Institute of Legal and Management Studies

The Supreme Court has clarified that the 2018 amendment to the Specific Relief Act, 1963, which made the grant of specific performance of contracts a mandatory relief, has no retrospective effect and does not apply to suits or transactions that arose before its enforcement on October 1, 2018.

The Bench comprising Justice JB Pardiwala and Justice Manoj Misra, while addressing the issue in a recent judgment, observed that prior to the 2018 amendment (brought through Act 18 of 2018) the grant of specific performance was a matter of judicial discretion, not a mandatory relief.

The bench referred to its earlier decision in Katta Sujatha Reddy v. Siddamsetty Infra Projects (P) Ltd(2022).,which held that the 2018 amendment was prospective in nature and could not govern contracts or suits instituted before its commencement. Although the decision in Katta Sujatha Reddy was later reviewed and recalled in Siddamsetty Infra Projects (P) Ltd. v. Katta Sujatha Reddy(2024), the Supreme Court clarified that even in the review judgment, there was no express finding that the amended provisions would apply to suits filed prior to October 1, 2018.

"No doubt, this decision was reviewed and recalled in Siddamsetty Infra Projects (P) Ltd. v. Katta Sujatha Reddy but in the review order/ judgment this Court did not specifically hold that the amended provisions would govern suits instituted prior to the 2018 Amendment.The review decision merely proceeded on the assumption that the grant of specific performance continued to be discretionary for suits instituted before the amendment,” the Bench observed.

It further noted that since the impugned judgment in the present case had been delivered on February 2, 2018, prior to the amendment coming into force, the Court was bound to decide the issue based on the law as it stood at that time.

Background

A bench of Justices JB Pardiwala and Manoj Misra heard the case where an agreement to sell was entered into between the Appellant (buyer) and the defendant (vendor). The defendant, despite having no termination rights, had tried to terminate the contract even after accepting an additional amount of consideration from the plaintiff after a lapse of six months from the contract period. Plaintiff's specific performance suit against the defendant (vendor) was dismissed by the trial court, stating that no declaration to invalidate the termination was sought by the plaintiff before filing suit for specific performance.

The First Appellate Court, however, reversed the trial court's decision and decreed the suit for specific performance of the contract, stating that there was no requirement to seek a declaration about invalidation of the termination, as upon accepting the additional consideration amount, the vendor had wrongly repudiated the contract by waiving its right to terminate through his conduct of accepting additional consideration.

The High Court's reversal of the First Appellate Court's decision in a second appeal prompted the plaintiff-buyer to approach the Supreme Court.

Setting aside the High Court's decision and restoring the First Appellate Court's decision, the judgment authored by Justice Manoj Misra observed that the Respondent-vendors, after the lapse of the six-month contract period, accepted an additional payment from the buyer, conduct amounting to a waiver of the right to terminate.

“In our view, acceptance of additional money not only signified waiver of the right to forfeit advance money /consideration but also acknowledged subsistence of the agreement.”, the court said, pointing out that the subsequent notice of termination was therefore a wrongful repudiation, not a valid exercise of contractual right. The buyer was thus entitled to sue directly for specific performance without first seeking a declaration.

Accordingly, the appeal was allowed.

Also from the judgment - When Should Plaintiff In Specific Performance Suit Seek Declaration That Contract's Termination Was Invalid : Supreme Court Explains

Cause Title: ANNAMALAI VERSUS VASANTHI AND OTHERS

Citation : 2025 LiveLaw (SC) 1041

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