fact of existing ATS dated 28.04.2004

and the material terms agreed therein including but not limited to the

description of subject land, area of the subject land agreed to be sold,

sale consideration, payment of earnest money and payment stages

thereafter, and names and residential addresses of the original

vendees. Thus, by their own admission, the subsequent purchasers

were put in possession of all material particulars of the ATS. Having

been confronted with a document of this character, no prudent

purchaser acting in good faith could have remained passive. The

subsequent purchasers had at their disposal clear and concrete

means to demand from the original vendors a copy of the ATS itself or

at the very least verify from the original vendees the correctness of the

assertions contained in the notice of termination, however, the

subsequent purchasers chose not to pursue either course.

76. Further, the operative portion of the notice of termination itself ought

to have aroused curiosity in the mind of any bona fide purchaser. The

said notice did not state that the ATS stood terminated on 10.03.2003.

Special Civil Petition (C) Nos. 29405-29406 of 2017 Page 83 of 96

Instead, in the notice of termination, the original vendees were called

upon by the original vendors to “take back” their earnest money

within a period of one month from the date of the notice of termination

and upon their failure to take the earnest money back in one month

the ATS would be ‘deemed’ cancelled. The plain implication of this

stipulation is that the ATS did not in fact stand terminated on the date

of notice of termination i.e., 10.03.2003, rather any effective

termination of the ATS would have arose, if at all, only a month later,

that too, in the event of inaction by the original vendees. This aspect

alone should have been a giveaway to the subsequent purchasers

when they came to purchase the subject land in 2007 because a bona

fide purchaser acting with due care and attention would necessarily

have inquired whether the earnest money had in fact been refunded

by the original vendors and accepted by the original vendees with or

without protest, or whether the original vendees had contested the

termination or what had transpired after the period of one month. This

is especially so because the date of notice of termination could not

have been the date of actual termination and deemed termination

would have followed only if no response was afforded by the original

vendees within one month. Had the subsequent purchasers made

such an inquiry, it would have been revealed to them that not only

was no refund ever made by the original vendors but that the original

vendees had immediately repudiated the validity of the termination by

their reply dated 21.03.2003.

77. Moreover, the sequence of events in and around the notice of

termination and the impleadment application filed by the original

vendees in the Original Suit No. 30 of 2001 also carries considerable

Special Civil Petition (C) Nos. 29405-29406 of 2017 Page 84 of 96

weight. The subsequent purchasers have admitted that they had

ascertained that the original vendees had moved an application for

impleadment in the Original Suit No. 30 of 2001 on 02.05.2001 which

came to be dismissed only on 16.03.2005. Significantly, the alleged

termination of the ATS by the original vendors was during this very

interregnum i.e., on 10.03.2003. This sequence of events was

sufficient to raise a suspicion in the mind of any prudent bona fide

purchaser that if the said ATS is said to have been terminated on

10.03.2003 by the original vendors then what were the original

vendees trying to achieve by seeking to implead themselves in the

Original Suit No. 30 of 2001 until 2005. In other words, a reasonable

man, apprised of both these events, would have asked that if the ATS

stood cancelled in 2003 what then were the original vendees still

seeking in the Original Suit No. 30 of 2001 until 2005. This glaring

inconsistency ought to have raised a suspicion. Instead, the

subsequent purchasers ignored everything and confined themselves

to the ipse dixit of the original vendors.

78. The language of the termination notice itself discloses the unilateral

and self-serving character of the so-called termination. A bare reading

of the notice of termination shows that the original vendors had stated

therein that due to the status quo order in effect and the death of one

of the original vendors, they were “unable to execute a regular sale

deed in respect of land in question” and that they “cannot wait for an

indefinite period”. Thus, the original vendors cited their own inability

to execute a sale deed in view of the status quo order operating in the

Original Suit No. 30 of 2001 and the death of one of the original

vendors. Such grounds, as already discussed, were matters of

Special Civil Petition (C) Nos. 29405-29406 of 2017 Page 85 of 96

inconvenience very much personal to the original vendors and not the

breaches attributable to the original vendees. The subsequent

purchasers, upon a bare reading of the said notice of termination,

ought to have made inquiries to ascertain whether the original

vendees had challenged the factum of termination by any subsequent

communication. This was all the more necessary because the

language employed by the original vendors in the notice of termination

itself clearly gave away that what was being asserted was not a

termination arising out of any breach or default attributable to the

original vendees but rather a unilateral act grounded in the original

vendors’ own inability and inconvenience. It is a trite law that a

subsequent purchaser who relies merely on the assertions of the

vendor or who chooses to remain content with his own limited

knowledge while consciously abstaining from making further inquiry

into the subsisting interests in the property cannot escape the

consequences of deemed notice. Equity ought not assist a transferee

who deliberately avoids the truth that lies open to discovery. Thus, a

purchaser who has before him a document which on its very face

shows the termination to be unilateral and rooted in the vendors’

inconvenience cannot by shutting his eyes claim the benefit of “good

faith”.

