Read Time: 15 minutes

Synopsis

The Supreme Court has said in a case where the vendor unilaterally cancels an agreement for sale, the vendee who is seeking specific performance of such an agreement ought to seek declaratory relief to the effect that the cancellation is bad and not binding on the vendee. The court said it is so since an agreement that has been canceled would be rendered non-existent in the eyes of the law, and such a non-existent agreement could not possibly be enforced before a court of law.

A bench of Justices Dipankar Datta and Sanjay Karol also emphasized that it is imperative that an issue be framed with respect to the maintainability of the suit on such a ground before the court of first instance, as it is only when a finding on the issue of maintainability is rendered by the trial court that the same can be examined by the first or/and second appellate court.

"In other words, if maintainability were not an issue before the trial court or the appellate court, a suit cannot be dismissed as not maintainable," the bench said.

The court also pointed out that a jurisdictional fact is one on the existence or non-existence of which depends the assumption or refusal to assume jurisdiction by a court, tribunal, or an authority.

"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 VII Rule 1, CPC. 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," it said.

No higher court, 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 or defense on which the success or 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, the bench added.

The court explained it is fundamental that the assumption of jurisdiction or refusal to assume jurisdiction would depend on the 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 of rendering substantive justice to the parties, irrespective of whether any party to the lis has raised it or not, it added.

"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 the non-existent jurisdictional fact touching its jurisdiction. However, failure to determine the jurisdictional fact, or erroneously determining it leading to the conferment of jurisdiction, would amount to wrongful assumption of jurisdiction and the resultant order liable to be branded as ultra vires and bad," the court said.

"Any failure or omission on the part of the trial court to frame an issue on the maintainability of a suit touching the jurisdictional fact by itself cannot trim the powers of the higher court to examine whether the jurisdictional fact did exist for the grant of relief as claimed, provided no new facts were required to be pleaded and no new evidence led," the court added.

The court also pointed out that if there be admissible two constructions of a document, one of which will give effect to all the clauses therein while the other will render one or more of them nugatory, it is the former that should be adopted on the principle expressed in the maxim ut res magis valeat quam pereat.

If, in fact, there is a conflict between the earlier clause and the later clauses, and it is not possible to give effect to all of them, it is the earlier clause that must override the later clauses and not vice versa, the bench added.

The court allowed an appeal filed by R Kandasamy (since deceased) and others and set aside the Madras High Court's judgment of 2011. The High Court had reversed the judgment and decree of dismissal of the suit and granted a decree for specific performance related to an agreement of January 20, 2005, for the sale of the property on payment of Rs. 2.3 crore to the sellers.

In the case, the bench said scanning of the evidence on record unmistakably pointed to the conclusion that the buyer was not ready and willing to have the terms agreed by and between the parties performed.

"First, the conduct of the buyer does not inspire confidence in view of the fact that despite being aware in February 2006 of the property having been vacated by all the tenants, she started raising the bogey of failure of the sellers to share with her the ‘encumbrance certificate’," the bench said.

From the documents on record, the court noted that it was clear that there was no readiness and willingness on the buyer’s part to pay the balance sale consideration and get the sale deed executed. The buyer, despite multiple reminders, did not come forward for the execution of the sale deed, it said.

"A perusal of the buyer’s cross-examination reveals her admission of not having enough funds in either of her bank accounts to pay the balance sale price. This, in our opinion, is sufficient proof of her financial incapacity to perform her part of the contract. The husband of the buyer could be a wealthy man having sufficient balance in his bank account, but having perused the credit and debit entries, we have significant doubts in respect thereof," the bench said.

Further, the bench said, "Imperative and interesting it is to note, the buyer sought to return the demand draft to the sellers on the last day of its validity... it has intrigued us as to why the buyer would hold on to the demand draft and not return it earlier if she was genuinely interested in purchasing the property. Such conduct of the buyer, seen cumulatively, does not inspire confidence in granting her the discretionary relief of specific performance".

The bench restored the decision of the trial court, with the result that the suit instituted by the buyer would stand dismissed.

"It is made clear that the buyer shall be entitled to the return of the advance sum of Rs 25 lakh by the sellers. If not already returned, the sellers shall take steps in this behalf within a month from the date. If the buyer has made any deposit pursuant to any order of court, the same shall also be returned to her with accrued interest, if any," the bench said.