Supreme Court: No Specific Performance Without Challenging Termination of Sale Agreement

The matter arose from a 2000 Agreement to Sell (ATS) executed by the original landowners in Karnataka for 354 acres of Agricultural Land in Haveri district. The vendees paid part consideration and were to complete the sale after the conversion of land tenure and the resettlement of tenants. However, due to a partition suit involving the vendors and a stay order, the sale was delayed. In 2003, the vendors sent a notice terminating the ATS citing litigation and the death of a co-owner, and offered to refund the earnest money. The vendees replied objecting to the termination and claimed continued readiness to perform their part.

After the withdrawal of the earlier partition suit in 2007, the vendors sold the property to subsequent purchasers for Rs. 71 lakhs. The original vendees filed a civil suit seeking specific performance of the 2000 ATS. The Trial Court partly allowed the suit, awarding a refund of earnest money. The Karnataka High Court reversed that decision, decreeing specific performance in favour of the vendees and directing the subsequent purchasers to execute sale deeds in their favour. The subsequent purchasers approached the Supreme Court.

Issue Raised Before SC: Whether a suit for specific performance is maintainable without seeking a declaration that the termination of an Agreement to sell is invalid or bad in law.

SC’s Judgment: The Supreme Court allowed the appeal and set aside the Karnataka High Court’s decision. It held that the suit filed by the vendees in 2007 was not maintainable in the absence of a specific prayer challenging the 2003 termination notice. Relying on I.S. Sikandar v. K. Subramani (2013), R. Kandasamy v. T.R.K. Sarawathy, and Sangita Sinha v. Bhawana Bhardwaj, the Court reaffirmed that existence of a valid, subsisting agreement is a jurisdictional fact for granting specific performance, and once an agreement is terminated, it must first be declared invalid before performance can be ordered.

The Bench observed that unilateral termination may be impermissible in certain cases, but where termination is communicated and accepted or not challenged, the contract ceases to exist in law. Since the vendees never sought a declaration that the 2003 termination was void, their suit for specific performance failed. The Court restored the Trial Court’s decision, granting refund of Rs. 8,12,500 with interest, and held that subsequent purchasers were bona fide buyers for value without notice.

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