79. Even more significant is the fact that the subsequent purchasers had

sufficient means to unearth the prudent queries as the same notice of

termination that subsequent purchasers have gone through provided

all means to them to contact the original vendees. This is because the

notice of termination itself provided the names and addresses of all

the original vendees. Thus, the subsequent purchasers had in their

Special Civil Petition (C) Nos. 29405-29406 of 2017 Page 86 of 96

hands the most direct and reliable means of verifying the truth of the

assertions made by the original vendors. They could, with little effort,

have contacted the original vendees to ascertain whether the ATS had

indeed been terminated or whether any amount had been refunded.

Their deliberate abstention from this inquiry despite having the means

readily available cannot be dismissed as mere oversight. It would

constitute in the words of Sir James Wigram VC “designed abstention

for the very purpose of avoiding notice”.

80. The law as stated above is unequivocal on this point. In Ram Niwas

(supra), this Court laid down that to claim protection under Section

19(b) of the Act of 1963, the purchaser must show three things: (a)

purchase for value, (b) payment in good faith, and (c) absence of notice

of the earlier contract. “Notice”, it was emphasized, includes not

merely actual knowledge but also constructive and imputed

knowledge. In Durg Singh (supra), the Madhya Pradesh High Court

reiterated that bona fide purchase depends inter alia on the

purchaser’s knowledge of the prior agreement. In Jammula Rama

Rao (supra), the Andhra Pradesh High Court went further and held

that where subsequent purchasers were aware of the existence of a

prior agreement, their failure to make inquiries from the prior vendees

negated both honesty and good faith.

81. From the discussion as above, what can be deduced is that the

subsequent purchasers had sufficient notice of the facts that an ATS

dated 28.04.2000 existed; the names and addresses of the original

vendees; that an earnest money amounting to Rs. 2,00,000/ - had

been paid by the original vendees to the original vendors; that the

Special Civil Petition (C) Nos. 29405-29406 of 2017 Page 87 of 96

original vendors had sought to terminate the ATS due to their inability

to execute the sale deed in favour of the original vendees on account

of a status quo order; that the date of actual termination could not

have coincided with the date of notice; and that deemed termination

would have arose only if the original vendees had failed to claim the

earnest money within one month; and that despite the issuance of the

notice of termination in 2003, the original vendees continued to

contest the impleadment application in the Original Suit No. 30 of

2001 until 2005. These circumstances should have reasonably

aroused suspicion or at the very least prompted further inquiry by any

prudent bona fide purchaser. Yet the subsequent purchasers despite

having ample opportunity to become aware of these facts abstained

from making any such inquiries. It is therefore beyond cavil that the

subsequent purchasers cannot take shelter under Section 19(b) of the

Act of 1963. Far from showing honesty and due care, their conduct

reveals studied indifference to facts which were staring them in the

face.

(III). Readiness and willingness of the Original Vendees to perform the

ATS

82. Section 16(c) of the Act of 1963 requires that a plaintiff must both

plead and prove that he has either performed, or has always been

ready and willing to perform, the essential terms of the contract

incumbent upon him. It is now a settled law that a party seeking

enforcement of a contract must establish that all conditions precedent

have been satisfied, and that he has either discharged or stood

prepared and willing to discharge his obligations under the contract.

Special Civil Petition (C) Nos. 29405-29406 of 2017 Page 88 of 96

The expressions “ready” and “willing” under Section 16(c) carry

distinct connotations. In JP Builders v. A. Ramadas Rao , reported

in (2011) 1 SCC 429, this Court clarified this distinction, holding that

“readiness” relates to the plaintiff’s capacity to perform the contract,

including his financial ability to pay the consideration, whereas

“willingness” is demonstrated through the plaintiff’s conduct,

evidencing his genuine intent to perform the contract. The relevant

observation is as under:

“22. The words "ready" and "willing" imply that the person

was prepared to carry out the terms of the contract. The

distinction between "readiness" and "willingness" is that the

former refers to financial capacity and the latter to the

conduct of the plaintiff wanting performance. Generally,

readiness is backed by willingness.

