Financial Incapacity and Default in Loan Repayment Fatal to Specific Performance Claims: Chhattisgarh HC

The Chhattisgarh High Court has reinforced the stringent standards for 'readiness and willingness' in property disputes, ruling that a buyer’s failure to settle outstanding mortgage liabilities as agreed constitutes a fundamental breach that disentitles them from seeking specific performance.

Justice Sushma Sawant adjudicated on two cross-appeals arising from a dispute over a residential property. The Bench was tasked with determining whether a buyer, who failed to clear a bank loan that was a condition precedent for the sale deed, could still demand the execution of the contract under Specific Relief Act, 1963.

Key Takeaways

Financial Capability is Non-Negotiable

The Chhattisgarh High Court clarified that 'readiness' under Section 16(c) of the Specific Relief Act, 1963 specifically denotes financial capacity, and a failure to prove sufficient funds throughout the contract period is fatal to a claim.

Burden of Proof on the Plaintiff

Litigants seeking specific performance must prove they were ready and willing from the date of the agreement until the final decree; failing to produce bank records to show liquidity can lead to adverse inferences.

Restoration of Possession Post-Contract Failure

If a contract for sale cannot be specifically enforced, the buyer's continued possession of the suit property loses its legal basis, entitling the original owner to recover the premises.

Refund of Advance as Equitable Relief

While denying the sale, the Court protected the buyer’s interest by affirming a decree for the refund of the actual amounts paid towards the sale consideration with interest.

Judicial Scrutiny of 'Readiness and Willingness'

The Chhattisgarh High Court focused on the interpretation of Section 16(c) of the Specific Relief Act, 1963. It noted that the plaintiff was fully aware that the house was mortgaged and that delay in payments would lead to increased interest. The Court observed that the plaintiff only made payments until 2012, which led to the bank initiating auction proceedings in 2014.

The Chhattisgarh High Court explained that "The words 'ready' and 'willing' imply that the person was prepared to carry out the terms of the contact. 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... 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."

The Bench relied on U.N. Krishnamurthy v. A.M. Krishnamurthy and M/s J.P. Builders & Anr. Vs. A.Ramadas Rao & Anr. to emphasize that readiness and willingness cannot be a "straight jacket formula" but must be inferred from the entirety of facts, including the plaintiff's financial status and conduct.

Admissibility of Unregistered Agreements

The defendant challenged the admissibility of the agreement (Ex. P-1) citing Swadhin Nag Chaudhary v. Ajay Francis @ Subba, arguing it lacked proper stamping. However, the Chhattisgarh High Court dismissed this, noting that since the document did not explicitly mention the delivery of possession, it could not be treated as a 'conveyance' requiring higher stamp duty.

Ratio

In a suit for specific performance, the plaintiff must continuously establish both financial capacity (readiness) and the active intent (willingness) to perform their part of the contract from the date of execution until the decree. A failure to deposit consideration in a timely manner, especially when it leads to the property facing bank auction due to the buyer's default, constitutes a breach of the essential terms of the contract under Section 16(c) of the Specific Relief Act, 1963, rendering the buyer ineligible for the discretionary relief of specific performance.

Background

The dispute began with an agreement dated 31.03.2009, where the plaintiff agreed to purchase the defendant's house for ₹4,70,000/-. A major portion of this was to be paid directly to the State Bank of India to clear a mortgage loan. The plaintiff took possession but failed to clear the loan in full, leading the bank to issue an auction notice in 2014. The defendant subsequently borrowed money from a moneylender to save the property and refused to execute the sale deed, prompting the plaintiff to sue.

The Trial Court dismissed the plaintiff's suit for specific performance due to lack of readiness but allowed the defendant's counter-claim for possession, while ordering a refund of ₹3,58,700/- to the plaintiff. The Chhattisgarh High Court, citing precedents like Daya Ram v. Gyarsi Bai Khandelwal, Telikicherla v. Kalli Raj Rao, and N.P. Thirugnanam Vs. Dr. R. Jagan Mohan Rao & Ors., affirmed this decision, finding that the plaintiff failed to produce bank statements to prove she had the necessary funds at the time of the agreement.

Case Details:
Case No.: FA No. 335 of 2018 and FA No. 427 of 2017
Neutral Citation: 2026:CGHC:44669
Case Title: Smt. M. Kamla vs. Smt. Gulaba Manikpuri
Appearances:
For the Petitioner(s): Mr. Sunil Sahu, Advocate
For the Respondent(s): Mr. Hemant Kesharwani, Advocate

Source: 2026 CaseBase(CTH) 19906