High Court’s interference with appellate fact-findings on payment and readiness to perform is set aside; first appellate decree for specific performance is restored

A bench of Justices J.B. Pardiwala and Manoj Misra heard appeals against the Madras High Court’s judgment which set aside a first appellate court decree of specific performance and directed refund of advance consideration. The appeals arose from two consolidated suits concerning an agreement for sale dated 08.01.2010 and competing claims of title and possession over the same immovable property.

The Supreme Court allowed the civil appeals, held that the High Court erred in substituting its view for the first appellate court on questions of fact, and restored the decree for specific performance. The Court held that the first appellate court rightly found that the vendors had accepted an additional payment of Rs.1,95,000 after the six‑month period and thereby treated the agreement as subsisting and waived any right to forfeit the earnest money; in consequence the vendee was “ready and willing” to perform. The Court said that the High Court “fell in error” in discarding the endorsement acknowledging the additional payment and “exceeded its jurisdiction under Section 100 CPC” by interfering with the first appellate court’s appreciation of evidence. The Court, in its reasoning, observed: “At the cost of repetition, we may observe that in the case on hand, by accepting Rs.1,95,000 after expiry of six months, D‑1 and D‑2, firstly, waived their right, as available to them under the contract, to forfeit the advance consideration/ earnest money, secondly, by such acceptance and endorsement on the back of the agreement they treated the contract as subsisting and, thirdly, by transferring part of the subject matter of the agreement in favour of D‑3, even before serving a forfeiture notice, they committed a breach of the contract. In such circumstances, in our view, the plaintiff had an option to treat the contract as subsisting and sue for specific performance more so when termination was a void act, no longer permissible under the varied contract. In our view, therefore, the suit for specific performance was maintainable even without seeking a declaration that termination of the contract was invalid in law.”

Background The dispute began with two suits: O.S. No.73 of 2010 by Annamalai seeking specific performance of the sale agreement for two items of property against Saraswathi, Dharmalingam and Vasanthi; and O.S. No.32 of 2011 (renumbered O.S. No.60 of 2012) by Vasanthi seeking declaration and injunction as a purchaser in possession. The agreement fixed consideration at Rs.4,80,000, of which Rs.4,70,000 was alleged to have been paid immediately and Rs.10,000 payable within six months; possession was claimed to have been handed over. The vendee alleged that the vendors later demanded an extra Rs.2,00,000 and accepted Rs.1,95,000 by endorsement dated 09.06.2010 on the back of the registered agreement. Vendors later served a termination/forfeiture notice and purportedly sold part of the property to Vasanthi on 17.08.2010.

The trial court dismissed the vendee’s suit, treating the agreement as a loan security and finding lack of readiness and willingness. The first appellate court reversed, accepting the endorsement (Exb. A‑2) and holding the vendee ready and willing; it decreed specific performance and dismissed Vasanthi’s suit. The High Court, on second appeal, allowed the appeals, disbelieved the endorsement and concluded the vendee had not sought execution within six months and was not entitled to specific performance, directing refund of advance money. The Supreme Court found the High Court was not entitled to overturn the first appellate court’s factual findings under Section 100 CPC, held the vendors’ acceptance of Rs.1,95,000 waived forfeiture and signified subsistence of the contract, and concluded the suit for specific performance was maintainable without a separate declaratory decree. The Supreme Court set aside the High Court judgment and restored the first appellate decree, directing deposit of the unpaid Rs.10,000 in the execution court within one month if not already paid; parties to bear their own costs.

Case Details: Case No.: 2025 INSC 1267 (Arising out of SLP (C) Nos. 26848‑26849/2018) Case Title: Annamalai v. Vasanthi and Others Appearances: For the Petitioner(s): (Advocates not indicated in the judgment text) For the Respondent(s): (Advocates not indicated in the judgment text)