23. In N.P. Thirugnanam v. Dr. R. Jagan Mohan Roo at SCC

para 5, this Court held: (SCC pp. 117-18)

5.... Section 16(c) of the Act envisages that the plaintiff

must plead and prove that he had performed or has

always been ready and willing to perform the essential

terms of the contract which are to be performed by him,

other than those terms the performance of which has

been prevented or waived by the defendant. The

continuous readiness and willingness on the part of the

plaintiff is a condition precedent to grant the relief of

specific performance. This circumstance is material and

relevant and is required to be considered by the court

while granting or refusing to grant the relief. If the

plaintiff fails to either aver or prove the same, he must

fail. To adjudge whether the plaintiff is ready and

willing to perform his part of the contract, the court must

take into consideration the conduct of the plaintiff prior

Special Civil Petition (C) Nos. 29405-29406 of 2017 Page 89 of 96

and subsequent to the filing of the suit along with other

attending circumstances. The amount of consideration

which he has to pay to the defendant must of necessity

be proved to be available. Right from the date of the

execution till date of the decree he must prove that he

is ready and has always been willing to perform his

part of the contract. As stated, the factum of his

readiness and willingness to perform his part of the

contract is to be adjudged with reference to the conduct

of the party and the attending circumstances. The court

may infer from the facts and circumstances whether

the plaintiff was ready and was always ready and

willing to perform his part of the contract."

(Emphasis Supplied)

83. Further, in the case of Satya Jain v. Anis Ahmed Rushdie , reported

in (2013) 8 SCC 131, this Court had further observed that the test of

readiness and willingness would depend on the overall conduct of the

plaintiff both prior to and subsequent to the filing of the suit for

specific performance and such conduct of the plaintiff has to be

viewed in light of the conduct of the defendant. The relevant

observation is as under:

“36. The principles of law on the basis of which the

readiness and willingness of the plaintiff in a suit for

specific performance is to be judged finds an elaborate

enumeration in a recent decision of this Court in J.P.

Builders v. A. Ramadas Rao [(2011) 1 SCC 429: (2011) 1

SCC (Civ) 227]. In the said decision several earlier cases i.e.

R.C. Chandiok v. Chuni Lal Sabharwal [(1970) 3 SCC 140],

N.P. Thirugnanam v. R. Jagan Mohan Rao [(1995) 5 SCC

115] and P. D'Souza v. Shondrilo Naidu [(2004) 6 SCC 649]

have been noticed. To sum up, no straitjacket formula can

Special Civil Petition (C) Nos. 29405-29406 of 2017 Page 90 of 96

be laid down and the test of readiness and willingness of

the plaintiff would depend on his overall conduct i.e. prior

and subsequent to the filing of the suit which has also to be

viewed in the light of the conduct of the defendant. Having

considered the matter in the above perspective we are left

with no doubt whatsoever that in the present case Plaintiff

1 was, at all times, ready and willing to perform his part of

the contract. On the contrary it is the defendant who had

defaulted in the execution of the sale document. The

insistence of the defendant on further payments by the

plaintiff directly to him and not to the Income Tax Authorities

as agreed upon was not at all justified and no blame can be

attributed to the plaintiff for not complying with the said

demand(s) of the defendant.”

(Emphasis Supplied)

84. At the outset, it is significant to note that the Trial Court, upon

examining the peculiar facts of the case and the evidence on record,

held that the original vendees had established their continuous

readiness and willingness to perform the ATS. Relying on this finding

and further satisfying itself that the subsequent purchasers are not

bona fide purchasers, the High Court decreed the suit for specific

performance in favour of the original vendees. The Trial Court

observed that the original vendees had successfully demonstrated: (i)

that the original vendors had undertaken to execute the sale deed

within one month of completing the subdivision work; (ii) that the

original vendors failed to inform the original vendees about the

completion of the subdivision, thereby preventing execution of the sale

deed and payment of the balance consideration; (iii) that the original

vendees had already paid a total sum of Rs. 8,12,500/-, inclusive of

Rs. 2,00,000/- as earnest money; and (iv) that they had, at all material

Special Civil Petition (C) Nos. 29405-29406 of 2017 Page 91 of 96

times, remained ready and willing to perform their obligations under

the contract. The Trial Court’s finding on this issue is as under:

“[…] Ex. P.35 proves that defendants No.1 to 6 have

admitted the contents of Ex. P.31. I perused Ex. P.31 and

35: Ex. P.35 shown that defendants No. 1 to 6 are unable

to execute the sale deed on the ground that OS No.

30/2001 was pending and prohibitory order was passed.

Further proves that one Mahalaxmi (Godavari was died.

These are only two grounds shown for cancellation of

agreement. In Ex. P.35 does not disclose that plaintiffs

have not paid the amount as per the terms of agreement

and further Ex. P.35 does not disclose that defendants No.

1 to 6 have intimated to the plaintiffs as per para No. 11 of

agreement. In para No. 11 of the agreement shown

defendants No. 1 to 6 agreed to intimate to the plaintiffs

after measurement and fixation of boundaries. The para

No.11 of agreement is very relevant to decide the facts in

issue. So, I am of the opinion that defendants have not

intimated to the plaintiffs as per contents of para No. 11 of

Ex. P.31 […]

[…] So I am of the opinion that as peer the contents of Ex.

P.35 there is no refusal on the part of the defendants No. 1

to 6 for execution of sale deed but only shown inability to

execute sale deed on the ground of status quo order. So, I

am of the opinion that plaintiffs successfully to prove that

defendants No. 1, 2, 4, 6 and two others have agreed to

sell suit land for Rs. 26,95,501/- and paid Rs. 2,00,000/-

as earnest money on 28.4.2000. Further plaintiffs

successful to prove defendants No. 1, 2, 4, 6. and others

have agreed to execute sale deed within 1 month after

completion of work of sub division. The plaintiffs claim that

they have paid amount of Rs. 9,45,000/ -. I perused

contents of Ex. P.31, 39 and 47. So documents proves that

plaintiffs have paid sum of Rs. 8, 12,500/-. So plaintiffs

Special Civil Petition (C) Nos. 29405-29406 of 2017 Page 92 of 96

failed to prove that they have paid amount of Rs.

9,45,000/- to the owners. So, I am of the opinion that

plaintiffs successful to prove that they have paid amount

of Rs. 8,12,500/- to the defendants No. 1, 2, 4, deceased

Neelakanthrao and Godavari and others. So plaintiffs

failed to prove that they have paid amount i of Rs.

9,45,000/- and defendants failed to rebut the claim of the

plaintiffs in respect of issues No. 1 to 3. Further plaintiffs

successful to prove that they are ready ever ready and

always ready to perform their part of contract after

disposal of OS No. 30/2001 […]

[…] So, I am of the opinion that defendants: No. 1 to 6 failed

to perform their part of contract and plaintiffs immediately

after disposal of the suit taken steps to perform of their

part of contract and immediately defendants No. 1 to 6

have executed sale deed in favour of the defendants No. 9

to 16 […]”

(Emphasis Supplied)

85. As per the terms of the ATS, the original vendees had agreed to

purchase the subject land for a total sale consideration of Rs.

26,95,501/- out of which the they had already paid an amount of Rs.

2,00,000/- as earnest money to the original vendors. Under Clause 7

of the ATS, the original vendees were required to pay an additional

amount of Rs. 5,00,000/- to the original vendors at the time of

registration of ATS or within two months from the date of execution of

ATS and the balance amount was to be paid at the time of registration

of the sale deed. It was the case of the original vendors in their notice

of termination that the original vendees did not come forward to pay

the said amount of Rs. 5,00,000/- to the original vendors nor did the

original vendees get the ATS registered. The original vendees

vehemently denied the allegation of non-payment of Rs. 5,00,000/- in

Special Civil Petition (C) Nos. 29405-29406 of 2017 Page 93 of 96

its reply. In fact, the receipts of payment to the tune of Rs. 8,12,500/-

were placed on record before the Trial Court and relying on the same

the Trial Court reached the conclusion that payments were made to

the original vendors from time to time to the tune of Rs. 8,12,500/-.

No evidence was adduced by the original vendors to prove that such

amount was not paid or was not accepted by them. In fact, it appears

from the record that the original vendees had assisted the original

vendors in the process of conversion of land and shifting of 19 tenants

to one particular place. The averments made by the original vendees

in their impleadment application in the Original Suit No. 30 of 2001,

and the averments before the Trial Court, the High Court and now

before this Court all show that they were always ready and willing to

pay the balance consideration and execute the sale deed with respect

to the subject land. The conduct of the original vendees, both prior to

and subsequent to the filing of the Original Suit No. 36 of 2007, like

payment of substantial sums, their active assistance to original

vendors in completing the necessary formalities, their categorical

refutation of the termination notice, and their continuous pursuit of

legal remedies, all directs towards the conclusion that they have at all

times remained compliant with the mandate of Section 16(c) of the Act

of 1963. The findings of Trial Court being a finding on facts cannot be

said to be perverse.

86. Accordingly, we find no infirmity in the conclusion reached by the

Trial Court, which after a detailed examination of the evidence, rightly

held that the original vendees had performed their part of the contract

to the extent required, and had consistently been ready and willing to

perform their remaining obligations under the ATS.

Special Civil Petition (C) Nos. 29405-29406 of 2017 Page 94 of 96

87. In such circumstances referred to above, we find no good reason to

re-examine the question of limitation at this stage. The Trial Court,

while deciding the issues as framed had specifically considered

whether the suit for specific performance instituted by the original

vendees was barred by limitation and upon a detailed assessment

returned a finding that the suit was well within the prescribed period.

Significantly, when the subsequent purchasers carried the matter in

appeal before the High Court, no ground of challenge was raised

against the said finding. The subsequent purchasers, having

consciously chosen not to assail the finding on limitation, must be

deemed to have acquiesced therein. Once the finding of the Trial Court

on the question of limitation attained finality, re-agitation of the same

before this Court ought not be entertained. Accordingly, we hold that

the issue of limitation raised by the subsequent purchasers is

untenable and stands concluded against them.

88. In so far as the contention of the subsequent purchasers that since

one of the original vendees i.e., the Respondent No. 14 (defendant no.

8) neither entered appearance before the Trial Court or appeared

before this Court nor contested the relief of specific performance and

that the ATS being indivisible cannot be enforced in the absence of all

parties seeking enforcement is concerned, we see no force in the

argument in as much as the Respondent No. 14 had released and

relinquished his rights and interest under the ATS in favour of the

remaining original vendees i.e., the Respondent Nos. 15 to 22

(plaintiffs) and the Respondent Nos. 1 to 5 (defendant nos. 7)

respectively by executing an agreement dated 28.12.2002. In view of

Special Civil Petition (C) Nos. 29405-29406 of 2017 Page 95 of 96

such relinquishment, the Respondent No. 14 ceased to have any

subsisting claim or obligation under the ATS. Consequently, the right

to seek enforcement validly vested in the remaining vendees, who

alone pursued the remedy of specific performance.

D. CONCLUSION

89. In view of the foregoing, the appeals fail and are hereby dismissed.

90. The Appellants are hereby directed to execute a sale deed in respect

of the subject land in favour of the Respondent Nos. 15 to 22,

respectively & the Respondent Nos. 1 to 5, respectively, and also hand

over vacant and peaceful possession of the subject land to them within

six months from the date of this judgment, subject to the fulfilment of

directions issued by us in paragraphs 91 and 92, respectively, of this

judgment.

91. In the peculiar facts of the present case, we deem it fit to direct the

Respondent Nos. 15 to 22, respectively & the Respondent Nos. 1 to 5,

respectively, to pay the balance sale consideration of Rs. 18,83,001/-

with an interest at the rate of 16% p.a. from the date of the execution

of the ATS, to the Appellants within a period of six months from the

date of this judgment.

92. Further, having regard to the fact that almost 18 years have passed

by since the sale deeds in favour of the Appellants were executed, and

with a view to do substantial justice, we direct the original vendees,

i.e., the Respondent Nos. 15 to 22, respectively & the Respondent Nos.

Special Civil Petition (C) Nos. 29405-29406 of 2017 Page 96 of 96

1 to 5, respectively, to pay to the Appellants an additional amount of

Rs. 5,00,00,000/- over and above the balance sale consideration with

interest referred to above within a period of six months from the date

of this judgment.

93. It is only after the balance sale consideration of Rs. 18,83,001/- with

interest at the rate of 16% p.a. from the date of the execution of the

ATS and the additional amount of Rs. 5,00,00,000/- is paid to the

Appellants, that they shall proceed to execute the sale deed and

handover vacant and peaceful possession of the subject land to the

Respondent Nos. 15 to 22, respectively & the Respondent Nos. 1 to 5,

respectively.

94. In the event of any default on either side to comply with our aforesaid

directions or in case of any other difficulty, the parties are at liberty

to move to this Court.

95. The pending applications, if any, shall stand disposed of.

....................................... J.

(J.B. Pardiwala)

....................................... J.

(R. Mahadevan)

New Delhi;

10

th November, 2025.